Indian Wine Industry

Contents

Overview 3

Market scenario 4

Consumption Pattern 5

Classification of wines 6

Indian Wine Opportunities 7

Health Benefits of Wine 7-8

Growth Prospects 9

Our Advisory Services & Outlook 11- 12

Overview

• Wine market generated total revenues of $3 billion in 2008;

• Wine market is expected to reach $661.9mm in value and 32.8mm liters in terms of volume by 2012, posting a growth of 32.2% and 32.1% respectively over 2007

. • Per capita consumption of wine in the

country was estimated at around 9 Milliliters in

2008.

• Potential for wine sales in India is considered

to be very large.

• Indians consumed more than 300 million cases of beer,

90 million cases of whisky, and other spirits in 2007-08

• Market is approximately 5 million litres in volume terms and Rs. 500 crore in value terms.

• Wines sales in 2007-08 were 8,20,000 cases. France accounts for almost half of India’s wine imports and Italian 30%.

• Lastly in India the cost for opening and setting up a wine plant with capacity of around a lakh litres comes only to somewhere between the Rs. 10 - 15 million mark. As a result many entrepreneurs, Indian and foreign, are jumping on the Indian wine bandwagon.

Fact Sheet of Indian Wine Industry

Market Scenario

• The size of the wine market is of 1.5 million cases. Though the per capita consumption is 9 ml, the industry is growing at 25 to 30 per cent and the future seems bright at present.

• Approximately 38 wineries are presently operating in the country with a total production

of 6.2 million liters annually.

• Maharashtra is leading among the states with 36 wineries and 5.4 million liter production.

• At present 7,62,000 wine cases are sold every year, which includes 46,000 cases of

sparkling wines.

• Contributions made by major wineries such as, Champagne Indage (CI), Grover

Vineyards and Sula Vineyards for indigenous production of quality wines in the country are

highlighted.

Sl.No Segment

Domestic production

(‘000 cases*)

Imports

(‘000 cases)

Total

(‘000 cases)

Retail Value

(Rs. Million) 2003 2004 2003 2004 2003 2004 2003 2004

1. Sparkling wines 35 35 5 11 40 46 258 297 2. Still wines -premium 117 143 53 63 170 206 779 944 3. Still wines -cheap 234 240 -- --- 234 240 281 288 4. Fortified wines/Others 4 5 1 1 5 6 13 16 Total 390 423 59 75 449 498 1331 1545  

Segment wise Indian wine market during 2003 and 2004

*Note; A case is a unit of 9-liter capacity or equivalent to 12 bottles

Market Segmentation

Consumption

• The per capita consumption in India is only 0.07 litre/person/year as against 60-70 litres in France and Italy, 25 litres in US and 20 litres in Australia and even China has 0.4 litre.

• Domestic wine market will grow around 25% per annum to touch around 9 million litres by 2010 from current estimated level of over 5 million bottles a year.

• The biggest consumption up to 80% is however confined to major cities like Mumbai (39%), Delhi (23%), Bangalore (9%) and the foreign tourist dominated state of Goa (9%), where as Rest of India has only 20% consumption.

Major Wine markets of the World

France 5.6 Billion ltrs Italy 5.3 Spain 3.5 US 2.2 Argentina 1.4 Germany 1.0 South Africa 770 Million ltrs Australia 750 M Ltrs China 690 Gallo (MNC) 675 Portugal 611  

Out of worlds total annual production of 32 billion litres, the following are among the top countries and MNC’s have their major share in the world wine market.

• Around 63% of the volume sales of wine are through off-trade channel in five-star hotels, pubs and bar-restaurants. Now even the emerging tier II cities working professionals and younger generation are also consuming wines a lot.

Classification of Wines

Wine is classified in three major categories:

• Table wines: Table wines, also called still or natural wines, are consumed mostly with food; they tend to compliment the meal.

o By Color § Red Wine § White Wine § Rose (pink) Wine

o By Character § Dry White and red § Sweet White and red

These wines shall be the products obtained from the alcoholic fermentation of grape juice/must. Their color shall be colorless to golden pale.

• Sparkling wines: Sparkling wines, for example champagne is distinguishable by its effervescence and is drunk for the most part on festive occasions such as weddings, birthdays, and during the holidays.

• Fortified wines: Fortified wines, such as sherry or vermouth, are most commonly drunk before or after meals and it is also frequently used in cooking.

Indian Wine Opportunities

The main factors attributable to this fast growth can be enumerated as below:

• Increasing social acceptance of drinking of alcoholic

beverages.

• Increasing awareness of wine as a separate drink other than

spirits.

• Increasing spend on corporate and personal entertainment.

• Indian women increasingly become independent, financially

& otherwise, & begin asserting their spending power, wine

drinking is becoming the rage.

• Increasing health consciousness.

• Increasing awareness in Govt. Authorities to encourage wine

drinking compared to spirits.

• Increasing awareness and knowledge about wines from

different regions of the world.

• Increasing tendency to try newer products / brands.

• Increasing awareness in Govt. to encourage wine drinking

over spirits.

Health Benefits of Wine- ‘Cheers to your Health’

A new study offers more evidence that moderate wine consumption is associated with a significant reduction in all-cause mortality, cardiovascular disease and cancer among men.

Check out some of the most recent studies that boast the health benefits of wine:

Overall Health Benefits:

• Anti-aging effects in red grape skins (Harvard Medical School in Boston, 2004)

Lung Health Benefits:

• Improved lung function from antioxidants in white wine (American Thoracic Society, 2002)

Heart Health Benefits:

• Coronary heart disease reduced (University of California, Davis, 1995)

• Healthier blood vessels in elderly (University of Ferrara in Italy, 2004)

Ulcer Prevention:

• Ulcer-causing bacteria reduced (American Journal of Gastroenterology, 2003)

Cancer Prevention:

• Cancer cells killed by protein in red grape skins (University of Virginia Health System, 2004)

Stroke Prevention:

• Arteries kept clean by polyphenols in red grape skins (William Harvey Research Institute, 2002)

Women’s Health Benefits:

• Decreased ovarian cancer risk (The Queensland Institute of Medical Research in Australia, 2004)

• Stronger bones (Twin Research and Genetic Epidemiology Unit, St. Thomas’ Hospital in London, 2004)

• Lower risk of stroke (Centers for Disease Control and Prevention, 2001)

Men’s Health Benefits:

• Lower risk of heart attack for men with high blood pressure (Worcester Medical Center in Massachusetts, 2004)

Prospects for Indian Wine Market

At the moment India produces only 8.35 million bottles per year. There is a huge potential in Indian market itself. For export market, the increasing popularity of Indian cuisine is an automatic opening. With more and more professionals visiting India on regular basis, and the fact that Indian wine exports are going up every year, word is getting spread very fast creating awareness of Indian wines in International market. What the country needs now is set of rules and norms to monitor quality compliance so that credibility of Indian wines as a product or brand is established.

Domestic demand weakness, rising excise rates and dwindling tourist numbers all combined to lead to Indian wine sales declining by 60% in the nine months through to June 2009.

Through to 2014, we expect Indian wine sales in local currency terms to increase by 77.9%, surpassing our growth forecast of 62.3%, in rupee terms, for the wider alcoholic drinks industry (see chart).

India 5yr Alcoholic Drink Sales Growth Forecasts (%) by Category

Source: BMI

Value sales of wine are also forecast to surpass volume sales growth (59.1% to 2014) as consumers gradually trade up to more expensive wine variants in line with increased familiarity with the drink. As ever, the main driver of this growth will be India's ongoing economic development, which will lead to rising disposable incomes, middle class growth acceleration and faster urbanisation.

Our Advisory for Indian Wine Industry

n Wine consumption in India is expected to triple within the next three years. Lifestyles in urban areas and some semi-urban pockets are developing. By 2011, Asia will account for 4.8% of world wine consumption.

n Market is expected to reach $661.9mm in value and 32.8mm liters in terms of volume by 2012, posting a growth of 32.2% and 32.1% respectively over 2007

n The sales of wine through on-trade channels are expected to be marginally faster than off-trade sales. On-trade volume sales are expected to be driven by the establishment of exclusive wine shops while off-trade sales will be driven by non-specialist stores like supermarkets

$164$220

$299$398

$519

$662

0100200300400500600700

2007 2008 2009 2010 2011 2012

Sal

es V

alue

($ in

mill

ions

)

Still light grape wine Sparkling wineFortified wine and vermouth Non grape wine

CAGR: 32.2%

$164$220

$299$398

$519

$662

0100200300400500600700

2007 2008 2009 2010 2011 2012

Sal

es V

alue

($ in

mill

ions

)

Still light grape wine Sparkling wineFortified wine and vermouth Non grape wine

CAGR: 32.2%

Forecast Sales of Wine (2007-2012)

The Indian wine industry is currently on an

upswing. Production and consumption are

expected to increase by 25% to 30% over the

next 5 years. Being in the early stages of market

growth, the industry enjoys protection from the

state as it stands low in cost competitiveness

when compared with the global benchmarks

Outlook

REEAP can bring to your company experts with a broad range of skills and business acumen. We work as multi-disciplined teams to provide strategic and management consulting Services.

• Development of business strategies,

• Reviews of processes and technology,

• Systems implementation (including vintage costing),

• Performance measurement and managing through change.

Source: Euromonitor, Rabobank research dated February 2008, press

Sub Sector Total Value

($ mm) Total Volume

(Liters mm) CAGR

(2007-2012) Still light grape wine 571.6 30.5 34.7

Still Red Wine 271.9 15.4 35.0 Still White Wine 299.7 15.1 34.5 Still Rose Wine _ _ _

Sparkling wine 81.2 1.1 21.1 Champagne 61.5 0.3 21.4 Other sparking wine 19.7 0.8 20.0

Fortified wine & vermouth 9.1 1.2 19.6 Port / Oporto 9.1 1.2 19.6 Sherry _ _ _ Vermouth _ _ _

Non–grape wine _ _ _ Total 661.9 32.8 32.2  

n Organic wine is unlikely to take a significant place in the market, given the total absence of organic wine till 2007. Moreover, no major domestic vineyards are involved in organic farming and the high prices of organic wine further discourages its demand

n With the entry of new players such as Seagram and United Spirits in 2007, and a number of other players such as Diageo said to be keen to enter the market, competition is expected to intensify.

The industry is expected to evolve further

with intensifying competition, and more

investments in wineries, bottling facilities,

their distribution, promotions and

advertising. Such investments will result in

the expansion phase in the lifecycle of the

industry, leaving the emerging phase

Forecast Sales of Wine by Sub Sector (2012)

n Indian companies like Champagne Indage and United Spirits through acquisition of foreign companies are trying to set up production facilities in countries like Australia, Argentina, France, Italy and South Africa, where domestic consumption is strong

n Support measures from the government in policy and infrastructure provision will be an incentive for more investments particularly from liquor players who have established distribution networks

Currently the wine market is expanding with new entrants and increasing awareness among consumers. The highly concentrated industry dynamics are set to change with the entry of several spirits majors and foreign entities. More fragmentation is expected in the industry with several competitive groupings comprising many players entering the market.

Source: Euromonitor, Rabobank research dated February 2008, press

 

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