This is the fourth in a series of articles on wine in the BRICs – Brazil, Russia, India and China. (Note: According to today’s Financial Times, Jim O’Neil, who coined the term BRICs has decided to expand the list to include Mexico, South Korea, Indonesia and Turkey. Hmmm. I will be expanding the Wine BRIC list myself in an upcoming post!)
India’s wine markets are full of surprises for anyone who hasn’t been following them closely in recent years. The only previous Wine Economist post on wine in India dealt with that country’s misguided tariff policies that I argued stifle the wine industry in an attempt to protect it (a view I still hold).
Because most people don’t associate wine with India, you might think that wine is quite new in India — and it is as you will see below, but it is also very old. Like the other BRIC nations, wine in India is going through a dramatic transition today, but one that is quite distinct because of India’s unique history, politics and culture.
The Roots of Indian Wine
Persian conquerors brought grape vines to India nearly 2500 years ago; wine consumption is first mentioned in a text on statecraft written about 300 b.c. Wine was a beverage for elites, not the masses (who apparently wanted stronger stuff), and lived a shadowy existence that continues today due to concerns about alcohol consumption. The influence of British colonizers contributed to the growth of Indian wine production in the 19th century, before the scourge of phylloxera hit India’s vineyards in the 1890s with predictable results.
Table grapes are a major crop in India and wine grapes are grown in several regions, generally at altitudes of 200m – 800m, although vineyards at 1000m exist in Kashmir. Growing conditions are surprisingly good using viticultural practices that take humidity and rainfall patterns into account (harvest must be complete before the monsoon). Two crops per year are common.
Since independence in 1947, wine has been caught in a crossfire in India. On one hand, it is a heavily controlled substance. Article 47 of the constitution makes it a function of the state to discourage alcohol consumption (Gandhi and some other early leaders were teetotalers), so wine imports are highly taxed and advertising is forbidden. Individual state governments within India tax and regulate wine sales much as in the United States, creating a distributional crazy quilt. At the same time, however, some state governments promote viticulture and wine making as an economic development tool. It’s a push and shove situation for wine.
The surprising state of wine in India today reflects this condition. On one hand wine (especially imported wine) is highly taxed and the national market fragmented by uncoordinated state regulator regimes. At the same time, pro-development government policies seem to have led to an over-expansion of supply by encouraging new vineyard plantings. Wine consumption is growing rapidly as India’s expanding middle class embraces the fruit of the vine, but for the moment at least there’s a shakeout taking place among producers who find themselves out ahead of demand.
A Tale of Three Winemakers
The contemporary history of Indian wine can be told through the three most important wineries, Chateau Indage, Grover Vineyards and Sula Vineyards.
Chateau Indage is generally credited with starting the quality wine industry in India in the 1980s. Bombay investor Sham Chougule sought to produce sparkling wines, mainly for export (40% foreign sales today). Piper-Heidsieck, the French Champagne house, provided technical expertise for site selection, grape variety choice and wine making. The result was India’s most famous wine, Omar Khayyam, a sparkling wine praised by Jancis Robinson among others. Chateau Indage was until recently India’s largest wine producer, offering two sparking wines, a pair of reds (Cabernet Sauvignon blended with indigenous varietals) and two white wines. Chateau Indage today is expanding globally, having acquired wineries in Australia and a distributor in the UK.
Grover Vineyards came next, a collaboration between Kanwal Gover and French wine maker George Vasselle. Their ambitious goal was to bring Bordeaux to Bangalore — to make French-style wines in India using only French varieties. This they have achieved to a very considerable extent. With the help of flying winemaker Michel Rolland, Grover’s signature red wine La Réserve has gained an international reputation.
Sula Vineyards recently overtook Chateau Indage to become India’s #1 wine producer. Sula is the project of Rajeev Samat, who left home to study at Stanford and work in Silicon Valley before returning to manage the family enterprises. His Tuscan-inspired winery and associated vineyards in Nashik, a few hours drive from Mumbai, is part of an elaborate economic development plan that includes vineyards, wine production and wine tourism.
Having introduced a value range to complement its premium wines in 2008, Sula is expanding rapidly on all front (see the video above for more information), adding 1000 acres of new vines to supplement their current 1200 acres. A new winery is in the works to handle the increased tonnage. Sula now has more than 300 employees and a 70% market share, making it the Big Dog in Indian wine.
Sula is a big part of the movement to make Indian wine part of the mainstream middle class lifestyle using all the techniques of modern marketing. It is worth taking a detour to visit the Sula website to see how they tell their story and position their products. Like its colorful label (and Rajeev Samat, its enthusiastic owner), Sula combines Indian roots and international influences.
The Indian wine market has obvious potential that has attracted investors to the domestic industry and international firms seeking markets for their products. The U.S. Wine Institute commissioned a 2008 report on the Indian wine industry (the link takes you to a pdf of the report) that makes good reading. Only a very small percentage of India’s total population has the right combination of religious views, legal age, location in states where alcohol can legally be sold, disposable income and exposure to wine to be considered potential customers, according to the report. However this tiny percentage amounts to 24 million people, a considerable and growing market!
The study’s SWOT analysis provides an effective summary of the situation.
- Indian wine consumption has grown 25-30% annually over a 5year period.
- Good climate for grape growing
- Urban population is increasing.
- Youth are craving an alternative to hard liquors and developing a more refined taste.
- Wine is becoming more acceptable to women and youth.
- Wine remains an elite taste.
- Wine is difficult to store in India due to lack of cellars and refrigeration.
- Less than 50 percent of the population is legally old enough to drink (25 yrs. old).
- 400 million persons are 18 years old or younger.
- Poor awareness of wine and infrastructure.
- 100 million persons will be legally allowed to drink alcohol (25 yrs. old) in the next 5 years.
- Supermarkets are emerging to support wine distribution infrastructure.
- Domestic market with increasing disposable income.
- Growing tourism industry.
- The Indian constitution discourages alcohol consumption.
- Wine viewed as a “sin” by some.
- Indians still prefer whisky.
- Advertising for alcoholic beverages is banned.
- Domestic wine production is coddled by state governments.
While there are many challenges to the development of the Indian wine industry, I suspect that the biggest obstacle will be reforming government policies that fragment the market and create counter-productive domestic incentives and barriers to foreign competition. After that, serious infrastructure limitations must still be addressed.
It is pretty clear that good wine can be made in India and that a large and growing potential consumer market exists. A lot of work remains to realize India’s grape potential (sorry about the pun!).