Wine sector poised for a strong comeback

PUNE: Backed by a slow, yet steady economic recovery in the country and across the globe, India's wine sector that was hit by last year's recession and the terror attacks in Mumbai, which dried the flow of foreign tourists to the country, is gearing up for a strong comeback this year.

The sector is, however, expected to witness some shakeout in terms of wineries that may not sustain in the long-run. Terms that govern business practices, like procurement of grapes, etc, are also set to become more stringent.

Rajeev Samant, chief executive officer of Sula Vineyards, told TOI that though the production this year will be less as compared with last year's, the unsold stocks will meet this year's increased demand.

"Quite a few wineries will be crushing almost 75 per cent less than they did last year, but there is leftover wine from the last two vintages mainly red, that gets better with a year or two of ageing," Samant said.

Samant's confidence is shared by Ravi Jain, managing director of Valle De Vin, who launched a sparkling wine last week. "With the economy is improving, there is increased consumption of wine and the tourist inflow also seems to have improved," Jain said, adding that his company wants to produce 3,00,000 bottles of wine this crushing season, which begins early 2010.

On the grape procurement front, Jain said there is no cause of worry as many wineries plan to crush less because of last year's economic slump. Samant, too, said grape availability will not be an issue and, in fact, Sula would be crushing 800 tonnes more grapes than it did last year. "Bigger wineries may not do crushing at all this year, which means grapes will be there for others to use," Samant observed.

"Last year's terrorist attacks in Mumbai were a big blow to our industry. Wine sales in hotels make a large portion of our overall sales, more so than for spirits and beer. So, December, traditionally the biggest month of sale, was catastrophic for the industry in 2008. Things are looking better this year. Tourism still hasn't bounced back to its earlier levels, but domestic demand is strong. So, while markets like Rajasthan and Goa have been affected, Maharashtra and Delhi are going strong," Samant said.

Jaideep Kale, technical co-ordinator for wine industry with the Maharashtra Industrial Development Corporation, told TOI that the production of wines fell from 2.32 crore litres in 2008 to 1.32 crore litres in 2009 and is expected to be 1.35 crore litres in the 2010 crushing season. "This will balance the availability and demand in the market. This year's wine grape plantation is 6,000 acres and the grape growers have an added opportunity to send grapes to four new wineries that opened this year in Karnataka and one in Tamilnadu."

Nitin Desai, managing director of Vinsura, a company set up by farmers, is also in a mood to exploit the rising mood as he has engaged an agency to do the branding and marketing for his company's red, white and sparkling wines. "We lay low for some years, using the traditional sales channels. But the time is now right to create a brand image for ourselves," Desai said.

Vinsura has a wine producing capacity of 6 lakh litres and sees no problem procuring grapes as the company has its own vineyards.

Staying power will, however, prove crucial for wine producers in their bid to exploit the opportunity offered by the economic recovery, Samant pointed out. "New strategies to suit the market needs, such as introducing low-priced wines at a time when the business is struggling, helped Sula," he said, adding that he expected quite a few wineries to shut down.

"This is natural as a lot of people got into this business without understanding the fundamentals. There is a paradigm shift and we won't return to the days of grapes being procured at Rs 35 per kg. We will also see a lot more lower-priced (below Rs 250) wines in the market. But I see very positive growth over the next decade and I fully expect the Indian wine market to regain its position as one of the world's fastest growing wine markets," he noted.