Homegrown wines winning!

Bangalore Business

The Karnataka government is actively engaged  in encouraging wine culture in the state. Programme called WEAT organised  to increase wine culture annually.

Bengaluru; Business for Indian wineries is booming, while imported wines face heavy cess. Data from the Ministry of Commerce and Trade shows a decline in wine imports since 2019.

Data from Karnataka State Beverages Corporation Ltd (KSBCL) shows that domestic wineries are growing steadily. In 2017, the sales reached Rs. 223.54 crores, in 2018 it was Rs. 251.87 crores, and in 2019, it was Rs. 258.35 crores. The latest data available till January 2021 was Rs. 207.07 crores.

Prasad, Operation Head, SDU Wineries said that sales had improved over the years. He said, “The competition is fierce; there is a significant indirect competition from imported wines, because if one is specific, they will always go for the one they want.”

He said that while there was not much fluctuation in the domestic market due to the pandemic, there has been a shift in retail trade. The on-trade, which is sales in restaurants, bars, and pubs, was hit hard and there was a negative downturn, he said. But, he added, “the off-trade, which is retail sales, has been really good. In fact, one cannot differentiate between pre-pandemic and post-pandemic.”

There are 16 wineries under Karnataka’s Wine Board, Somu T, Managing Director, Karnataka Wine Board said, “In 2020, sales declined substantially, with a production decrease of around 20 percent. But the industry is coming back on track.”

The data  from the Ministry of Commerce and Trade  showed that the business grew by one and half times from 2016 to 2018, but it saw a steep decline by more than five times from 2018 to 2020.

Import duty

The import duty on wine is 150 percent, which is the maximum limit allowed under the agreement by the World Trade Organisation (WTO). Prior to 2004, India charged countervailing duties (CVD) in addition to import duties, for a total import duty of 260 percent.    

But the case is different for domestic wines. In Karnataka, the government is actively involved in encouraging wine culture in the state. MD said, “Due to slack in sales, duty on home-grown wines have not been increased. In addition, we are running a programme called WEAT and conduct wine festivals to increase wine culture annually.”

However, citizens still enjoy imported wines, despite the high import duties on international wines. Pavan, TONIQUE, said, “Imported wines register higher sales compared to the domestic ones.” The wine section has 350 labels, of which 60 are Indian wines.

Wine drinkers mostly feel price to be the most important factor when opting for a domestically grown wine. 

Farhan said that on regular days, he opts for Sula as it is budget friendly. But if he has a bigger budget, he added, “I would definitely go for an imported one.”

In terms of consumer preference, there are a lot of patterns shifting. This has happened due to factors like pay-cuts, growing uncertainty about the future and a steep hike in the price of alcohol, he added.

Shankar Prasad, a business expert said, “The wine industry has seen a compounded annual growth rate (CAGR) of 25 percent. In the past five years, there has definitely been an improvement in the domestic wine industry. However, if you actually see the quality of homegrown wines, it’s not so premium. These can’t be compared with those premium Italian or French wines. Then there is a lack of knowledge about the ingredients, taste, and brands.”

Shankar mentioned the challenges in the domestic market. He said that there is more to be done, but transportation and storage are issues. And since that isn’t that great in India, often the taste of wine is compromised. The government should extend more support to the wine industry for the industry to see better growth in the future. 

“The Indian domestic market has great potential as it’s an emerging market for both consumers and producers, so as for the growth, it can go up to maybe 30-35 percent in the future,” he said.

Amit Dutt, professor, Indian Institute of Hotel and Management (IIHM), Bangalore, gave more information on how the government and the institute are trying to induce wine culture and education through initiatives like WEAT. He said, “Indian wines are new age wines, with great potential to compete with imported ones.”