France is by far the biggest exporter of wine in the world, having exported over $10.4 billion worth of the beverage in CY2013
An intriguing sense of respect overpowers you when a connoisseur torpedoes you with a battery of rare wine variety proper nouns. A sparkle in the eye escorts the vocal demonstration; a sign that the beverage is a close-to-the-heavens sign of celebration. And what pairs well with a ritual glass of this beverage (for any importer) is the fact that it’s already a multi-million dollar industry in India with potential margins that call for a refill
Neha Dewan | @TheDollarBiz
According to a study by Vinexpo, an exhibition portal created by the Bordeaux Chamber of Commerce and Industry (for international operators in the wine and spirits sector), wine consumption in India grew by 16.3% in CY2013, up from 11.8% in CY2012. The study also revealed that a quarter of the beverage consumed in India is from the imported stable, with Australia leading the list. [Australia has increased its exports (by value) of wine to India by over 170% over the last five years. However, value-wise France is still by far the biggest exporter of wine to India.] Research findings also indicate a greater propensity among Indians towards red wine than white, with over 61% of the wine consumed in India being red.
According to Sukhbir Singh, Food & Beverage Service Manager at Hilton Garden Inn’s multi-cuisine restaurant India Grill, demand is on an enthusiastic upswing. “For wine importers, the business dynamics convert to good profitability, with margins at least in the range of 20-30%. Although the wine market in India is being mainly fuelled by the strong growth in domestic wine production, imported wine plays a crucial role in creating awareness and increasing demand,” he tells The Dollar Business.
About 80% of India Grill’s clients are expatriates, and to cater to them it stocks both classic and new world wines from countries like France, Italy, Chile, Argentina, South Africa and Australia.
Statistics on imported wine in India narrate the story quite vividly. As per a report by consulting firm Technopak Advisors, imported wine accounts for 30% of the total wine market in India and is growing at a steady rate of 25-30% y-o-y. In addition to leading hospitality chains, several swish and fine dining restaurants have sprung up across the country serving the choicest wines sourced from across the world. Market estimates peg the current size of the wine market in India at 1.2 million cases. According to projections, the market will scale up to 10 million cases by 2017, of which imported wines will account for 2 million cases. The imported wine category branches itself out into the ‘Old World’ and the ‘New World’. Countries like France and Italy make up the former. The other group consists of South Africa, Australia and New Zealand.
India’s Commerce Ministry data substantiates the rising demand for ‘fine wine’ sourced from some of the top wine producers in the world. Not surprisingly, France was no. 1 in terms of quantum of sparkling wine imported in FY2014, followed by UK and Germany. For Port wine and other red wines too, France led the way in FY2014 (in terms of value), recording a growth of nearly 24% over FY2013, followed by Italy and Australia.
Interestingly, Australian wine Jacob’s Creek has been steadily climbing up the popularity charts in India. Nicola Watkinson, Senior Trade & Investment Commissioner (South Asia), Australian Trade Commission, explained the reasons for this trend to The Dollar Business. “We have a very different way of marketing our wines. We like to tell everything about the wine, including what kind of a grape it is, which region it comes from, as well as other details that keep the consumer well informed. Besides this, we also use a lot of new wine-making techniques, blends and approaches that can work better for an international palate,” she told the magazine.
In fact, the growing potential of international wine brands in India has led to importers like Brindco, Pernod Ricard, Aspri and Moet & Hennessy, aspiring for a larger share of the pie. Others are following suit. Fratelli Wines, an Indo-Italian joint venture, which positions itself as the second most distributed domestic wine brand with 18 different labels, will now be expanding its portfolio to include imported cases as well. The company recently tied up with leading wine merchant Hallgarten Druitt, part of the worldwide German WIV Group, for importing an array of fine wines.
“We have started with 2,000 cases and our target is to reach about 4,000 cases in FY2015. We currently have six different varieties of wine, which we have sourced. Delhi, Mumbai, Goa and Bangalore will be our main target markets. We are optimistic about this venture,” Kapil Sekhri, Director, Fratelli Wines tells The Dollar Business. Although Sekhri terms the logistics of wine importing a ‘tough market’, he labels it as ‘diverse’ in its varied offerings and opportunities.
Besides just the business dynamics, diversity is also an inherent characteristic of the wine business. Essentially, there are four types of wines – Table wine, which harmonises well with food – primarily red, white and rose wines; sparkling wine, which implies Champagne and other ‘bubblies’; fruits & plants make up the aromatic wine type. Then there are the fortified wines, which include an added distilled beverage – usually brandy – in them. They are frequently used even in cooking. Table wines tend to be the most preferred, due to their flavour complementing meals quite well. They also go a tad easy on the pocket and tend to be the wine of choice for most social occasions.
However, wine experts insist that appropriate food is extremely necessary to suit the taste of the wine. The problem with teaming a wine with curry is the acidic flavour of vinegar and yogurt – common ingredients in such a cuisine. “Acidic ingredients don’t mix well with wine. Moreover, highly tannic wines taste bitter when confronted with chillies and seasonings as the curries strip the fruit flavours from the wine, leaving it too astringent,” adds Singh. Popular wisdom suggests that while white wine is served best with white meat and fish, red wine pairs better with red meat. Cheese is a good companion for Port & red wine. And exotic dishes prepared with wine taste best with that specific wine.
Although wine importing is an extremely lucrative business, it has its own set of challenges that act as a stumbling block for importers. At one of the fine dining restaurants in the capital, Amour –The Patio Restaurant Café & Bar, international wine labels command a significant share of the product portfolio, approximately 60% in value terms. The restaurant’s Indian clientele mostly tend to favour the New World wines, as these are easy on the palate. Its international clients, however, tend to be a bit more experimental with other grape varieties and usually prefer Old World wines.
Further, there are a lot of other factors that play spoilsport, even though they are not directly involved in the process of importing themselves, and have a bearing on their overall sales. “Heavy taxation and tedious processes due to which wine cases are locked up in ports for months before they are cleared by authorities, result in inconsistent supply and much higher prices. This impacts us as it hits our ability to sell a specific wine consistently. Also, high taxes result in high costs for us which erode our margins as the consumer does not want to pay more than a certain amount for a glass or bottle of wine,” Randeep Bajaj, Promoter, Amour – The Patio Restaurant Cafe & Bar, tells The Dollar Business.
Bajaj’s woes are not unfounded. At present, customs duty is a whopping 150% on wine, with additional duty sometimes as high as 75%. Other add-ons such as insurance and freight cost, storage cost, State taxes, unsystematic logistics, and needless to mention, marketing expenses, push up the price of a bottle of wine to the sky.
Despite challenges, the market for fine wine continues to grow at a robust 30% y-o-y. With more Indians preferring wine over other spirits for consumption during social occasions, the future for this segment looks brighter, profitable and more sparkling.
Wine is profitably special if you are an importer. But even this beverage – you can’t drink and drive.
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