Protection for the domestic wine labels gets even better with the recent announcement of the new taxation policy by the government of Maharashtra. Meanwhile, importers can take the equally tough choice of bowing down to market meters or find newer markets in other states.
As far as newer markets are concerned, the middle class is steadily on the rise in India, and there are cities other than Mumbai and Pune ready to pick up the wine culture, what with wine clubs and tasting events giving people a taste of wine. But as a matter of fact, building a new market takes time and effort. While Mumbai (read Maharashtra), the otherwise number one consumer of wine in India has lesser competition from foreign brands due the 4x taxation.
Neethu Sheth of The Wine Rack, importing wines from South Africa comes to grips with the new taxation, and gets on with restructuring pricing. That is just the thing to do, considering that trade was suspended for over three months. 'Together with an earlier suspension of three months,' points out Hans Raj Ahuja, 'this makes it almost six months of no trade in imported wines and other spirits.' Ahuja, is heading Echidna Wines, importing wine from Australia for the Indian market.
He takes an objective view of the situation: 'Though the policy brings common taxation on wines, it clearly ignores the fact that wines produced and sold in Maharashtra pay no excise duty. Further, the spirits enjoy a multiple of six as per the formula while wines has to bear with a multiple of four making it more biased towards imported wines while allowing good margins for spirits. The policy is a clear political statement towards local grape growers and wineries.'
Another factor to be noted is that most of the small wineries are more or less 'contract wineries', selling their produce to domestic market leaders . Purchasing bulk wine from small wineries, who can ill-afford budgeting for marketing and distribution activities, further assists the domestic market leaders keep their position. The smaller wineries working on lesser margins sell in bulk to market leaders, securing the financial health of their unit.
The big wineries that do buy bulk wines make the most of their marketing efforts and distribution network, staying on top; adding to their capacity without any capital investment. Meanwhile, wine-importers meet sundry other costs including warehousing, label registration, etc.
'With so much tariff protection, Indian wines have no reason to improve their quality and compete with world wines on quality and prices,' notes Ahuja. Well, and does that explain the negligible impact of Indian wines on the international scene? But if the domestic market is so good for the domestic wine big wigs, would they care so much for an international impact?
'Despite zero tax, no winery has reduced its rates thus taking the consumer for a ride' notes Ahuja, adding, 'may be it is the beginning of the end for imported wines in Maharashtra and consumers in Maharashtra will be destined to buy inferior quality wines at exorbitant rates.'
Agreed that other than taxes, the local wine industry has its share of obstacles to contend with, which includes sourcing good quality grapes to begin with, finding the right distributor, creating the right marketing strategy, introducing wine to an otherwise spirit-loving Indian people, and most of all maintain the quality of their wines.
Thank you, government of Maharashtra, but now can we move to the international arena please...
Let us face it, how does the government of Maharashtra propose to take the Indian wine market to greater heights? The Wine Park and facilities for farmers and wineries have been helpful, and wineries at the top continue to sustain even the smallest denominator in the industry, thanks to contract farming and contract wineries.
But to take Indian Wines to the world, one does need to allow world wines a place in India, minus the step-treatment of 4x taxes, which incidentally other spirits are better off with at 6x.
Sample Cost Calculator for Maharashtra (by Ahuja)