Wine MARKET in India
Headlines
·
Total volume grows by 35% from
2007 to reach sales of 11 million litres in 2008
·
Domestic wine companies thrive
with low-cost brands
·
Still light grape wine posts
fastest growth, with total volume sales up by 36% in 2008
·
Unit prices see a marginal drop
in 2008
·
Competition intensifies with
the entry of leading spirits players and mushrooming of small wineries
·
28% total volume CAGR expected
over forecast period
Trends
·
Domestic wine manufacturers
increased their sales towards the end of the review period, by increasing brand
awareness of their economically-priced brands and expanding off-trade
distribution coverage all over India. These included leading players such as
Champagne Indage as well as smaller boutique wineries. Sales were driven by the
widespread availability of domestic low-cost wine and the higher visibility of
wine due to the mushrooming of wine bars, wine shops and wine tourism. Economy
brands such as Zinzi and Vino Sparkling encouraged trials and more frequent
wine consumption, driving up volume sales.
·
In Maharashtra, the state with
the largest proportion of national wine sales, excise duty on imported wine was
increased from 150% to 200% of the declared cost of each bottle from November
2007 onwards. This made imported wines sold through off-trade channels
prohibitively expensive and domestic wine was heavily favoured in off-trade
outlets.
·
The total volume growth rate
seen in 2008 was two percentage points higher than the review period CAGR. This
was attributed to the success of low-cost domestic wine and the establishment
of spirits players’ brands. Spirits players, especially United Spirits, used
their extensive distribution networks and large marketing budgets to push their
newly launched wine brands. Their successful brand launches meanwhile had a
trickle-down effect, drawing the attention of the masses towards wine drinking.
New launches such as Kingfisher Bohemia and Nilaya successfully attracted new
wine drinkers, with their appealing positioning as fuss-free wines without the
usual formalities associated with wine drinking. The availability of wine in
supermarkets/hypermarkets and food courts in malls also increased the
accessibility and visibility of wine.
·
Still light grape wine
continued to lead sales growth in 2008. Growth was spurred by campaigns
promoting food pairings with red and white wine and the easy availability of
affordable still light grape wine for regular consumption, as well as premium
variants for special occasions. Wine-and-food pairing sessions combining Indian
food with red and white wine were organised by several domestic and
international brands, including Nilaya and Chantilli.
·
Comparatively, awareness about
sparkling wine remains low. No particular type of cuisine is associated with
sparkling wine for everyday consumption and, due to higher price points, it
continues to be seen as a niche celebratory wine. Moreover, still light grape
wine is widely available across all price points both off-trade and on-trade,
whereas there are fewer sparkling wine brands and the availability of most
brands is restricted to premium on-trade outlets. The popularity of fuss-free
everyday wine also favoured the growth of still light grape wine over sparkling
wine.
·
Off-trade unit price showed a
marginal decline in 2008 over the previous year. This occurred as sales were
driven by affordably-priced brands and off-trade promotions such as
buy-one-get-one-free. Low-cost wine boosted wine volume sales by attracting new
wine consumers. Premium wine is mainly sold through premium on-trade outlets,
such as five-star hotels, where the clientele is more discerning about wine.
·
On-trade unit price also showed
a decline in 2008 over the previous year. This was due to a marginal reduction
in wine prices in hotels, due to government pressure on hotels and restaurants
to pass on their benefit of purchasing wine duty free to the consumer. The
increased sale of economy and semi-premium wines in on-trade outlets in second
tier cities such as Chandigarh and Pune and in semi-premium on-trade outlets
also contributed to the marginal decline in on-trade unit price.
·
“Other” sparkling wine sales received
a fillip in 2008 due to the success of low-cost domestic brands. Champagne
Indage’s Vino Sparkling was launched across India by late-2007 and Samant
Soma’s Dia was launched in February 2008. These generated much interest due to
their affordable positioning and convenient packaging. Both are packaged in
bottles with screw caps, while Vino is offered in 375ml bottles. At Rs55 for
375ml and Rs180 for 750ml, Vino Sparkling and Dia are priced lower than the
unit price for “other” sparkling wine. These brands are positioned at price
points in direct competition with beer and RTDs/high-strength premixes and
generated widespread interest as well as high volume sales.
·
Off-trade sales led volume
growth in 2008 over the previous year. This occurred as leading domestic
players such as Samant Soma increased the depth and width of their off-trade
distribution chains and low-cost wine attracted new consumers. As traditional
Indian drink specialists are considered socially inappropriate for women to
visit, sales of wine through supermarkets/hypermarkets in malls proved
particularly successful in attracting female consumers and young workers with
high disposable incomes.
·
Premium domestic wine and old
world wine are meanwhile mainly sold through five-star hotels and restaurants.
The high price points of these wines make them unaffordable for mass consumers
in off-trade outlets and they are mainly consumed on-trade by an older, more
affluent and knowledgeable clientele who have a more experienced palette and
enjoy dryer old world wines. Off-trade consumers meanwhile typically prefer
domestic and new world wine, which tend to be sweeter and less complex.
·
Sales of imported wine take
place primarily through on-trade channels. Hotels and restaurants pay low
excise duties and no custom duty on imported wine, allowing them to enjoy high
margins on the sale of imported wines. As such, on-trade establishments prefer
to have imported wines on their menus as they can sell these with high margins.
Domestic players thus feel that the above tax incentive given to restaurants to
sell imported wines is unfair as it is obstructing their efforts to promote
domestically produced wines. Due to vocal opposition from the domestic wine
lobby, in March 2008 the government advised hotels to pass the benefits of
their duty free purchases of alcoholic drinks on to consumers by limiting the
selling price to 220% of their own purchase cost. Accordingly, wine prices were
marginally reduced in some major five-star hotels.
·
Chenin blanc, sauvignon blanc,
shiraz/syrah and cabernet sauvignon remain the most common wine grape varietals
grown in India. Success with other varietals such as merlot and pinot noir
remained limited. However in 2008 companies such as Vintage Wines and Samant
Soma started to experiment with growing newer varietals such as sangiovese and
riesling in order to cater to consumers with more discerning palates.
·
New world wine accounted for
87% of total volume sales of wine in 2008. Old world wine volume sales, which
are dominated by French wine, however grew by 42% in the year, albeit from a
very small base. New world wine dominates sales due to being more accessible to
the average Indian wine consumer. This wine is cheaper, sweeter and less
complex and more widely available in off-trade outlets.
·
About 60% of off-trade volume
sales of red wine are attributed to wine priced at an affordable Rs300-500 per
litre. Prominent brands such as Sula, Zinzi and Vino are priced within this
range. “Other” sparkling wine saw a slight price polarisation towards the end
of the review period, meanwhile, with the under Rs499 price band increasing its
share of off-trade volume sales by five percentage points in 2008 over the
previous year. This was due to the contribution of Vino Sparkling at Rs147 per
litre. The bulk of sales in “other” sparkling wines however stem from Marquise
De Pompadour and Sula Brut which are priced at above Rs750 per litre.
·
France, Australia and Italy are
the top three countries from which wine is imported into India, with these
together accounting for 71% of all wine imports into India in 2006. In 2006,
France, Australia and Italy accounted for 42%, 16% and 13% respectively of
still light grape imported into India. France also led imports of sparkling
wine with 62% volume share in 2006, followed by Germany and the UK with 12%
share each.
·
With low awareness about
Organic products in India players have not introduced Organic wines in India.
·
In order to make wine more
convenient for the average Indian consumer, companies are moving away from traditional
corked bottles. Several new brands, including Nilaya and Kingfisher Bohemia in
2008 and Zinzi and Vino Sparkling in 2007, were launched in bottles featuring
screw cap closures. Low-cost brands Zinzi and Vino are also available in 375ml
bottles.
Production, Imports and Exports
·
Official figures for the
production of wine in India are not available. The number of wineries in India
grew from six in 2002 to at least 50 in 2008, however, of which at least 45 are
in Maharashtra. As expertise in winemaking, marketing and distribution is not
easily available, most new wineries supply facilities on lease and/or supply
bulk wine to established players. Samant Soma is expected to extend its
production capacities to seven million litres per annum by December 2009, up
from five million litres per annum in 2008. In 2008 Champagne Indage meanwhile
extended its production capacities beyond its four vineyards in Maharashtra
through contract farming in Himachal Pradesh. Champagne Indage also plans to
further increase its production capacity to 20 million litres per annum by
April 2009, up from 15 million litres in 2008.
·
With the mushrooming of a large
number of domestic wineries in India and the large of amount of domestic and
international media coverage of leading Indian wine brands such as Sula, both
the exports and imports of wine in India have seen a sharp hike. Interest in
wine consumption in India is fuel a growing demand for international wines. In
2006 imports grew by 29% in volume over the previous year, whereas exports grew
by 26%. The major exporters of wine to India were France and Australia. The
major importers of wine from India were Maldives and France, with these
countries accounting for 41% and 14% volume share respectively of total exports
in 2006.
Competitive Landscape
·
Champagne Indage continued to
lead sales with 44% total volume share in 2007. Samant Soma Wines and Grover
Vineyards were meanwhile at second and third place with 17% and 9% volume
shares respectively. Champagne Indage offers prominent brands Vino and
Chantilli with these accounting for 10% and 9% volume shares of wine
respectively in 2007.
·
Champagne Indage is able to
lead due to its strength in the distribution and production of wine in India.
Its low-priced brands such as Vino are hugely successful in generating large
volume sales. The company also benefits from its wide range of product
offerings, which span all price points, from economy brand Vino Sparkling at
Rs147 per litre to premium brand Chantilli at Rs1,133 per litre. Champagne
Indage also has more than 3,000 off-trade outlets, including wine bars and wine
shops across India and the company is expected to increase its number of
outlets to 5,000 during the forecast period. Comparatively, Samant Soma has
only one wine bar and plans to open up to three more by April 2009. United
Spirits Ltd also plans to open direct wine off-trade outlets during the
forecast period.
·
Volume sales attributed to
“others” saw the highest growth in 2007. These sales grew by 37% in total
volume terms in 2007 over the previous year due to the mushrooming of new
wineries in Maharashtra. Domestic wine players such as Sankalp Winery Pvt Ltd
and ND Wines Pvt Ltd expanded their distribution capabilities and established a
presence in metros. These players are driving sales of affordable wine across
India. Boutique wineries with premium offerings such as Vintage Wines, Chateau
D’Ori Pvt Ltd and Terrior India Wineries Pvt Ltd also enjoyed a niche success.
·
Domestic brands enjoyed greater
sales than imported brands towards the end of the review period. This was due
to their widening presence in off-trade outlets across India and sustained
price discounts, along with the use of food-pairing promotions. Revised duty
levies in Maharashtra meanwhile dealt a blow to sales of imported wine in the
largest wine-consuming region.
·
Competition among domestic
players heated up in India towards the end of the review period. In 2007 and
2008, there were several launches of premium wines such as Reveilo, Indus Wines
and Chateau D’Ori from domestic boutique wineries, with these well-received by
high-income consumers. In addition, there were several notable mid-priced
launches, such as Kingfisher Bohemia from United Spirits in July 2008 and
Nilaya from Diageo in late-2007.
·
On Valentine’s Day 2008, Samant
Soma launched Dia. This is India’s first low alcohol, asti spumante style
economy wine in “other” sparkling wine. It is targeted specifically at women in
terms of flavour, distribution and packaging. Dia is positioned in direct competition
to Champagne Indage’s Vino Sparkling, which was launched in 2007. Both wines
generated large volume sales in 2008 due to their low price points which
triggered trial purchases by first-time wine consumers.
·
Advertising for wine in the
mass media is not permitted as it is an alcoholic drink. However, wine received
unprecedented mainstream attention when it was served to spectators at the
Indian Premier League Cricket Tournament's inaugural match in Bangalore in
April 2008. Companies also make extensive use of below-the-line marketing
activities, especially off-trade promotions such as price discounts and
sampling. Players also use on-trade promotions such as the wine-and-food
pairing sessions organised by Diageo for Nilaya and Seagrams for Nine Hills.
·
Industry leaders such as
Champagne Indage and Samant Soma, as well as new entrants such as United
Spirits and Diageo, introduced wine brands that are only available in bottles
with screw caps in a bid to promote the everyday consumption of wine. These
launches included Dia, Nilaya and Kingfisher Bohemia in 2008 and Zinzi and Vino
Sparkling in 2007.
·
Champagne Indage acquired
Australian wineries Loxton and Vincrest and UK wine supplier Darlington Wines
in 2008. The company thus increased its production capacity and widened its
range of price points in its brand portfolio for international sales.
·
Larger players increased their
production capacities by purchasing bulk wine supplies from small new wineries
towards the end of the review period. This allowed new entrants such as United
Spirits to make multiple large-scale product launches in 2008. United Spirits'
subsidiary, Four Seasons Wines, is looking to expand its 500 acres of area
under contract farming to 2,000 acres by 2010. United Spirits owns 51% equity
in Four Seasons Wines, while the rest is owned by around 500 farmers of the
Baramati region of Maharashtra.
·
Companies are also reaping
additional revenues from wine tourism in and around the Nashik region in
Maharashtra, offering fee-paying tours of vineyards and wineries, and through
wine resorts. Companies following this route include Samant Soma Wines,
Champagne Indage and Vintage Wines. In addition to profitable high-margin sales
of wine and wine accessories such as corkscrews and glasses, wine tourism provides
an avenue for educating consumers and building brand awareness.
Prospects
·
Major wine companies are
expected to move into direct retail during the forecast period, opening wine
bars and wine shops in order to expand their distribution capabilities. This
will increase the accessibility and visibility of wine in India. It will also
attract new consumers and promote connoisseurship and premiumisation among
pre-existing wine consumers. Champagne Indage is expected to increase its
number of direct off-trade outlets to 5,000 in the forecast period and has
already allocated Rs40 crore for this venture. Samant Soma meanwhile plans to
open up to three more wine bars by April 2009, with each spread over an area of
2,000 sq. feet. United Spirits Ltd also plans to open direct off-trade outlets
by 2011.
·
A strong total volume CAGR of
28% is expected in the forecast period. While this is five percentage points
lower than the review period total volume CAGR, wine is expected to maintain
considerable volume growth momentum during the forecast period, with sales
reaching 38 million litres by 2013. The leading companies will continue to
increase their production and distribution capabilities and diversify their
product portfolios. In addition, wine will also receive a considerable boost
from the entry of spirits players. New entrants such as United Spirits are
expected to inject vast amounts of resources into wine during the forecast
period. They will also engage their massive marketing and distribution prowess,
honed in spirits and beer, in promoting wine, thereby increasing the wine
consumer base.
·
Companies may be pressured to
pass on the rising costs of agricultural goods, fuel and other raw materials to
the consumer during the forecast period by reducing price promotions. This
could potentially threaten the volume growth of wine, as the widespread
availability of low-cost wine was a crucial factor in driving volume sales
growth in the review period. State governments’ protectionist excise policies,
such as those already implemented by Maharashtra and Karnataka, make wine
imported from other states more expensive. These could also potentially raise
wine prices, threatening future growth.
·
Still red and white wine brands
are increasingly adopting an anytime fuss-free positioning. These product areas
will continue to lead sales growth in wine in the forecast period, due to their
widespread distribution and availability at various price points. The
contribution to sales of still rosé wine will remain small, however, as this
has not gained a mainstream appeal with Indian consumers. Sparkling wine will
continue to grow dynamically from a small base in the forecast period. However,
at 20% total volume CAGR it will grow considerably more slowly than still light
grape wine at 29% total volume CAGR, due to its niche positioning and high
price.
·
The unit price of wine is
expected to slowly decline during the forecast period. This will occur as
economy wine continues to generate high volume sales due to its affordability
and accessibility in off-trade channels. As competition intensifies, companies
may increasingly compete based on price. Mid-priced brands generate lesser
volume sales than economy brands and have lower margins than premium wine.
Consequently, companies may seek to polarise their brand portfolio by focusing
on premium and economy wine while phasing out mid-priced brands during the
forecast period.
·
In the short-term, Kingfisher
Bohemia from United Spirits is expected to enjoy considerable success in wine
due to its accessible positioning, with the slogan “no rules, no rituals and no
special occasions”. It is also expected to ride on the pre-existing brand
equity and high visibility of its family brand Kingfisher, which is the leading
beer brand in India. Domestic boutique wine Chateau D’ori was recognised as a
high quality wine and will enjoy niche success as a premium wine. Dia from
Samant Soma will also see niche success because of its low price point and
marketing targeted specifically at women, along with its female-specific brand
name, packaging and taste, as well as its targeted distribution through
supermarkets/hypermarkets. Diageo’s Nilaya is likely to meet with a lukewarm
response, however, because of its semi-premium price positioning. It will also
suffer from its lack of an established pan-India distribution network
comparable to that of Champagne Indage, Samant Soma and United Spirits.
·
With the success of 375ml
packaging for Vino, more companies may consider introducing economical brands
in single-serve packaging during the forecast period. Domestic companies are
also expected to expand their premium wine portfolios in order to benefit from
the exorbitant taxation introduced on imported wine in off-trade channels
towards the end of the review period. Boutique wineries such as Terrior India
Pvt Ltd are planning to introduce premium wine priced in direct competition
with imported wine such as Jacobs Creek in order to capitalise on wine gifting
during festival seasons. However, they will simultaneously boost their portfolios
with high-volume low-cost wines for all-year-round sales.
·
In mid 2008, a National Wine
Board (NWB) was set up in Pune under the Union Ministry of Food Processing
Industries (MFPI) to promote wine. Over the forecast period it is expected to
establish quality standards and enforce a uniform tax and duty regime for wines
across all states. It is also expected to allow wine sales in department stores
and to set up wine parks. If a uniform tax regime is established, it is
expected to bring down the unit prices of wine and simplify the distribution
and marketing of wine for both domestic and international players. Fiscal
incentives and government aid will be offered to companies who set up
production and marketing facilities in zones designated as wine parks.
·
The production of good quality
wine by small new wineries is expected to receive a boost in the forecast
period due to help from the government. The National Wine Board will promote
contract and co-operative farming of grapes and undertake research and development
in grape processing technology. In addition the Indian Institute of Vine and
Wine (IIVW) will start its first intake in 2009, offering degree and diploma
courses in wine making, finance and wine marketing.
Published Data Comparisons
National Consumer Expenditure
·
Consumer spending on wine in
India stood at Rs30 billion in 2007 according to official statistics, up by 20%
in current value terms over 2006. The off-trade value size generated by
Euromonitor International meanwhile grew by 34% in current value terms from
2006 to reach Rs8 billion in 2007.
·
The large discrepancy between
official national consumer expenditure and Euromonitor International’s value
size can be attributed to the difference in the way these data points are
estimated. Euromonitor International collects volume sales by brand and company
to compile a total volume size, which is further split between on-trade and
off-trade sales. Total value size is built based on these volumes by
configuring in separate on-trade and off-trade unit prices. In contrast,
official national consumer expenditure is based on official estimates from
national and international statistical sources such as Census of India and
World Bank. The national statistical estimates are essentially compiled from
sample surveys from select households and then extrapolated to estimate
national consumer expenditure.
