By Mark Morley, Trade Commissioner, Austrade India and Pakistan, and Bhavin Kadakia, Business Development Manager Food & Beverage, Austrade India
In a country with a billion-plus population and 485 million people above the legal drinking age, India is a market with many opportunities for Australia’s winemakers.
The wine sector in India is a market to watch in the medium to longer term. Exposure to new cultures, growth in foreign tourists, overseas education, and a rapidly changing demography are driving wine consumption in the country.
With a young population, increasing urbanisation and the position of wine as a ‘status choice’, India has parallels with other Asian markets where there is a growing acceptance and preference for wine among the upper and middle classes. Wine sales are growing faster than spirits and beer in the country, according to the Indian Wine Insider 2017 report.
And it is India’s young people who are showing an interest in wine. With more than 19 million new consumers entering the legal drinking age every year[1], wine has grown in recent years by 16 per cent per annum, with sales of 32 million litres in 2016[2].
Fundamentally, wine is seen as a sophisticated and stylish drink compared to whisky, scotch and rum. With a preference for red wine over white, wines are making their way into functions, events and marriages, and are a particularly popular gift for status-conscious Indian consumers. Another distinguishing feature of the market is that women are the major buyers of wine in the country – primarily as gifts for other women.
Although traditionally and even today, whisky and rum continue to dominate alcohol consumption in India, the increasing availability of locally produced and imported wine over the last decade has spawned significant consumer interest in wine. – Economic Times of India, 15 March 2017
The Indian wine market
There are more than 300 wine importers in India and the number is growing every year[3]. India imported approximately 475,000 cases of wine in the Indian financial year (April 2016-March 2017)[4]. While there is a strong market for bottles priced below A$36, the high duties and taxes on imported wine mean importers are only prepared to pay a low FOB price – around A$2 to A$3.50 FOB per bottle.
India has its own domestic industry too, with Sula Vineyards, Indage and Grover Vineyards among the top Indian vineyards and wineries. Collectively, they have 90 per cent of the market and are perceived as ‘better value for money’.
However, trade data suggests that while France and Italy continue to be the top two overseas suppliers, wines from the ‘New World’ are growing. Australia is the third largest source of wine imports, and Chilean wines are starting to penetrate the Indian market in the entry-level segment with strong competition likely at the lower end in coming years.
According to Wine Australia, for the year ending December 2017, Australian wine exports to India grew in volume and value by 48 per cent and 51 per cent respectively. However, this is coming from a fairly low base – 1.5ML with an FOB value of A$5.3 million. There are over 40 Australian wine companies in India including established brands like Penfolds, Lindemans, Westend Estate, AVL, D’Arenberg, Jacob’s Creek, De Bortoli, McWilliams and Wines by Geoff Hardy.
In a market where makers and sellers have long been challenged, Jacob’s Creek has maintained a steady leading position over the last five years. It is the most imported wine brand in India, followed by Moët & Chandon, Sauvignon, Dom Pérignon and Carlo Rossi.
While Mumbai is India’s largest wine consumption market, Delhi has a higher consumption of international wines over domestic wines, coupled with a higher propensity for wine spending than Mumbai.
Bangalore and Pune are vibrant markets for both domestic and international wines. Consumers in these two cities have high awareness and consumption of various wine styles, and a willingness to pay higher price points, pointing to a rapidly emerging wine culture.
Consumers from Goa, on the other hand, prefer drinking wines largely at home, and have a high prevalence of inexpensive Indian wines in their portfolio.
Market barriers
Alcohol sales have been problematic for state governments in India for some time. Alcohol is banned in Gujarat, Bihar, Nagaland and Lakshadweep, with additional restrictions in many other states.
Each state government controls the taxation, distribution and sale of alcohol. Brand/label registration is mandatory for the brand to be sold in the respective states/regions. Separate licences are required to produce, bottle, store and sell all liquor products.
Alcohol advertisements are also banned, making it hard for companies to promote their brand directly.
Australian winemakers should note the customs duty on wine is 150 per cent on cost, insurance and freight (CIF). Thus, the final cost to the consumer would be around 9 to 11 times of FOB in Mumbai, around 7 to 8.5 times of FOB in Delhi and around 6 to 7 times of FOB in Bangalore.
The hospitality sector (hotels, restaurants, catering, clubs and pubs) has a larger market share than the organised retail sector, as the Indian Government allows hotels to import alcohol duty-free (equivalent to 5 per cent of the average foreign exchange earned). This means much of the imported alcohol consumed in India is in five-star hotels in major cities.
Opportunities for Australian winemakers
The growing Indian wine market offers Australian winemakers a longer-term opportunity to engage at a mid-tier price level. Growth factors including the rising middle class, a trend towards wine rather than spirits, and the status associated with wine, mean the market is on a strong trajectory, regardless of the significant tariff and non-tariff barriers to entry in the market.
In a boon for Australian winemakers, the South Australian Government has launched a two-year wine education program in Mumbai and Delhi to raise the profile of and position South Australia in the premium and ultra-premium wine segment. This will have flow-on effects for Australian wines generally.
Although Australian wineries shouldn’t compare the Indian wine market with China and expect similar growth patterns in the shorter term, India is a stable and longer-term opportunity for Australian wine.
