Wine prices in Bangalore likely to soar

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Bangalore has a thriving wine culture, but enthusiastic wine consumers like Stanley Pinto are none too happy. Here’s why.
I bought two cases of Indian wines made outside Karnataka yesterday. If you live in Bangalore, I strongly recommend that you do so as well because starting some time soon you could be paying 80-110% more per bottle. That’s absolutely true. Here’s what it’s all about:
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There are two wine producers in Karnataka – Grover and Naka Spurt. Their wines and 45 others made outside Karnataka (18 of them from other parts of India) are freely available in Bangalore. The wine-drinking habit is growing very nicely in Karnataka, as a comparison of sales figures for the months April-July 2007 and 2008 shows. Although April to July is usually a slow sales period and the July 2008 figures are incomplete, the figures, nevertheless, are more than encouraging.
An interesting feature of the wine consuming habit almost everywhere in the world is that as the habit takes hold, consumers gravitate from the cheap and cheerful variety to the mid-range and higher quality. The situation in India and Karnataka is much the same with the actual sales in Karnataka during the last financial year. Apparently, wines that retail for around Rs 350 to Rs 550 account for 55% of the entire wines sales in Karnataka. It wouldn’t be surprising if this represents most people’s buying habit – it certainly does mine.
However, hapless wine lovers like us will soon have to pay a great deal more for this pleasure because of an unexpected increase in government prices.
In 2007, the Government of Maharashtra imposed a special tax on wines “imported” from outside the State. It was done to protect their wine makers. Perhaps not coincidentally, one of the most influential politicians in India has for a long been reportedly the major player in the wine-grape farming and wine producing industry in Maharashtra. Consequently, non-Maharashtra wines became more expensive in Maharashtra and, as a result, the two wine growers from Karnataka, Grover and Naka Spurt, found it hard to compete. Subsequently, to dodge the special tax bullet in Maharashtra they set up wineries in the State to produce their brands, and so resolved the problem to an extent by a most commendable business tactic.
On the face of it, this may seem to be an unnecessary additional expenditure, but, for example, with Grover’s national sales increasing with the growing wine drinking habit, and production capacity in their existing Bangalore winery unlikely to meet the additional demand, a second production facility was inevitable. They would have had to build new facilities in the foreseeable future anyway, so why not in Maharashtra where they could address their other problem as well? So far as Naka Spurt is concerned, I would hazard the guess that with negligible interest in their brand in the home market of Karnataka, they could scarcely stand to lose access to the substantially larger Mumbai and Maharashtra markets.
The problem is that these two producers went further. They have actively (and successfully) encouraged the Karnataka government to levy a tax similar to the offensive one in Maharashtra on all wines “imported” into the State from wineries in the rest of India and from abroad.
Now, what does all this add up to in real money terms?
The new levy proposes to raise this so-called import fee on wine from outside Karnataka to Rs. 300 per bulk litre from the existing Rs. 10 per bulk litre. Every case of wine is equivalent to nine bulk litres. So the effective additional fee is going to be Rs 2,700 per case against the existing Rs 90. That’s an increase of Rs 2,610 per case or Rs 217.50 per bottle. Add to that the other levies that will subsequently accrue (including the government wholesaler’s margin, and the retailers margin) and the final retail price to consumers will rise by about Rs 280 per bottle.
Add this amount to the current price of wine from outside Karnataka you are drinking and you will understand the reason you should be emptying out the local wine store right away! Because you will shortly be paying Rs 730-800 per bottle for the Big Banyan, Indage, Mandala, Nine Hills, Revielo and other such wines that you like.
It gets worse: If you use a low-priced wine (like UBS’ Zinzi) for daily quaffing, it will rise from
Rs 250 to Rs 530 per bottle! In fact Mr Mallya’s new wine business is going to take a challenging hit in Bangalore as all his Indian wines are produced in Maharashtra.
The only Indian wines that will continue to cost the same in Karnataka will be the produce of Grover and Naka Spurt. But even that may not last for long: The temptation to indulge in some opportunistic marketing tactics is likely to be irresistible and I’d wager that their prices will see am unannounced rise. After all, they will be cheaper than the rest by a whopping Rs 280; enough of a gap to take advantage of.
Which brings me to a very personal point of view: Should we continue to drink Grover and Naka Spurt wines at all? I most certainly will not. In fact, I have decided to go further and proscribe the offerings of these two producers from any functions I have any control over. I’d rather pay the extra costs than let any of my money flow into their pockets.
As it happens, the Grover wine I favoured was La Reserve but I stopped using it some months ago, when I found its quality had slipped meaningfully. Most of my knowledgeable friends feel similarly. And as for the other bloke’s produce, I tried it once and decided life was too short to have to settle for it.
I have always maintained that if there is a wrong way to do something, our benighted governments will find it. For years they have clubbed wines with hard liquor in the tax regime. Despite this, lifestyle aspirations have encouraged Indians to drift toward wine and the local businesses are growing satisfactorily. But now, with this retrograde step that I gather other rapacious State governments (Goa, for example) are planning to emulate, how many wineries will find their business models ruined?
There’s another most untimely consequence: the entry-level wines will rise from Rs 250 to Rs 530 per bottle. How many of the new acolytes of the nouveau wine-drinking habit will decide this is all too rich for their blood and revert to hard liquor?
In effect, insofar as sales in Karnataka is concerned, the majority of the wine producers in this country are going to take a hit – the emerging wine drinking segment will take a hit – the retailing industry will take a hit – only Grover and Naka Spurt will be in perfect shape.
With wineries in Bangalore, and the price differential between them and the competition, they will expect to take over a major share of the industry in Karnataka. And with their wineries in Maharashtra, they will keep their business buoyant there as well.
We in Karnataka and Bangalore, who have played such a big role in growing the Grover image and turnover, have been given the shaft. Which reminds me of that hoary old story of the Indian species of crab – but you know it already.

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11 Comments

  1. These protective tax hikes will have serious consequences to Inter State Commerce…
    The Indian Constitution needs to be amended
    to prevent this from escalating to uncontrollable levels.Logical conclusion if
    uncontrolled….each State would be a Country
    with import firewalls all around.Maharashtra started it…they should be step back and show that they are true leaders

  2. The convoluted alcoholic beverages policy in India, makes each state, akin to another country, each with their own cumbersome taxes and regulations. The recent collapse of the Doha round of trade talks was not the only failure last month. The trade war growing between the three wine producing states in India, Maharashtra, Karnataka and Goa, highlighted by Mr. Pinto is another one. Unfortunately, unlike global trade which has the World Trade Organisation, India has no mechanism for settling economic wars between states.
    A few years ago, the Government of Maharashtra imposed a special tax of 150% on wines “imported” into the state from outside Maharashtra. It is alleged, that it was a purely political decision, done at the behest of one of India’s most influential politicians, who has, for long, been reportedly, the major player in the wine-grape farming and wine producing industry in Maharashtra. The 150% tax made non-Maharashtra wines more expensive in Maharashtra. The wine producers of Karnataka, found it hard to compete in Mumbai.
    There have been half-hearted attempts by the Karnataka Government to resolve this issue with their Maharashtra counter-parts. The lack of genuine desire, urgency or sensibility, on both sides, expectedly, has not yielded positive results.
    I disagree with the decision of the Karnataka Government, and I am the first to say, two wrongs to do not make a right, but……………
    The nasty actions first precipitated by Maharashtra deserve a response. They started the Indian wine industry down this slippery slope.
    The market place, consumers and producers, determine usage. Government can implement rules of conduct (procedures) but no one, including the self-proclaimed smartest people in the world, often found working in government, can accurately predict a marketplace. The market place determines itself.
    Everyone in this country from the farmer to the consumer is going to take a hit.
    I wonder if Indian wine producers and consumers, can go to the WTO and beg for protection from their own governments.

  3. I am from Maharastra, and the increase in any taxes in karantaka is only a response to the state like Maharastra (who is going to be most hit with the increase). We in maharastra are forced to drink the lousy Wines produced here because the imported wines are outrageously priced due to state taxes. . I dont see you talk about that or banning or not promoting those Mahrastra wines. why the bias. and By the way LA Reserve still stands to be the best India red wine available period. The people of Karantaka are fortunate to have this wine available at a resonable price. please get your fact correct before you make such press releases. only reflects that either you are involved in production of wines in Maharastra like the politicians or you have vested interest. Rather the whole country should ban wines out of Maharastra till the duties and taxes in maharastra are leveled. or each state to protect their farmers should do the same Rice in Punjab Fruits in Himachal etc.. Its high time the central Govt brings about some for of uniformity to disparity in taxes across the country in Wines.

  4. Really interesting piece and it just shows how consumers are being hurt by the interstate price wars. I wonder if Grover will increase its prices too. The fault lies with the Maharashtra government for starting this micro-protectionism.

  5. Stanley, this is a fascinating article and it goes to show how little clout consumers have. At a time when wine drinking should be encouraged, the producers are putting the profits ahead of trying to grow the market. Its a pity and will hurt India in the long run.

  6. Hi there, can you guys help me how can I find wine shop in Bangalore with the reasonable price that can do home delivery of imported wine such as Penfolds and other liquor (Chivas, Johnny Walker, Dom Perignon champagne)? Thanks.

  7. We represent the large German Cooperative Winemaker NEIDERKIRCHENER
    WEINMACHER consisting of 457 wine growers who want to introduce there wines to the Indian Market.
    The wines they are offering are :
    Riesling Dry (White)
    Riesling Sweet (White)
    Dornfelder Sweet (Red)
    Dornfelder (Red)
    Pinot Noir Quality White and Pinot Noir Quality Red
    Incase you need any further details like price list ,characteristics of wines,production capacity,glabal presence etc, you can mail me or call on me on my mobile,and I shall revert back immediately.
    Looking forward to your positive response,
    Thanking You,
    For,VERVE TRADING PVT.lTD.
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    20 Shakespeare Sarani
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  8. We represent the large German Cooperative Winemaker NEIDERKIRCHENER
    WEINMACHER consisting of 457 wine growers who want to introduce there wines to the Indian Market.
    The wines they are offering are :
    Riesling Dry (White)
    Riesling Sweet (White)
    Dornfelder Sweet (Red)
    Dornfelder (Red)
    Pinot Noir Quality White and Pinot Noir Quality Red
    If you need any further details , ie. price list,characteristics of wine,glabal presence,production capacity you can mail me or call on me on my mobile, and I shall revert back to you at the earliest.
    Looking forward to your positive response,
    Thanking You,
    For,VERVE TRADING PVT.lTD.
    ROHAN TONDON
    Mob : +91 9831491080
    20 Shakespeare Sarani
    Kolkata

  9. How can maharashtra govt boost tourism
    Taxes are high import duty is high
    Promoting wines among India’s population no awareness
    So many wine companies but no wine regulatory body with strct governing rules for Indian wines
    Like A O C in france
    Though india not a wine continent like Europe
    But atleast let’s start growing awareness n benefits of wine drinking for our educated future generations

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