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Imagine starting a winery for just $44,000 in a country where the wine industry is growing at a rate of 25% to 30%.
Yes, the Wine Industry of India is at the introduction stage of its life cycle and a small winery can be started in India with an investment of about $44,000. Required know-hows and machinery are available locally.
For the year 2008-2009, the wine consumption in India was only 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.
The prospects of growth for wine in India are quite high. About 600 million Indian’s 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 such as wine is expected to increase. In spite of India’s high import tariffs on wine, this country was one of the world’s fastest growing wine markets. Until the year 2008-2009, growth was about 25% to 30% every year. However, sales 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. Despite the recent setback, consumption of wine in India is projected to increase to 2 million cases by 2011 and 4 million cases by 2015.
It is critical to note that, the level of tax burden for both local winemakers and importers of wine is high. Control over selling, distribution, and pricing of wine belongs to state governments. Each of India’s 28 states and 7 union territories has its own rules and regulations for sale of alcohol. In some states an imported wine may cost almost 4 to 5 times of its price, with over 50% of its revenue shared between various levels of government. A wine bottle that leaves France at three euros (under $4) is sold in India at approximately 15 euros (about $20).
However, states like Maharashtra, Karnataka and Himachal Pradesh have taken steps to encourage wine industry and given preferential treatments by liberalizing their excise regime and reducing excise duties. Eighty precent consumption of wine in India is confined to major cities such as Mumbai (39%), Delhi (23%), Bangalore (9%) and Goa (9%).
The supply chain of the wine industry in India is fairly linear. Winemakers are the key to the supply chain and they record good profits. The key to success in the wine business is branding so, a substantial chunk of dollars are spent in selling and distribution. It is also critical to note that, promotion of alcoholic beverages is prohibited in India. So, winemakers use strategies such as surrogate marketing and creating economies of scale.
Success in the wine business in India is conceivable if you do the hard yards of government regulations and have the right marketing mix.
Table of Contents
- Product and Service Segmentation
- Major Market Segmentation
- Industry Concentration
- Geographical Segmentation
- Barriers to Entry
- Industry Assistance
- Regulation and Deregulation
- Cost Structure
- Capital and Labour Intensity
- Technology and Systems