Emerging Opportunities in India’s Wine Market
India’s wine market is estimated to be valued at US$150 million, where imported wine accounts for 30 percent and the rest is catered for domestically. The wine market is expected to grow at a compound annual growth rate (CAGR) of 20 to 25 percent.
India’s population above drinking age is over 485 million and appears to be experiencing a shift that is normalizing a drinking culture, especially in the metropolises. The social and cultural taboo around alcoholic beverages is slowly dissipating and some beverages, such as wine, is becoming a status symbol among the upwardly mobile classes.
Growth of India’s wine market
India is traditionally known to have a male dominated drinking population who favor the consumption of beer, rum, and scotch. Wine, on the other hand, is perceived to be more suited to feminine taste. However, among the upper and middle-class populace, that perception is fast changing. It has also become one of the most viable gifting options for birthdays, anniversaries, and other events.
India’s modern rendezvous with wine began in 1984 with the setting up of the Champagne Indage plant; however, wine consumption was not widespread till much later. Only recently has the culture around wine consumption changed, increasing multifold from a mere one million liters per annum in 2001 to over 30 million liters per annum in 2019.
The Indian wine industry saw a CAGR of 14 percent between 2010 to 2017, making it the fastest growing alcoholic beverage in India.
Rapid urbanization, changing lifestyles, rising disposable incomes, exposure to new and western cultures, and overseas education have contributed to the popularity of wine in India, particularly among urban consumers.
Growth in the number of foreign tourists in India has also led to an increase in overall wine consumption.
Apart from a loyal fanbase among female consumers, wine brands covering all categories like Cabernet Sauvignon, Pinot Noir, Syrah/Shiraz among red varietals and Viognier, Riesling, and Chardonnay among white varietals, have found connoisseurs among millennials who made up for over 50 percent of wine drinkers in 2018.
Local industry and key players
In 2018, India’s local wine production stood at approximately 17 million liters whereas wine imports in the same year were 5.2 million liters, valued at US$28.38 million.
India’s top destinations for wine imports in 2018 were Australia (41 percent) and the European Union (38 percent). High tariff rates are a point of contention for exporters but the fast-growing Indian wine market can no longer be ignored.
Moreover, geopolitics continues to disrupt global trade, making it necessary for exporters to diversify their target markets.
For example, Australian winemakers recently experienced huge tariffs slapped on their products exported to the Chinese market or tightening regulatory scrutiny – effectively blocking their market access.
While ASEAN markets are definitely a key target market in the wake of reducing access to the Chinese market, foreign winemakers cannot afford to altogether ignore opportunities in India’s market.
With a vast young population who are present online and whose preferences are influenced by the latest trends – India’s consumer market present several opportunities, both currently and in the medium- to long-term.
Moreover, in terms of the development of its industry and cultivation – India has 123,000 acres of vineyards, out of which only one to two percent area is used for the production of wines.
At present, there are around 110 wineries in India; 72 of them are in the state of Maharashtra. Wine production in India is spread across five major wine producing regions, including Nashik and Pune in Maharashtra state and Bangalore, Hampi Hills, and Bijapur in Karnataka state.
Among domestic wineries and vineyards, the Sula Vineyards (Nashik, Maharashtra), Chateau Indage (Pune, Maharashtra), and Grover Vineyards (Bengaluru, Karnataka) are major key players who claim around 90 percent of the market. While Indage marked the beginning of localized wine production in India in the early 1980s, Sula and Grover ventured into this business in the late 1990s.
India’s wine import by region
Key preferences among wine drinkers in India
Indian wines are perceived as “better value for money” by cost-conscious consumers who often find imported wines a bit expensive. Thus, despite a similar awareness of wines from India (59 percent) and France (58 percent) among wine drinkers in India, a higher proportion of Indian drinkers consume domestic wine.
However, that trend is fast changing.
Indian consumers are steadily becoming more willing to spend on higher-value products, placing a premium on finer experiences. This has led to the conscious favoring of imported wines brands like Cotes de Luberon, Rojo Vivo, Hardy’s, and Broken Hills across Zinfandel, Shiraz, Merlot types of wine, to suit their evolving tastes.
This additionally corresponds to the changes in wine making techniques and approaches, with winemakers catering to a diverse set of consumers – offering more approachable sweet wines to new consumers and evolved ones, including prosecco types and frizzante, for more experienced drinkers. For example, in 2018, red wine (at 49 percent) was one of most consumed categories of wines among Indian consumers, whereas the carbonated sparkling wine (three percent) and white wine (13 percent) was still limited to experienced wine drinkers. Fortified wines like Marsala and Madeira, which have a higher alcohol content, claimed 35 percent share of the Indian market.
According to the Wine Intelligence 2018 survey, most of India’s wine consumption takes place in urban centers, including Mumbai (32 percent), Delhi (25 percent), Bangalore (20 percent), Pune (five percent), and Hyderabad (three percent). Domestic wines dominate the Indian wine market due to their lower price and higher availability. Imported wines face an import tariff of 150 percent, which severely limits the availability and accessibility of foreign wines in the market.
Factors driving market performance of wine brands
The major factors driving the consumption trends among different types of wines are price sensitivity, brand familiarity, and country of origin.
In terms of price, economy wines ranging from US$7 to US$10 are the most preferred and as most Indian wines are placed in this category – they seize the lion’s market share. It has also been surveyed that even though middle-income groups are willing to explore international brands, lack of access to reasonably priced wines in the range of US$10 to US$15 restricts them to domestic options. Lack of awareness, owing to marketing restrictions (more in the next section) can be one of the reasons for this trend.
Thus, for foreign wine exporters, key to claiming the Indian market would be to cater to the Indian palate that is biased towards sweet wines and broaden its appeal to middle-income Indian consumers by working on the price range.
Another prerequisite to performing better in the Indian market would be to increase consumer knowledge to ensure increase in demand, specifically towards higher quality and premium wines ranging over US$20.
Rules and regulations governing India’s wine industry
The advertisement of all alcoholic drinks is banned in India since 2000.
Although liquor companies like Royal Stag advertise their brand through the sale of music CDs and mineral water, direct advertising of the alcoholic beverage is not allowed. Therefore, the marketing options are limited to wine tasting events, trade shows, festivals etc. Wine tourism is a key strategy adopted by leading wineries to lead consumers to their product. But the outreach in India remains limited.
Investment considerations and compliance standards
- Foreign direct investment (FDI): FDI up to 100 percent is allowed under the automatic route for brewing and distillation of alcohol, subject to the license approval by the appropriate authority.
- License to manufacture wine in India: In India, the respective state governments have the authority to levy or collect excise duties and make the rules on import, purchase, sale, or manufacturing alcoholic liquor – including wine in their respective jurisdictions. Here is an outline of state licensing and distribution structures in different Indian states:
- Open markets: A business may apply for a license at a set fee, if licenses are available. States which follow this structure are Maharashtra, West Bengal, Goa, Assam, Meghalaya, Arunachal Pradesh, and Tripura.
- Auction markets: Licenses are auctioned to the highest bidder. States which follow this structure are Uttar Pradesh, Rajasthan, Madhya Pradesh, Punjab, Haryana, and Chandigarh.
- Government controlled: These states have different models. For example, Karnataka is the most open state. In Delhi and Tamil Nadu, retail alcohol shops are run by the government.
- Prohibition states and union territories: States like Gujarat, Bihar, Nagaland, and Mizoram, and the Union Territory of Lakshadweep have prohibited the purchase, sale, import, export, bottling, or manufacturing of wine.
- Taxes and duties: The Central government imposes Custom Duties and Social Welfare Surcharge on import of wine into India and Central Sales Tax on inter-state sale of wines. The State government levies duties, such as Excise Duty, Value Added Tax, Transport Fee, Import Fee, Export Fee, Toll Tax, Label Fee etc. on import, purchase, sale, or manufacturing of alcohol, including wine, in their respective state. In July 2007, the Government of India imposed a basic customs duty on all wine products (HS code 2204) at 150 percent. An additional 18 percent Integrated Goods and Services Tax (IGST) is also charged on the imported wine.
- Food Safety and Standards Authority of India (FSSAI) labeling requirements: FSSAI has published a new notification for labelling standards, which includes specified requirements for the labeling of wine and other alcoholic beverages.
- Non-rectifiable labeling requirements should be printed on the product label and cannot be affixed.
- Name of Product (Red/White Wine)
- Ingredient List
- Manufacturer Name and Complete Address (Produced and Bottled by)
- Date of Bottling/Vintage
- Country of Origin
- Net Weight/ Volume
- Rectifiable labeling requirements signify that a label can be rectified by affixing a single non-detachable sticker next to the principal display panel without altering or masking the original label information in any manner. The rectification will be carried out at custom bond warehouses.
- Name and address of importer
- FSSAI logo and license number
- Statutory warnings: “consumption of alcohol is injurious to health” and “be safe-don’t drive and drive”
- Non-rectifiable labeling requirements should be printed on the product label and cannot be affixed.
The Indian wine market might be at a nascent stage, but its potential is fast attracting the interest of wine exporters from all over the world. The cultural revolution that millennial India is undergoing is forcing a change in tastes and preferences, inching towards more refined and premium imported wines. A rising level of health consciousness among Indians who see wine as a healthy alternative to other hard liquors also contributes to its popularity.
As geopolitical trends are forcing large-scale wine exporters like Australia to refocus on newer markets – the Indian market should not be ignored. The right market strategy will involve assessing key market bases, developing a relationship with and promoting awareness among Indian wine consumers, and investing in the opportunities associated with the country’s young market.
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