to the customers.

Key Statistics
Wine Consumption

Year

Domestic

Imports

Total

Growth

Units

2003-2004

425,000

74,000

499,000

9 Litre cases

2004-2005

515,000

100,000

615,000

23%

9 Litre cases

2005-2006

652,000

137,000

789,000

28%

9 Litre cases

2006-2007

931,000

168,000

1,099,000

39%

9 Litre cases

2007-2008

1,250,000

224,000

1,474,000

34%

9 Litre cases

2008-2009

1,300,000

175,000

1,475,000

0%

9 Litre cases

Sales of higher-priced wines were impacted in 2008-2009 due to a downturn in the hospitality industry and the global financial crises. Sales have reportedly; fell in the year 2009-2010 for the first time since 2001. Wine exporters blame the slump on the 26/11 Mumbai terror attacks two years ago that led to a dip in tourism in India.

Wine Consumption according to Price Structure

Price per bottle Domestic Imports

Total

Units

Under $10

700,00

700,000

9 Litre cases

$10 to $19

468,750

48,600

517,350

9 Litre cases

$20 to $29

112,500

87,500

200,000

9 Litre cases

$30 and Over

18,750

38,900

57,650

9 Litre cases

Import Market Share for Top Four Counties of Origin

Country

Market Share

France

45%

Australia

16%

Italy

11%

US

5%

Source: ImaginMor, JBC International, Indian Wine Market Report, and Gryphon Brands Inc.

Supply Chain

Source: ImaginMor The supply chain of Wine Industry in India is fairly linear. The flow of orders comes from the bottom of the channel i.e. from customers and goes to the top and the flow of products is from the top to the bottom. The winemakers are the key to the industry and define the quality of the wine. The description and the role of each of the contributors to the supply chain are discussed below. Grape Growers The wine industry derives grapes, its most important raw material from the grape growers. Fruit and vegetable processors Ascorbic and citric acids are inputs required for some wine types. These require fruit processed from growers. Flour and Starch Manufacturers- They produce yeast, which is an input into wine making. Solid Paperboard Container Manufacturers They provide containers which are used in storage and transportation of wine bottles. Glass and Glass Products Manufacturers They provide glass bottles which are essential for storing wine and preserving the quality over significant time periods, and for transport to markets. Wine Manufacturers They hold the key and are the centre to the wine industry. These winemakers produce the wine, starting with selecting the grapes or other produce and ending with bottling the finished wine. Branding is vital for their success. Liquor Wholesalers - They purchase wine from producers and supply to retailers, pubs, hotels and restaurants. Liquor Retailers/Foreign embassies They purchase wine from wholesales and provide them to the customers. Pubs, Taverns and Bars They purchase significant quantity of bottled wine from the wholesalers for sale to consumers.

Hotels and Restaurants Mini bars in hotels, in-house bars, and restaurants which are licensed to sell wine, are an important channel in the distribution and consumption of wine.

Segmentation
Product and Service Segmentation

Source: ImaginMor Red table wine is the favourite among Indian wine consumers and accounts for an estimated 52% of all wine sales. White table wine being the second most preferred wine type, accounts for an estimated 40% of the volume sold by the industry. Sale of Rose wine, Sparkling wine and Vermouth wine together account for the remaining 8% of the wine market in India.

Major Market Segmentation

Source: ImaginMor and Utsav Australia On-trade businesses such as hotels, bars, pubs and restaurants account to about 70% of the sales in the domestic market of India. The remaining 30% of the sales come from retail outlets such as specialist retailers, foreign embassies, supermarkets and hypermarkets.

Industry Concentration The concentration in the industry is high Until the year 2008, the three largest Indian wine producers Sula, Indage and Grover collectively occupied over 80% of the Indian wine market. This represented a high level of concentration in the industry. Concentration in the industry changed in the year 2009 and 2010, with Indage facing major issues and losing most of its market. As a result, Sula and Grover have emerged as market leaders, further increasing the concentration of the industry.

Geographical Segmentation

Source: Indian Wine Inc. Eighty precent consumption of wine in India is confined to major cities such as Mumbai (39%), Delhi (23%), Bangalore (9%) and the tourist dominated state of Goa (9%), while rest of India accounts to only 20% consumption. The market dominance of Mumbai and Delhi ensures their place as the fulcrum points for any producer or distributor looking to increase sales to India. The city of Bangalore (also known as Bengaluru) with its high-tech industry flow and the State of Goa with its tourism sector are secondary, yet important markets. Chennai and Hyderabad have much potential due to the growth in their IT industry but their government policies are not yet conducive to wine sales.

Market Characteristics
Market Size For the year 2008-2009, the wine consumption in India was about 13.3 million litres or 1.5 million 9-litre cases at a value of $82 million. At a per capita level, the consumption was about 9 millilitres annually. In the same year, the world wine consumption was 2.6 billion cases. The size of the Indian wine market is small when compared to global consumption and annual per capita consumption of 70 litres in France and Italy, 25 litres in the US, 20 litres in Australia and 40 millilitres in China. However, the prospects of growth in the Indian market are quite high. About 600 million Indians are currently below the legal drinking age and 100 million will come of that age over the next 3 to 4 years. So, the consumption of alcoholic beverages, including wine, is expected to increase. With

the current growth rate of 25% to 30%, consumption of wine in Indian is projected to increase to 2 million cases by 2011 and 4 million cases by 2015. (Source: UB Group, Analyst report and Indian Wine Inc.)

Demand Determinants: As an importer, trends in markets such as the United Kingdom, Australia and United States contribute to determining demand, in addition to domestic factors. The factors that determine the overall level of demand for wine are: Disposable income In general, higher disposable income allows consumers to spend more on discretionary products, including wine. It can also serve to shift consumers from low-price to high-price products. No evidence of trading down in fact, consumers are trading up to premium products due to increased spending power and growth in young drinkers. Relative prices Wine consumption in India has been encouraged by the favourable movement in wine prices relative to beer and whisky prices. In past, this resulted from the relatively favourable treatment of beer and whisky as opposed to wine. Consumer tastes Wine is a close substitute for beer and whisky. As such, demand for wine depends on its appeal relative to beer and whisky. Consumer preferences are influenced by marketing and beverage taste. Exchange rates The increasing proportion of imports for this industry means that exchange rates are an important determinant of demand. Consumer confidence Along with growth in disposable income, greater confidence among consumers in the outlook of the economy stimulates higher consumption of discretionary products such as wine. Consumer confidence is affected by macroeconomic factors such as employment, interest rates and inflations, as well as political events. Health considerations Some research shows benefits to wine drinking in moderation. Conversely, research has shown the many negative aspects of drinking beer and whisky. Beer in particular, due to its high calorie content, is vulnerable to consumer health considerations. Societal Acceptance In the past, Indian consumers have not encouraged alcohol consumption as a part of its society and culture. However, with growing awareness and new perceptions of young consumers, alcoholic beverages like wine may receive better social acceptance and demand may shift.

Basis of Competition Competition in this industry is low Competition in this industry is increasing Wine manufacturers in India are subject to increasing competition from high quality imported wine and entrance of new players such as the UB group. None the less, until the year 2008 the competition was low with three major players occupying over 80% of the market. Those three major

players faced competition from both internal sources which were other wineries and external sources such as players in other related industries like beer and whisky. Internal competition Quality and branding: Producers of wine in the mid-to-high price range compete on the basis of quality and branding. The quality with respect to the taste of the wine is a basis of competition for individual brands, winemakers and enterprises. A wine with an appealing taste to the consumer can encourage repeat purchases, and build loyalty to the brand and winemaker. Wine shows and awards are also an important means for promoting quality of wine. Awards and positive media reviews attract new customers and build brands. Price: By volume, industry sales are dominated by bulk wine, which compete primarily on the basis of price. Given the importance of price, economies of scale and scope, the size of a wine manufacturing enterprise plays an increasingly important role in competition. The size of an enterprise will also contribute to access to markets and distribution channels. Industry clusters (economies of agglomeration): At an international level, Indian wineries do not have any competitive advantage over their Australian and European rivals. This is mainly due to lack of professional expertise, high price due to customs duties, and low quality. India has not fully leveraged its network of related industries such as tourism and hospitality to increase wine sales. Indias reputation as a low quality producer is a major set-back in overseas markets. External competition External competition is increasing with more premium beer and whisky brands which compete directly against wine, being promoted through surrogate advertising. Indians are predominantly whisky drinkers hence; the market of Super Premium Whisky is growing at a rate of 50% and Premium Vodka and Premium Scotch are growing at a rate of 50% and 75% respectively. Wine also faces competition from spirits and to a degree with, non-alcoholic beverages. (Source: UB Group, Analyst report)

Life Cycle The life cycle stage is introduction

Source: ImaginMor

Life Cycle Reasons

Current market size of the wine industry is small. The current competition in the wine industry is low. Industry is trying to establish a market and build consumer demand for wine. Research and development is required in India in order to improve quality of wine. Substantial awareness about the health benefits of wine is required.

Life Cycle Analysis The Wine Industry in India is at its introduction stage of its life cycle. General measures are been taken to increase awareness and improve the quality of wine in India. For example, Indian Grape Processing Board has been set up to increase awareness. The Maharashtra Industrial Development Corporation (MIDC) established two wine parks. Apart from providing basic infrastructure facilities, these parks have other interesting features such as wine festival ground, exhibition centre, wine therapy centre and a three star hotel. The competition in the industry is fairly low with more than 80% of the market been occupied by three major players. Additionally, more than 46 new wineries have gone into production recently, and another 100 farmers have set up small wineries.

Industry Conditions
Barriers to Entry Barriers to entry are low Barriers to entry are reducing A small winery can be started with an investment of around USD 44,000. Required know-hows and machinery are available locally. In the last two harvesting seasons, the state of Maharashtra alone witnessed entry of over 100 players; many of whom have gone into production. Despite complexities in trading interstate and high regulations, there are low barriers to entry for wine makers who satisfy the licensing and approvals required by the states and central government. For international players, the key is find the right partners and links who understand the Indian market and legislations. It is also essential to note that some of the states, notably Bihar, Daman & Diu, Jharkhand, Tamil Nadu and Uttaranchal, either prohibit or restrict import and sale of bottled in origin (BIO) wine. States such as Gujarat, Lakshadweep, Mizoram, Nagaland and Manipur have complete prohibition of alcoholic beverages including wine. Thought Indage and Sula have a substantial market share in the industry, there are no real barriers from them in terms of control over scarce inputs, absolute cost advantage or exclusive dealings. (Source: Ministry of Food Processing Industries (MOFPI), Grape Wine)

Taxation: The level of tax burden is high The level of tax burden is decreasing India has a complicated tax structure when it comes to manufacturing and sale of alcoholic beverages such as wine. The main tax/duty that the Union Government is empowered to levy on the wine industry is Customs duty and there are several taxes and duties levied by the State Governments. A comprehensive list of the taxes and duties generally levied on wine are mentioned as: Customs Duty, Excise Duty, Additional Duty, Distillery/Brewery License Fee, Bottling fee, Litterage fee, Assessment Fee, Franchise Fee, Permit Fee, Gallon age Fee, Raw Material Excise,

Availability Fee, Brand/Label Fee, Permit Fee, Transportation Fee, Import Pass Fee, Export Pass Fee, Educational/Welfare Cess, Vend Fee, Sales Tax/Surcharge, License Fee, Toll Tax and TOT. Import duty: The following notes are to be conserved while importing wine form India:

Wine may be imported into India under an Open General Licence (OGL) - meaning no licence is really required to import wine into India. A wine importer would need to be a company registered in India with an Import Export Code (IEC) issued by the Director General of Foreign Trade, Ministry of Commerce. Wine so imported can be stored in a Customs Bonded Warehouse (CBW) for upto 3 months without having to pay customs duty. Importers generally tie-up with a C&F Agent beforehand to clear the goods and move them to the CBW of their choice.

Imported wine may be sold either duty free (against a duty free licences held by a hotel or restaurant or embassy or duty free shops in airports) or duty paid (to licenced trade), after paying the customs duty applicable and debonding the stocks.

Import/Customs Duty Wine

Customs Duties are currently the same on both Bottled In Origin (BIO) wine and wine imported in bulk (defined as any packing of 2.0 liters or more per container): Duties are expressed as % of the CIF (Cost Insurance & Freight) rate, converted at the customs-notified rate of exchange

Rate

Assessment Fee

1%

Basic Customs Duty

150%

On the cumulative Last Point Tax 4% amount - theoretically reimbursable

Total duties

161.6%

State Excise:

There are twenty eight States and seven Union Territories in India. Some states formulate their own policies for taxation of wine and spirits, and others operate under policies determined by the Central government. A few Indian States also maintain a ban on sale of alcoholic beverages such as wine. States which allow the sale of alcoholic beverages are generally subject to a number of different indirect taxes. It is to be noted that:

All brands (whether imported or produced in India) have to be registered with the Excise Department of each state. Formalities may include submitting a cost-card of prices proposed to be charged down to the MRP (Maximum Retail Price) and payment of registration fees ranging from USD 110 to USD 440 (INR 5,000 to INR 20,000) per label per year.

Written permission (Permits) should to be obtained from concerned excise authorities for movement of wine from winery/CBW to trade. Such permission is generally issued after payment of applicable state excise duties. In case goods are being moved between two states, this would entail paying an Import Fee and an Export Pass Fee.

The Indian Government has committed to the WTO, that it has started gradual reduction of Duties and Taxes on imported wine in India. In July 2007, government of India abolished the countervailing duty (CVD). It has affected the prices of wine from 157% to 273%. However, there has also been a corresponding increase in the basic customs duty from 100% to 161.6% (150% customs duty plus additional taxes). Hence, with the existing import duties, taxes and VAT, wine will still cost almost 4 to 5 times to that of the actual value of the product. Indian Government has also decided to do away with the education cess on imported wine. However, different Indian States may impose local levies on imported liquor equivalent to taxes imposed on domestic liquor. All these steps have had deep impact on the wine industry of India. Value Added Tax (VAT) The government has progressively shifted from a policy of charging Sales Tax (Central and Local) to a nationwide one-point VAT. A uniform 20% VAT is charged on the total cost of the product, which is passed on to the consumer at the point of purchase. The city of Chandigarh was an exception, imposing only 4% VAT on wine. However, Maharashtra the biggest producing state charged 4% VAT on wine for a decade however, at the introduction of the federal 20% VAT decided to follow the course. A model cost-card for Wine manufactured in Maharashtra is illustrated below:

Quantity

1 bottle of Wine (750 ml) USD 5.00 USD 0.00 USD 2.50 USD 0.50

Manufacturers selling price Excise Duty @ 0% Distribution Costs at 25% of MRP License Fees at 5% of MRP (LF) VAT (Sales Tax @25% of ECP or 20% of MRP) Total Consumer Price (MRP) Govt. Revenue per bottle

USD 2.00

USD 10.00 USD 2.50

Manufacturer share as % to MRP Distribution share as % to MRP Govt. revenue as % to MRP MRP per case

50% 25% 25% USD 120.00

A model cost-card for Wine imported to Maharashtra under duty- paid scheme is illustrated below:

Quantity

1 bottle of Wine (750 ml) USD 5.00 USD 0.05 USD 7.58 USD 12.63 USD 0.51 USD 13.14 USD 0.00 USD 6.57 USD 1.31

Cost Insurance & Freight (CIF) Assessment Fee @ 1% of CIF Basic Customs Duty @ 150% Sub Total Extra Additional Duty @ 4% Total as Landed in Maharashtra Excise Duty @ 0% Distribution Costs at 25% of MRP License Fees at 5% of MRP (LF) VAT (Sales Tax @25% of ECP or 20% of MRP) Total Consumer Price (MRP) Govt. Revenue per bottle

USD 5.26

USD 26.28 USD 14.71

Importers share as % to MRP Distribution share as % to MRP Govt. revenue as % to MRP MRP per case

19% 25% 56% USD 315.36

A model cost-card for Wine imported to Maharashtra under duty- free scheme is illustrated below:

Quantity

1 bottle of Wine (750 ml) USD 5.00 USD 0.10 USD 0.05 USD 0.00 USD 5.15 USD 0.00 USD 5.15 USD 0.00 USD 2.57 USD 0.5

Cost Insurance & Freight (CIF) In Bond Transfer fee @ 2% of CIF Assessment Fee @ 1% of CIF Basic Customs Duty @ 0% Sub Total Extra Additional Duty @ 0% Total as Landed in Maharashtra Excise Duty @ 0% Distribution Costs at 25% of MRP License Fees at 5% of MRP (LF) VAT (Sales Tax @25% of ECP or 20% of MRP) Total Consumer Price (MRP)

USD 2.06

USD 10.30

Govt. Revenue per bottle Importers share as % to MRP Distribution share as % to MRP Govt. revenue as % to MRP MRP per case

USD 2.73 48.50% 25.00% 26.50% USD 123.60

Source: Central Board of Excise and Customers Government of India, Gryphon Brands Inc. and Seth Associates

Industry Assistance Level of industry assistance is medium Level of industry assistance is increasing Assistance to the wine industry is been provided in the forms:

Indian Grape Processing Board Excise Duty reductions Food Parks Financial support

Indian Grape Processing Board: The key objectives of the Indian Grape Processing Board include focus on research & development, extension and quality upgrading, market research and information and domestic and international promotion of Indian wine. Other objectives include setting up facilities for wine analysis, testing for defining 'quality', label standards, certification of wine, promoting Good Manufacturing Practices (GMP), Hazard Analysis and Critical Control Point (HACCP)/ISO22000, 2005. The grape processing board also promotes cooperative efforts, backward and forward linkages between growers and wine industry in general. They formulate vision and action plan for the growth of Indian wine sector and also take an active role in upgrading to new technologies and foster sustainable development of Indian wine industry. The expected outcomes of Indian Grape Processing Board would be as follows: Increased awareness and capacity building among farmers, processors and other stakeholders resulting in increased productivity, reduced wastage and improved quality of grapes and wine conforming to global standards. Satisfy growing demand of domestic markets and for exports. Increase in farmers' income and employment generation, with a particular focus on rural areas. Encouragement to cluster farming, contract farming and farm diversification. Benefits of value addition brought to farming community and farmers fetching remunerative prices for their produce.

The Indian Grape Processing Board has a total of 15 members including the Chairman who is an eminent professional from the wine industry. The Board is located at Pune, Maharashtra and was formally launched by the Honourable Minister of State for Food the Processing Industries in Pune on 15 February, 2009. (Source: Ministry of Food Processing Industries (MOFPI), Annual Report 2008-09) Excise Duty reductions: States like Maharashtra, Karnataka and Himachal Pradesh have taken steps to encourage wine industry and given preferential treatments to wine industry by liberalizing their excise regime and reducing excise duties. Maharashtra has abolished excise duties on wine whereas; an excise duty of USD 22 per case has been levied on other alcoholic beverages. Karnataka has excise duty of USD 0.08 per bottle on wine whereas; 40-50% excise duty levied on other alcoholic drinks. Similarly, in Himachal Pradesh, excise duty is USD 0.30 to USD 0.40 per case for wine and USD 3.35 to USD 7.4 per case for other alcoholic beverages. (Source: Ministry of Food Processing Industries (MOFPI), Eleventh Five Year Plan) Food Parks: The Maharashtra Industrial Development Corporation (MIDC) has established two wine parks under the "Food Park" scheme of the Ministry of Food Processing Industry one at Palus near Miraj known as "Krishna Grape Wine Park" and the second one at Vinchur near Nasik christened as "Godavari Valley Wine Park". Apart from providing basic infrastructure facilities, these parks have other interesting features such as a wine festival ground, exhibition centre, wine therapy centre and a three star hotel. The Govt. of Maharashtra has also declared a special incentive package for the grape processing industry. Thus, a number of promotional schemes are available in Maharashtra. (Source: Ministry of Food Processing Industries (MOFPI), Grape Wine) Financial support: Ministry provides financial support for setting up, modernisation and expansion of wine units at 25% of the total cost of plant and machinery. In addition, assistance for technical civil work subject to a limit of USD 110,000 for general areas and 33.33% of plant and machinery, and technical civil work subject to a limit of USD 165,000 for difficult areas is provided. (Source: Ministry of Food Processing Industries (MOFPI), Annual Report 2008-09)

Regulation and Deregulation Level of regulations is high Level of regulations is steady Given the traditionally closed nature of the Indian import market, its high import duties, the multitude of state taxes and complex state licensing and approval process, the existing market for imported spirits, exporting wine to India can be a regulatory adventure. The following key regulations apply to the wine industry in India: 1) State authority: Control over selling, distribution, and pricing of wine belongs to state governments under Section 47 of the Directive Principles of the Indian Constitution. India is a federal nation, and like the U.S., the central government has empowered states to generate revenue and control sales. Each of Indias 28 states and 7 union territories has its own rules and regulations for alcohol control. The following apply to regulation in states: a) Differing methods of alcohol control in specific states: Gujarat, Lakshadweep, Mizoram, Nagaland and Manipur are states that enforce total prohibition of wine. Sates like Haryana, Tamil Nadu and Andhra Pradesh briefly instated prohibition.

States like Uttar Pradesh and Tamil Nadu control imports by refusing to issue an excise Transport Permit. The Transport Permit is the distribution authorization form that allows goods to be released from warehouse and delivered to designated customers like hotels or authorised retail outlets. States like Kerala do not allow retail sales of imported wine. The states of Punjab and Himachal Pradesh are more liberal in their rules and procedures but maintain high excise duties. b) Possession of Wine: Every state has its own law dealing with the amount of wine a family can store in their homes without acquiring an excise license. No state allows maintaining a wine cellar with more than 100 standard bottles of wine without a license. c) Wholesale and Distribution License: Each state has its own licencing system. There are several licenses for wine import, transport and warehousing of wine. The Licensees required for wine are L-2 (Retail Vend: 309), L-3 (Hotel-Room Service: 1), L-4 (Restaurant: 251), L-5 (Hotel-Bar: 47) and L-19 (Club: 54) etc. Permit Branch issues Import permits for import of liquor and Transport Permits for transportation of liquor from Bonded Warehouse to off and on site licensed consumption. Import permits are issued to the L-1 licensees on demand which is duly recommended by the inspector posted at Bonded Ware House. The applicant immediately on the approval of L-1 Licence has to deposit Licence Fee, Brand registration fee and Brand Fee & apply for, Registration of Brands, Approval of Bonded Warehouse, Approval of Label, and Fixation of ex-distillery price. 2) Marketing Regulations: In India, there are restrictions on promotion of alcoholic beverages like wine and beer. So, creating a strong umbrella brand for various products is important. For example, Kingfishers alcoholic beverages cannot be advertised however, the Kingfisher brand is now promoted through the airlines and its various sporting activities. The industry calls this, surrogate advertising or brand extension, which has now become the order of the day in India. 3) Exemption of federal customs duties for specific entities: In the year 2003, the Directorate General of Foreign Trade (DGFT) in India announced that Hotels (3 Star and above) and other service providers in the tourism sector could receive a duty-free import entitlement equivalent to 5% of their average foreign exchange earnings for beverages and spirits including wine. 4) Storage regulations: Imported wine must be stored at a government approved custom bonded warehouse. The wine can be released from the bonded warehouse for distribution only after the importer/distributor meets all the mandatory requirements of the state where they plan to market and/or sell the product. 5) Labelling Regulations: Imported wine, often referred to as bottled in origin (BIO), are subject to the labelling provisions of the Standards and Weight and Measures (Packaged Commodities) Rule of 1997. The labelling declaration on the wine bottle must include: a) Name and address of the importer b) Generic and common name of the packaged commodity c) Net quantity in terms of standard units of weights and measures. In case of wine it should be in millilitres and litres. In addition, the standards of Weights and Measures (National Standards) Rule of 1998 prescribe that the alcoholic strength be declared on the label as percentage of volume and stated as xx % Vol. (Source: JBC International, Indian Wine Market Report)

Cost Structure

Source: Indage Vintners Annual Report Wine makers are recoding good profits with earnings before interest and tax being just over 25% and combined material cost and labour cost being fewer than 35% for some wine makers. The key to success in the wine business is branding so, a substantial chunk of dollars are spent in selling and distribution of products. The cost structure, as illustrated above restores the benefits of entering into wine business and its year on year growth of over 25% in India.

Capital and Labour Intensity Level of capital intensity is high Level of capital intensity is not changing The wine industry is capital intensive with majority of dollars spent in buying the latest technology and systems. It is to be noted that, only depreciation costs half of what is spent on wages to employees, which is to say that the labour intensity of the industry is low and the capital intensity is high. Despite many new wineries opening up, the level of capital and labour intensity is not likely to change. (Source: Indage Vintners Annual Report)

Technology and Systems The level of technology change is high The rate of change in technology is high Technology plays a key role in the development of new grape varieties, plantings and irrigation, quality assurance and traceability systems. Though India has a lot to learn about wine making from its European and Australian counterparts, its capability in the following technical areas have been rapidly increasing:

Viticulture services: vineyard establishment, input management, canopy management, Technologies to improve health of grapevine root stocks and grape yield, Energy efficient air conditioning-systems and insulation products Irrigation and waste water management Vineyard and winery equipment Winery design Oenology services: wine making, wine consultancy services, wine education

(Source: ImaginMor and Utsav Australia)

Key Competitors

Source: JBC International, Indian Wine Market Report Players Performer Chateau Indage or Indage Vintners: Market Share 43%

Champagne Indage Ltd. was Indias largest and oldest wine company, established in 1982. With vineyards spread over 2500 hectors, Champagne Indage has its facilities in Nasik and Narayangaon, with 20 varieties under cultivation and over 137 varietals under plantation. It had its presence across the globe with 10 offices and more than 600 employees until the year 2008. Champagne Indage was a pioneer in producing authentic Indian wine, with more than 36 brands of Red, white and sparkling wine under their umbrella. The company was growing at an annual growth rate of 70% every year until financial year 2007-2008, ahead of the industry which was growing at around 25% to 30%. The company deployed the state-of-the-art technology at its manufacturing facility with the largest wine production facility in India, with a capacity of 15 million litres at Narayangaon. It has a bottling capacity of 15,000 bottles per hour, using Methode Traditionelle technology and multiple manufacturing facilities across India, which ensures minimal lead time and consistency in supplies across the country.

Champagne Indage, was the first sparkling wine producing and exporting company from India, exporting to 69 countries across the globe. Their range of exquisite wine like Chantilli, Ivy, the flamboyant Marquise de Pompadour and many more have won several awards ranging from the International Wine and Spirit Competition (IWSC), held annually at London to Wine Style Asia from Singapore to national levels at the INDYs. It also holds the honour for being listed in the world wine encyclopaedia and is revered by wine critiques from Jancis Robinson to Oz Clarke. In the year 2009 Champagne Indage changed its name and becomes Indage Vintners. It is critical to note that, the above figures represent of the state of competition in the year 2008 and things have changed for Indage Vintners since then. The company has suffered heavy losses in the 2009 and 2010 and has been fighting possible liquidation. Some of the issues that caused their downfall in the past two years were bad overseas acquisition, accumulation of stock, global financial crises and liquidity stress. The Management of the company, despite of above difficulties is very confident and striving best to ensure revival of Indage Vintners. (Source: Indage Vintners, Press Kit and CNBC TV 18) Sula Vineyards: Market Share 33%

Since its inception in the year 2000, Sula has rapidly established itself as Indias leading premium wine brand. Sula has expanded from the original 30 acre family estate to about 1500 acres (owned and contracted) under plantation, both in Nashik as well as in nearby Dindori, Indias upcoming wine region. In addition to having a wide national distribution network within India, Sula also exports its wine internationally, as well as importing and distributing wine from leading producers worldwide. In 2005, Sula launched its first reserve wine, the Dindori Reserve Shiraz, as well as Indias first dessert wine, the Late Harvest Chenin Blanc. The company produces and markets premium wine products. Sula markets its products in the US, the UK, Italy, France, Canada, Finland, Sweden, Germany, Japan, Singapore and Middle East Asia. The company offers a wide range of wine including red wine, white wine, rose wine, sparkling wine, and dessert wine. It markets its products under the brand names Brut, Seco, Madera Rose, Sula Blush Zinfandel, Dia, and Viognier. Sula also imports wine from Argentina, Australia, France, Italy, Japan, New Zealand, Portugal, and South Africa. Some of the imported brands include Single Varietal Malbec, Astica Cabernet, Hardys, Heidsieck Monopole, and Ruffino. In 2008, the company launched a wide range of products such as Dia, an Asti Spumante-style low alcohol wine; and Dindori Reserve Shiraz, a luxurious and premium red wine. Unlike Indage Vintners, Sula has grown substantially in the year 2009 and 2010. Where Indage has fallen, Sula has reportedly gained a substantial market share in Delhi and is moving towards become the leading Winemaker of India. Grover Vineyards: Market Share 11%

Grover Vineyards, north of Bangalore, was established in 1989 with a focus on delivering quality wine. Grover Vineyards has a successful French collaboration and exports 25% of its production every year. Grover Vineyards, is also the countrys only winery which has Michel Rolland the internationally acclaimed French winemaker, as its consultant. Grover Vineyards along with Michel Rolland introduced a breakthrough invention in wine bottling the Stelvin Cap (SCap). This cap seal, is not just the traditional cork seal but a prefect sterile seal, which cuts off any bacterial contact with the alcohol content of the wine and thus ensures that the wine is devoid of a musty wet odour. Grover Vineyards, is spread over 400 acres, and has eight wine types in its the collection - the La Rserve-, which is their flagship wine, followed by an Art Collection, comprising of- Cabernet-Shiraz, Shiraz, Shiraz-Ros, Sauvignon Blanc, Blanc de Blancs, Viognier and the Chenin Blanc. Unlike other wine makers in India, Grover Vineyards is the only company that rejects ordinary table grapes, while exclusively using only French wine grapes, selected from the original thirty-five varieties of the Vitis Vinifera species. (Source: Grover Vineyards)

Vinsura: Market Share 3%

Vinsura wine, from Nashik, India are a brand product of Sankalp Winery Pvt Ltd, was formed in 2003 by a group of Indian horticulturists from Nashik, Maharashtra. The winery is located inside the Vinchur Wine Park. Some of the brands from the company are Vinsura Brut, Vinsura Zinfandel and Vinsura Rose. With the recent appointment of Gopal Jadhav as the companys Chief Operating Officer, the company is growing and has a small share in the market. (Source: Indian Wine Inc.) Vintage wines: Market Share 1%

Vintage Wines, located near Nashik, is known to produce high quality wine under the Reveilo label. Their production is reported to be small (near 100,000 cases) and they produce Reveilo Syrah, Cabernet Sauvignon, Chardonnay, and Chenin Blanc. United Breweries Group (UB Group) Market Share not available The UB Group has varied business interests, the core being alcoholic beverage (spirits & beers) and aviation. At a time when wine consumption in India is growing at a rapid pace and is fast approaching international levels, the Groups Spirits Company USL has already made a fresh entry into this business. USLs Wine Business in India operates through two companies United Vintners Limited (UVL) and Four Seasons Wine Limited. Today, under the guidance of Mr. Abhay Kewadkar, Business Head and Chief Winemaker, the Group plans to take the Indian wine industry to new heights. UVL imports wine from all over the world to offer a portfolio of wine of different origin, varietals, styles and price points. This is to ensure a wide choice for the consumer and to initiate interest and awareness in the existing consumer base. The current portfolio comprises a selection of some exquisite New world & Old world wine from New Zealand, Australia, Portugal, South Africa and France. Four Seasons Wines Limited produces wine from grapes grown around Sahyadri valley in Maharashtra, India and at its state-of-the-art Four Seasons winery near Baramati, around 65 kms from Pune. The company aims to drive interest in wine and wine consumption by offering good quality wine at reasonable price points and packaging options; and, through education and engagement. The wine is marketed under the brand names Zinzi and Four Seasons. Four Seasons Wines Limited is in the process of planting 300 hundred acres of its own vineyards around the winery. For its annual production requirement, the company has already entered into long term contractual agreement with local farmers for 500 acres and will enter into contractual agreements for a further 2000 acres of vineyards. Besides, the company will also share its technical expertise with the local farmers of Baramati and help in their viticulture. This project will act as a catalyst in the socio-economic development of the local community by generating approximately 2000 direct and indirect job opportunities to the people of Baramati. Simultaneously, it will also promote wine tourism at its winery & vineyards. (Source: UB Group)

Key Factors

Key Sensitivity
Consumer Sentiment Index: Description: Customer Sentiment Index, 12 month rolling average of the Index; historical and forecast data and analysis.

End customers are very important to ensure the growth of the wine industry. Economic downturns and other events can affect the expenditure decision of households. When customers are not happy or optimistic about the future of the economy, they will tend to postpone expenditure until times are better. In 2009-10, customer sentiment has gone up, giving momentum to the 25% to 30% growth of the wine Industry. In fact, consumer sentiment was highest in India, followed by Indonesia and Norway, according to the survey conducted by the New York-based Nielsen Company in March 2010. (Source: Thomson Reuters, India consumer sentiment highest Nielsen) Import and Export Taxes (Duties): Description: Tariff rates applicable to the industry High taffies may restrict flow of trade but may attract investment if domestic market is big enough and growing. Over the last few years Indias tariff policies and conditions for import of wine have improved however, customs duty at 150% is still very high to attract investment and imports. Industry is keen that the existing tariff structure roadmap and conditions of import of wine are improved, so that quality wine is available at an affordable price. State Government regulations: Description: Impact of policies by various States Control over selling, distribution, and pricing of wine belongs to state governments under Section 47 of the Directive Principles of the Indian Constitution. India is a federal nation, and like the U.S., the central government has empowered states to generate revenue and control sales. Each of Indias 28 states and 7 union territories has its own rules and regulations for alcohol control. States like Maharashtra and Karnataka have liberalised their excise tariffs on wine however, stringent rules prevail in most other states. States like Gujarat, Lakshadweep, Mizoram, Nagaland and Manipur have complete prohibition of alcoholic beverages like wine.

Key Success Factors Economies of scale: Wine manufacturers with larger production facilities can achieve lower average costs, which can in turn facilitate lower pricing, increased marketing expenditure or capital investment. Financial structure of the company: The extent of a companys debt and the way in which it is financed will affect the ability to acquire new assets and ensure healthy cash flows. Financial position of the company (as against financial structure): Asset backing is sometimes necessary in such a capital intensive industry as this to compete with the production, technology and quality of overseas winemakers. Establishment of import markets: Strong ties with overseas winemakers have been a critical growth factor for players during the growing domestic conditions of the current period. Surrogate marketing: Promotion of alcoholic beverages is prohibited by the Government of India, so the winemakers have to look at innovative ways of promoting their brands using surrogate marketing. Guaranteed supply of key inputs: If grape supplies are assured by buying from the key geographic regions and also via contract a firm will have an advantage over many other producers.

Economies of scope: Manufacturers that produce a range of wine varieties, wine brands, and other beverages, can achieve efficiencies in activities such as distribution, marketing and administration. Production of goods currently favoured by the market: An ability to switch production for a market that has ever-changing tastes is critical to success. Industry wine-tasting awards are an effecting means of marketing wine with an appealing taste.

Appendices
Appendix 1: Wineries in India

UNIT

LOCATION WEF

CAPACITY KL

KEY BRANDS

Grover Vineyards

Bangalore

1992

500

Grover

Heritage Grape Winery Pvt Ltd

Bangalore

2004

300

Heritage Port

Hampi Heritage Winery

Bijapur

2006

Kinvah

Pampasar Distillery Ltd

Bangalore

1000

Golconda ruby

Le Meredien Distillry & Winery

Goa

Donna Maria

Naveen Distillery

Goa

Vinho de Goa

Nita Industries

Goa

Port No 7

Oceanking Distilleries

Goa Mapusa

Pinsons Wine Industires Goa

Pinsons

Springfields (India) Distilleries

Goa

2003

San Andre etc

Vinicola

Goa Margao

1975

Vinicola

John Distillers

Goa (Cuncolim)

2004

Goana's

Goa Vinbros & Co (Margao) & Pondicherry 2005 -

Globus, Vinho de Goa

Associated Wines Pvt Ltd

MHR Baramati

2005

100

Baramati Grape Industries Ltd

MHR Baramati

1975

Bosca

Malhar Winery Pvt Ltd

MHR Baramati

2005

110

Chateau dOri

Pyramid Wines Pvt. Ltd.

MHR Baramati

2004

100

Yellowstone

Chateau d'Ori

MHR Nashik

2007

200

Chateau D'Ori

Chaya Winery Pvt Ltd

MHR Nashik

2005

35

Flamingo Wines

MHR Nashik

2004

200

30th Lat

Girana Valley Vineyards

MHR Nashik

2001

500

India Food Company

MHR Nashik

2008

100

Vin & Vouloir

Maharaja Winery

MHR Nashik

2003

54

Rising Sun

Mercury Winery

MHR Nashik

2008

100

Aryaa

Mountain View Wines

MHR Nashik

2005

180

Natural Brews Pvt. Ltd

MHR Nashik

2005

100

Nasik India Grape Wines

MHR Nashik

2003

62

ND Wines

MHR Nashik

2003

300

ND

Pratamesh Wines

MHR Nashik

2004

50

Rajdheer Wines

MHR Nashik

2003

60

Aurum, Le Vino

Renaissance Winery Pvt. MHR Ltd. Nashik

2005

135

Shailendra Pai

Seagram India

MHR Nashik

2006

300 e

Nine Hills

Shivprasad Wines

MHR Nashik

2005

20

Sigma Wineries Pvt Ltd

MHR Nashik

2005

100

Sula 1: Samant Soma Vineyards

MHR Nashik

1999

Sula

Sula 2: Nashik Vintners Ltd.

MHR Nashik

2004

650

Sankalp Vineyards Ltd.

MHR Nashik

2002

200

Vinsura

Terroir India Wineries

MHR Nashik

2008

100

Indus

V.M. Agrosoft

MHR Nashik

2002

50

Sailo

Vikas Winery Pvt Ltd

MHR Nashik

2005

25

Vintage Wines Pvt Ltd

MHR Nashik

2005

200

Reveilo

Bluestar Agro & Winery

MHR - Pune 2004

300

Champagne India - unit 1 MHR - Pune 1985

200

Marquise de

Pompadour

Champagne India - unit 2 MHR - Pune 1988

400

Riviera, Chantilly, Ivy

Champagne India - unit 3 MHR - Pune 2004

800

Riviera, Chantilly, Ivy

Grapecy Wine & Breweries

MHR - Pune 2004

50

In-Vogue Creations

MHR Raigadh

50 KL

Datacon Wine Industries

MHR Sangli

G P Research Institute Winery

MHR Sangli

2005

200

Green Gold Wineries

MHR Sangli

2004

100

Greno

HM Fine Wines

MHR Sangli

2003

25

Kalyani Winery & Breweries

MHR Sangli

2004

25

NC Fine Wines

MHR Sangli

2003

36

Neema Winery Pvt Ltd

MHR -

2005

110

Sangli

Pranav Agro Industries

MHR Sangli

Sahayadri Hills Vineyards

MHR Sangli

2005

100

Sai Krupa Wineries

MHR Sangli

2004

30

Indo Grape Wines

MHR Solapur

2002

125

Mohini Wineries Pvt Ltd

MHR Solapur

2004

300

Rajwardhan Wines Pvt Ltd

MHR Solapur

2005

110

-represents that Information is not available Source: Gryphon Brands Inc.

Appendix 2: Wine Clubs in India

Wine Club

City

Sinc e

Contact

Email

Club's website

Bangalore Wine Club

Bangalore 2002

Ruma Singh

[email protected]

Rotarian's Wine Fellowship Bangalore 2007

Chander [email protected] Mannar m

of India

Overseas Women's Bangalore 2008 Wine Club

Maureen [email protected] Overseas Women's Wine Kerlau r Club

Bombay

Mumbai

Wine Club (Bombay)

2006

Vishal Kadakia

[email protected]

Calcutta

Kolkata

Wine Club (Calcutta)

2008

Peter Mitter

[email protected]

Chandigar h Wine Club

Chandigar h

2003

Pavan Khaitan

[email protected]

The Wine Society

Delhi

1997

Prem Behl

[email protected]

Delhi Wine Club

Delhi

2002

Subhash Arora

[email protected]

www.delhiwineclub.com

Terroir Madras Wine Club Chennai 2009

Capt. Arjun Nair [email protected] www.terroir.in

Pune Gourmet Club Pune 2006 Shankar

[email protected] m

www.punegourmet.in

Mumbai The Wine Society of India

2007

David [email protected] Banford Nirad Muthann www.thewinesocietyofindia.co m

Bangalore 2008

[email protected]

a -Delhi 2009 --

Appendix 3: Grapes available in India Table Grapes

Bangalore Blue

Red

Sharad Seedless

Selection Seven

Thomson Seedless

Anab-e-Shahi White Arkawati

Arka Shyam

Wine Grapes

Cabernet Sauvignon

Red

Pinot Noir

Shiraz (Syrah)

Merlot

Zinfandel

Chardonnay

Clairette

White

Chenin Blanc

Ugni Blanc

Sauvignon Blanc

References
Central Board of Excise and Customers Government of India CNBC TV 18 Grover Vineyards Gryphon Brands Inc. Indage Vintners Annual Report Indage Vintners, Press Kit Indian Wine Inc. JBC International, Indian Wine Market Report Ministry of Food Processing Industries (MOFPI), Annual Report 2008-09 Ministry of Food Processing Industries (MOFPI), Eleventh - Five Year Plan Ministry of Food Processing Industries (MOFPI), Grape Wine Seth Associates Stacy Slinkard, How Wine is Made Thomson Reuters, India consumer sentiment highest Nielsen

UB Group UB Group, Analyst report Utsav Australia

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