New whine, old bottle

‘Sick’ wineries in Maharashtra will take a while to bounce back.

A news item in an Indian business daily a few weeks ago, captioned “Maharashtra’s Big Bang Wine Story Goes Sour”, seems to have caught the attention of legions — everyone I meet wants to know why the wine industry in India is in such trouble, so here’s my take.

There were a reported two million litres of wine in the tanks of wineries in Maharashtra at the beginning of this year’s wine grape harvest (which generally starts in February), and “of the state’s 58 wineries, 32 are in dire straits”.

Essentially what happened was that in 2008-09, consumption of wine made from wine grapes fell 15 per cent to 550,000 cases due to the combined effect of the global economic recession, the slowdown in overseas visitors following 26/11, the meltdown at Indage, and increased prices owing to higher state taxes in key markets (Bangalore, Goa and Delhi). In the normal course, this figure should have grown 25 per cent to about 770,000 cases, so the difference (220,000 cases) entirely accounts for the pile-up of wine with Maharashtra vintners (one case has nine litres of liquid — 12 bottles each of 750 ml).

It’s a fact that the winemaking capacity that has been created in Maharashtra is far in excess of what the market can absorb. Two, most wine-makers are farmers who know little about how to market and distribute wine, are at sea in the ocean of sharks that comprises the alcoholic beverages industry in India, and, in any case, don’t have the resources to compete with the big boys for shelf space or listing on-premise.

But the problem is not that the government has been encouraging the wine industry — it’s that selling, marketing, and distributing wine in India is horribly difficult and expensive. Alcohol being a state subject, each state has its own rules and regulations, duties and taxes, and few states allow for lower duties or licensing costs on low-alcohol products like wine and beer.

Wines have to compete for distributors and shelf space with spirits and beer. With volumes being small, overheads are high, as are costs for merchandising or promotion. In any case, one cannot use classic marketing tools to promote new brands — in fact, in Delhi the excise department fines companies for even doing wine-tasting in restaurants, and prohibits stacking any bottles at the bars of standalone restaurants.

All this makes wines in India far too expensive. Most domestic wines retail at between Rs 350 and Rs 450 per bottle, and while there are a slew of wines (Mosaic, Madera and Samara from Sula, and Sante from Grover) at lower prices, broader consumption of wine will not take off in India till we get the equivalent of “Two Buck Chuck” here: decent quality wines priced at Rs 100-Rs 150 per bottle.

No wonder, a number of wineries are ‘sick’ — but as an unsympathetic friend (from the liquor industry) quipped, “If you can’t stand the heat, get out of the kitchen.” India has little place for small players in wines. And while growth is back (30 per cent in 2009-10), grape prices will peak in three years’ time since many vineyards have cut back on planting — leading to another cycle of over-planting and low prices.

Wines I’ve been drinking: Some Australian wines at a delightful new ‘wine lounge’ at Fava, UB City, Bangalore: the improbably-named Bird in Hand (Sparkling Pinot, Merlot) and Two In the Bush (Semillon Sauvignon Blanc, Shiraz), with the tasting most ably conducted by wine-maker (and owner) Justin Nugent. Watch out for the Wizards of Oz!

[Alok Chandra is a Bangalore-based wine consultant]