Everyone wants to grow grapes and crush them these days. Granted, Indian wine consumption is expected to grow at annual rate of 25% but still, is there enough business opportunity here for entreprenuers? There are more than 35 wineries in Maharashtra alone now, most of which came up in the last few years.
According to estimates, per capita consumption of wine in India is about 4.5 ml per year. In comparison, France consumes 42 litre per person per year, and China 375 ml. Maybe that’s why the industry is excited about the potential of wine.
Wine on a High
by Neha Kaushik for The Hindu Businessline
The Indian wine industry is on a high. Quite literally! For, as the market is growing at a consistent 25 per cent every year, a range of local entrepreneurs, foreign liquor companies and private equity firms have set their sights on the segment which is bubbling with action.
In fact, estimates point out that there are already more than more than 35 wineries in Maharashtra alone, most of which came up over just the last few years. Further, over 1,500 acres of grapes are under cultivation for wine production in the State (mostly in Nasik, which is increasingly being referred to as the Napa valley of India). And the rapid expansion in this segment is unlikely to stop any time soon as newer players are set to enter this domain, while the existing ones chart out major capital expansion plans.
Take, for instance, technopreneur Ranjit Dhuru, founder CEO of Aftek Infosys. Dhuru’s D’Ori Winery is all set for production by the end of this year. The company is setting up a 600-tonne winery producing 6.5 lakh bottles in the first year.
“We will have a total capacity of one million bottles in two years. We plan to go about doing this in a planned and phased manner and will be incorporating the latest trends in oenology. Our wine will be largely influenced by the French style of wine-making,” says Dhuru. Dhuru’s company has been marketing quality French wines for the last two years to get a feel of the market.
“With the current vineyards and the upcoming winery, we are looking at investments of Rs 30 crore – Rs 50 crore, which we plan to spread out in a phased manner. Investments could go upwards as we are increasing our land by another 500 acres. So the investments can be extrapolated accordingly,” he says. Dhuru feels that with the growth of economy going up to 8 per cent, the middle class income booming and changing lifestyles, wine culture is increasing more than ever. “With the government making concessions for wine makers, the wine market is growing at 100 per cent on a CAGR. The growth may not be comparable to international standards but in the Indian context it is very high.”
In fact, the last year saw sales of half-a-million cases of India-made wine and this figure is expected to rise to 6.5 lakh cases this year.
“Significantly, it is not the cheaper wines that are driving growth but those priced at Rs 300-plus,” says Rajeev Samant, CEO, Sula Vineyards, one of the largest wine producers in the country. Sula, which claims a value market share of 20 per cent, is in expansion mode with its new one million-litre winery set to commence production in March.
This would take the company’s total capacity to 1.8 million litres. “We target growing by 35 per cent in 2006-07 with sales of 1.5 million bottles. There is immense potential for growth,” says Samant, a Stanford engineering graduate who quit his job at Oracle in the US to take care of his family farm.
Sula has more than 300 acres of grapes under cultivation and sells a variety of wines including a sparkling wine, a Chenin Blanc, a Cabernet Shiraz, a Sauvignon Blanc and a blush Zinfadel. The company recently concluded a Rs 15-crore deal with private equity fund Gem India Advisors for a minority stake in the company.
In fact, private equity interest in the wine industry is sky-high at present. Singapore-based Arisaig Partners’ private equity fund recently picked up close to 10 per cent stake in Champagne Indage, the country’s largest wine maker. This is Indage’s second equity dilution after the Anil Dhirubhai Ambani Enterprises (ADAE) arm picked up nearly 9 per cent in the company earlier in 2005.
Grover Vineyards too is reported to be in talks to offload about 35 per cent stake to a foreign equity fund. Vinsura Vineyards, started by three grape growers Sadashiv Nathe, Pralhad Khadangale and Kishor Holkar, is yet another example of an entrepreneurial success story helped by the growing demand for wines.
Figuring that there is more money to be made in cultivating grapes for wine rather than the table, the trio initially started out by selling grapes to wineries located in Nasik. They later set up their own winery, which now produces three red wines and two white wines.
“We will be launching sparkling wine very soon, becoming one of only three wine houses in the country to do so. Our vineyards are now primarily for captive consumption,” says Nathe, Vinsura’s CEO.
The company is expanding capacity at its winery by 3 lakh litres this year to 4.5 lakh litres. Vinsura sold about 75,000 litres last year.
Not to be left behind, several foreign companies too are eyeing a slice of the domestic wine market, which is currently estimated at Rs 250 crore. Liquor major Seagram has decided to crush grapes on its own in India, with its wines expected to hit the market in late 2006. According to industry officials, Seagram will initially start with a capacity of 1 lakh litres and may emerge as the largest player in the domestic market.
Australia’s Fosters too is reported to be charting out a strategy to enter this segment in India. Analysts say the double-digit growth in the segment is partly being fuelled by the tech boom. In fact, young, upwardly mobile techies who are exposed to the Western lifestyle are taking to wine in a big way.
Further, wineries have been actively organising wine festivals and tours and opening wine bars in States where they are allowed to do so.
Analysts add that the potential for growth in India is immense. According to estimates, per capita consumption of wine in India is about 4.5 ml per year. In comparison, France consumes 42 litre per person per year, and China 375 ml.
The success of locally produced wine is not only restricted to India. About 10-15 per cent of total sales at present comes from exports, with the figure growing.
Indian wine has also been received well abroad. Last year, international wine industry magazine Decanter ranked Grover Vineyard’s `La Reserve’ red wine as the best new world wine. The growth in the wine segment is also driven by the policies of the Maharashtra Government; the government declared the wine-making business as a small-scale industry. Further, the State Government has exempted wine manufacturers from excise duty to promote the industry. Surely with the exponential growth in the segment, the party for domestic wineries is far from over. Cheers!