It’s a bumpy ride for the Indian Wine market

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India, you are the next best thing in the world wine market, but you can
spoil it with unrealistically high wine prices, warned Stefan Gerber originally published in an article that appeared in Sommelier India-The Wine Magazine, September/October 2008. Gerber is a Sommelier India columnist.
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I am sitting on my front porch overlooking the vineyards to the north with a glass of 2008, 10 Chapters Sauvignon Blanc. It’s winter here in South Africa, so the vines are taking a deserved rest. While savouring the fruitiness of the wine, the farm manager drives by with a Tata pickup truck. Tata trucks are quite popular in South Africa because they are hard to beat when it comes to value-for-money.
The bitterness I suddenly taste in my mouth can’t be blamed on the wine, however. No, it’s due to the price of my wines in India which sell for six times more than what they get in my country. In India, my wine is almost the same price that icon wines sell for in London.
Imagine Indian wine lovers going to a wine store and being able to choose the best that South Africa, New Zealand, Australia and India have to offer – at affordable prices! It’s a pity they are being deprived of the chance to taste and compare the best wines from these countries by the government’s policies. Adding to India’s current wine making, viticultural and marketing problems, are pressures from the international community to lift trade restrictions and subscribe to the principles of free and fair trade.
Even if 10% of the Indian population drink only one glass of wine per year, it amounts to 45 million cases annually. India, in my opinion, will never be able to produce 45 million cases per year (not unless something drastically changes).
For a start, the price of grapes is very high, if not among the highest in the world. In South Africa the price for excellent quality Chenin Blanc would be about Rs 11,000 per ton. Currently, prices in Nasik vary from Rs 25,000 to Rs 32,000 per ton. If we were to take an average of Rs 28,000 per ton, without taking winemaking and bottling costs into account, the cost of Chenin Blanc would be roughly Rs 40 per litre. Now add to this the cost of marketing and distribution and it’s easy to understand why wine prices are so high.
But expensive grapes are not the only reason for high wine prices. The other reason is the undersized, uneconomical wine production units. Elsewhere in the world 15 ha seems to be the minimum. In India the majority of the farms are about 3.2 ha which are also used to cultivate other crops. This boils down to low volumes at high prices, while the quality of most harvests leaves much to be desired.
So OK, wise guy, how do you maximize the potential so that India will become one of the largest producers of quality wines? Well, my first piece of advice is to stick to the basic and proven factors that sell wine namely, price, packaging and consistency.
While one can sympathise with the predicament of local farmers, overprotecting them and the wine industry will seriously harm them both in the long run. As things stand it’s the bigger companies that benefit the most. Foreign wine competes typically with wine companies such as Sula or United Breweries which function like first world establishments while exploiting the protectionist umbrella.
You don’t need a PhD in economics to discover whose wines the average Indian can afford and this wine drinker has limited choice. Duties and commissions, apart, foreign producers can’t distribute their goods as cheaply and effectively as the big Indian guys. Therefore, if you want to enjoy foreign wine,
you’ll have to pay up.
Moreover, the rivalry between the states in India resembles the fierce competition usually found between wine producing countries. Instead of joining forces, they increase the intensity of internal competition to such a destructive level that to survive, they have to overprotect their own markets. This limits choice and raises the prices even further.
Finally, protection normally caps the growth of the industry. Prices become ridiculously high. Indeed so high, that serious and sophisticated wine drinking remains in the realm of a privileged few. Thus the market remains small, prices stay high, and the discerning drinker is left with very little choice.
It’s simple common sense that money spins from quantity and quality, not restrictions. If the government persists with high duties, the chance to sell 45 million cases annually is less
than zero. Drop the duties drastically, and although it may cause political and labour problems in the short term, the eventual expansion of the market will benefit all.
Consumed responsibly, wine is a cultural and healthy drink. With the price of wine unrealistically high, many find it more cost-effective to drink whisky or other spirits. Pour six large glasses and the wine bottle is empty whereas a bottle of whisky gives 25 small pegs. But common sense once again tells us that decent wine should be much cheaper than whisky.
Here comes the Tata pickup of the farm manager again. It’s really an affordable vehicle in South Africa – we have done away with a lot of duties and import restrictions, and Tata is surging full throttle ahead.
I leave you with the writer, Jake Lorenzo’s words: “No nation has ever delivered its full potential where wine was expensive!”
Cheers! Remember, an occasion without wine isn’t an occasion.
Stefan Gerber is a Sommelier India columnist

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2 Comments

  1. Interesting article. I knew high prices for international wines in India were driven by high duties. I did not think that the Indian wine industry was significant enough to influence the government to keep these duties high. I thought this was more to do with the fact that “alcohol” still has negative connotations with the government and bureaucracy

  2. When I returned to India 2 years back after spending the better part of the decade in California, I was delighted to walk into the neighborhood Fabmall (now More…) and find several of the familiar Napa valley wines on the shelves along with a mongrel bunch of labels from France, Australia, Chile and other usual suspects ala Trader Joes. What blew a gigantic hole in my enthusiasm was when I looked at the prices! My initial dreams of stocking up my cupboard with labels that were ‘regular’ in USA went up in smoke with the realization that I would have to spend a small fortune on buying them. I settled on some Sula – which I found most disappointing – and Grover’s La Reserve which made up for my earlier disappointment with Sula. These would be sub $10 wines in the US and are similarly priced in India.

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