Wine industry is in a nascent stage in India. Estimates suggest an enormous growth potential of this sector. Both the indigenous wine making industry and the wine market of India require equal attention for proper growth and expansion. We have definitely reached an “inflection point” for this industry and therefore an overhaul in all dimensions and forms seems inevitable. The growth in import, export and consumption suggests that immediate steps are to be taken at national level to help this sector grow at a faster rate.
Let us outline the primary factors acting as constrain for this industry in India. At the very outset we have four major issues to note: (a) legal aspect, (b) global aspect, (c) social aspect and (d) promotional aspect. Though as a part of WTO commitments Indian government has taken some positive steps to help the industry move smoothly but in order to secure a massive growth in this sector planned and phased strategies should be adopted. Let us raise each such issue in the discussion with all possible solutions.
The legal issues involve stringent laws and a plethora of duties and fees such as excise duty, licence fee, sales tax, brand/label registration fee, import/export fee, vend fee, gallonage fee, turnover tax etc. The alcoholic beverages sector being a State subject States/UTs frame their own policies and taxation regime. Rates of such duties/fees vary widely from State to State. Though anyone can import wines into a Customs Bonded Warehouse as no licence is required for the same; thereafter, goods can move either duty free (against a licence from hotels) or duty paid to licence holders after paying the relevant customs duties. Wine is still clubbed with spirits for licensing and taxation by all states (with the notable exception of Maharashtra), and its production and marketing still subject to all the checks and controls of the ‘licence-permit Raj’ that constrain growth of a healthy domestic industry. The distribution pattern and controls vary in each state. Some of the states like, Delhi, Rajasthan, Goa, and Chennai etc. do not allow sale of imported wine without due permit and licence by the Government.
The Government of India abolished quantitative restriction on the import of Bottled in Origin (BIO) alcoholic beverages. It has brought down the bound rate to 150% on spirits (The applied rate on wines and beers is at 100%) in terms of its commitment to the Uruguay round in the mini budget of January 2004.The Ministry of Food Processing Industries has also set up a working group comprising of the state excise commissioners to draw up a policy for rationalization of taxes and developing a uniform excise policy. Uniform Excise Code seems to be the inevitable step to make stringent and varied laws standardized.
There are 7 European companies in wine sector in India. India imports around 3 million liters of spirit and 7500 cases of wine from Europe. French wines are still the largest imported, but wines from Australia and California are making strong inroads. The wine market is growing at 25-30 per cent a year, nearly three times as fast as beer, whisky or rum, which together makes up 45 per cent of the total. Exports currently make up about 10-15 per cent of total output. Seeing the rapid growth in this sector India has to make the environment adaptable for the foreign players to venture Indian markets and Indian companies to gain maximum advantage of the situation.
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.
Wine is a complete lifestyle drink very much related to health which can be an extension of the consumer’s personality. Though most of the Indian consumers are unable to relate themselves to wine but off late they have been able to associate with it. Increasing awareness of wine as a separate drink other than spirits has made it more socially acceptable. Increasing health consciousness and the increasing spend on corporate and personal entertainment has given a boost to this sector. The increasing awareness in Govt. authorities to encourage wine drinking compared to spirits has certainly brought cheers to the companies in the sector.
The perception of wines as being up-market and sophisticated is helping in bringing about this change. One sign of the changes happening is the emergence of Wine Clubs in a number of cities. The per capita consumption in India is only 0.07 liter/person/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. Not only has the number of imported wines increased exponentially, the Indian producers, too, have introduced a number of new labels and wine styles. 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. Apart from this, 72,000 wine cases are imported mainly by ITDC, Sansula, Brindco, E & J Gallo and other private companies.
Use of the mass media to promote alcoholic beverages is not permitted, but in-shop advertising or on-premise promotions are allowed in all states except Delhi. The lack of promotional activities for wine consumption in the country and unfavorable rules for domestic marketing of wines except in few states has hindered the proper growth of this sector. Certain promotional strategies, such as easing of tariff barriers for the wines, developing awareness on health benefits of wine and to supply good quality wines in reasonable prices in the domestic market should be emphasized.
Indigenous wineries in India
The policy makers, financial institutions and government agencies dealing with the production, marketing, processing and certification of wines in the country should also concern themselves with the growth of indigenous wineries in India. Due to limited domestic consumption of wine and non availability of standard wine varieties to produce good quality wines of international standards, much emphasis was not given for research during previous decades in India. Grape growing is a highly capital intensive project, concerted efforts are required by the Financial agencies to reduce the rate of interest. Wine is a ‘farmer-friendly’ venture. The quality of the wine is decided in vineyards. But making appropriate and good quality wine out of good grapes is more of a skill of a wine-maker than pure science. Such skill can be better executed by the wine maker consistently and hygienically, if the winery has good machinery in place.
Authored by Seth Associates Advocates & Legal consultants.The law firm has unmatched expertise in managing projects for launch of products and services in the Indian market. Visit www.sethassociates.com for information.