The king of beer and whisky is trying to make a splash in wine, whose consumption is rising with the changing social landscape.
Wine, they say, reflects society and its mores. As documented, societal mores in India have changed beyond recognition in recent years. Rapid economic growth has led to a proliferation of the well-heeled and the well-travelled. The reflection of that change is being seen in the changing consumption of alcoholic drinks.
In India, buying liquor can be a disconcerting experience. It involves jostling with the multitude and shouting to attract the attention of the man at the counter, who would happily thrust any number of bottles in your hand without bothering with how you would hold or carry them.
Slowly, change has begun to set in. Supermarkets, themselves a new, raging phenomenon, are beginning to stock wine.
Recently, a woman reporter of Business Standard, looking to capture the new methods of selling wine, actually managed to rummage through the shelves at Lakeforest Wines, a dedicated store, in Gurgaon, helped by a polite, albeit not very well-informed, attendant.
It has helped that in July last year, prompted by complaints from the European Union and the United States to the World Trade Organisation, India reduced tariffs on imported liquor, potentially making a shiraz from Coonnawarra, Australia, for instance, as affordable as a product of an Indian vineyard.
Tariffs must be capped at 150 per cent now, down from rates that were as high as 550 per cent.
Earlier, when it came to offering drinks, what mattered was which whisky you were serving. The size of the wine market in the country remains minuscule, but is growing twice as fast as India-made foreign liquor.
These days wine is served at weddings and business meetings. Many would be able to point out Bordeaux on the world map. Wine clubs have sprouted and wine tasting is fast becoming a regular on the social calendar. Heck! Even journalistic parties have moved on from the India-made Old Monk.
It's IPL, again!In a sense, the Indian Premier League, whose widespread impact on cricket is still being assessed, also marked a dramatic "coming out" of wine when it was served to spectators at the tournament's inaugural match in Bangalore on April 18. That was just two months after United Spirits Ltd, or USL, the flagship of Vijay Mallya's UB Group, which includes the airline Kingfisher and IPL's Bangalore franchise, turned its attention to expanding the wine business in India.
For long, the company had abstained from wine, focusing on beer and whisky, where it is the runaway market leader.
However, in February, it uncorked a plunge into wine with the launch of Zinzi, targeted at the youth and novice drinkers. The next five years will see the company sinking Rs 100 crore in this segment.
Of this, about Rs 80 crore will go into USL's subsidiary, Four Seasons Wines Ltd. USL owns 51 per cent equity in Four Seasons Wines while the farmers of Maharashtra's Baramati region own the rest.
Four Seasons Wines will roll out six varietals: Sauvignon Blanc, Chenin Blanc, Cabernet Sauvignon, Shiraz, Zinfandel & Blush with the target of 1 million cases when the winery reaches full capacity. Also on the cards are oak barreled & sparkling wines, which are expected to be launched later this year and next year.
"The wine market's base in India is small — hardly 1 per cent of the total spirits sales, while in European countries it is almost 50 per cent. But there is huge potential of expanding the market and we are here to tap that potential," says Abhay Kewadkar, business head and chief wine maker, USL.
Pulling out all the corksThe per capita consumption of wine in the country is a paltry 10 mililitres, far below France's 73 litres. Even the world's average per captia consumption is much higher at 4 litres. Spirits fare better, but their per capita consumption of 1.05 litres, too, is below the global average of 3.04 litres.
However, according to a report by Rabobank International, the Indian wine market is expected to grow by 25 to 30 per cent by 2010, making it the fastest-growing industry in the country.
The Indian Wine Academy attributes the growth to the 250 million middle class that has the potential to consume 250 million litres of wine a year at just a litre per person.
The number of Indian vineyards, no more than half a dozen until recently, has risen to 50, centered mainly in the Nashik region of Maharashtra. That explains Four Seasons Wines' partnership with the 500-odd farmers of Baramati.
Touted as the biggest wine project in the country, Four Seasons Wines is looking at a chateau winery with a 330-acre vineyard with a capacity of 5 million bottles at the end of five years in the area, 65 km from Pune.
With the company having 500 acre under contract farming in the region, with plans to scale it up to 2,000 acre in the next two years, the share allotment is set to start with 500 farmers and the plan is to gradually go up to 1,000 acre as the farming expands.
Maharashtra, along with Karnataka, follows a wine-friendly policy that includes simplified licences and permits to wineries, promoting wine tourism and setting up of wine parks.
As part of its strategy to import wine, USL is looking at tie-ups in South Africa, New Zealand, and Australia. In 2007, it acquired French sparkling wine maker Bouvet Ladubay. Recently, it partnered family-run Burgundy giant Boisset and intends to launch 20 labels in the country over the next three months.
The spoilersWhile drinking in the potential of wine, USL continues to focus on its bread and butter, beer and whisky, especially now that it has control over Whyte & Mackay, which owns some of the world's most respected scotch brands.
The company, which already has some of the highest-selling whisky brands in India, like McDowell's No 1, is betting on the W&M portfolio to compete in the premium scotch whisky segment that is growing at a gratifying rate of 18.2 per cent.
It however is somewhat checked in its march by the soaring excise levies, especially on wine. The competition from the domestic wine players — Sula, Indage and Grover's, which together control 90 per cent of the market — won't make things any easier.
To top it all, the industry continues to be highly-regulated in all respects of packaging, distribution and communication. Its avenues to advertise can be counted on a fingerless hand.
"We have grown despite these barriers through pioneering communication with the best and biggest lifestyle events across sports, music, etc, and have managed to communicate our brand values. We are now looking at a big act every quarter," says Vijay Rekhi, USL's president and managing director.
Then there is the issue of logistics. The cabernet can be too warm. Some types of wine are meant to be served at room temperature, but room temperature cannot be taken to mean the temperature in Delhi in the summer or monsoon months.
Indian wine suffers from the same problems that destroy tonnes of foodgrain and vegetables. Stores and warehouses are rarely refrigerated. Entire shelves of wine easily oxidise.
USL is following a strategy of education, awareness, and accessibility. It is trying to educate consumers and retailers, and food and beverages staff in wine appreciation. It is supporting wine tasting sessions, wine newsletters and magazines, and wine tourism.
"USL intends to make its wines more accessible to the public by making them available in supermarkets and hypermarkets," says Kewadkar.
Val Smith, the chairman of International Wine and Spirits Record, believes that USL will eventually surmount the obstacles.
"The dominance of the UB group in the Indian market, its sheer distribution strength and marketing abilities will help the company overcome these challenges."
In that endeavour, USL may receive support from a very unlikely source. An integral part of the ongoing social change in India is the increased expression of the womenfolk. That includes the expression of the desire to storm this most male-dominated bastion.
According to USL, "More women are working today and a sizeable number of them is experimenting with moderate drinks like wine."
Jul 25, 2008
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