The Wine Market in India Opportunities for Canadian...

The Wine Market in India: Opportunities for Canadian Wine Exporters

July 2010

The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information. This report is intended as a concise overview of the market for those interested in its potential and is not intended to provide in-depth analysis which may be required by the individual exporter. Although every effort has been made to ensure that the information is correct, Agriculture and Agri-Food Canada assumes no responsibility for its accuracy, reliability, or for any decisions arising from the information contained herein.

Please address any comments or suggestions you have on this report to: Ben Berry – [email protected]

The Wine Market in India: Opportunities for Canadian Wine Exporters Table of Contents Executive Summary ............................................................................................ 1 India Wine Market............................................................................................... 1

Challenges...................................................................................................... 2 Domestic Industry............................................................................................... 2

Regions.......................................................................................................... 3 Varietals......................................................................................................... 3 Quality........................................................................................................... 3 Industry Classification ...................................................................................... 3 Regulation ...................................................................................................... 4 Current Situation ............................................................................................. 4 Challenges...................................................................................................... 5

Product Positioning.............................................................................................. 5 Promotions ..................................................................................................... 5 Pricing ........................................................................................................... 5 Product Varieties ............................................................................................. 6 Positioning within Alcoholic Beverages ................................................................ 6 Challenges...................................................................................................... 6

Product Development .......................................................................................... 7 Consumer Market................................................................................................ 7

Demographics ................................................................................................. 7 Consumption................................................................................................... 8 Preferences and Perceptions.............................................................................. 9 Challenges.....................................................................................................10

Key Markets ......................................................................................................10 Access..............................................................................................................11

National Versus State Regulations .....................................................................11 Regulatory Environment ..................................................................................12 Import Policies ...............................................................................................13 Labelling .......................................................................................................13 Challenges.....................................................................................................13

Local Wine Importers & Distributors......................................................................13 Distribution Channels .........................................................................................14

Retail Infrastructure........................................................................................15 Off-Trade Versus On-Trade ..............................................................................15 Challenges.....................................................................................................16

Competition ......................................................................................................16 Challenges.....................................................................................................18

Canadian Wine Industry......................................................................................18 Opportunities for Canadian Wine Exporters ............................................................19 Contact Information ...........................................................................................20 Key Industry Events ...........................................................................................21 Key Resources...................................................................................................21

The Wine Market in India: Opportunities for Canadian Wine Exporters July 2010

1


Executive Summary

India is the second most populous country on the planet and has a consumer base representing one-sixth of the world population. As part of the BRIC (Brazil, Russia, India, and China) countries, India is one of the fastest growing emerging economies.

With a growing economy and middle class, India’s economy has become the 12th largest in the world dominating the South Asian subcontinent. The economy, supported by many vibrant urban centers and a strong private sector, is also moving toward being increasingly knowledge and technology-based. The future of India's economy is bright and many predict that India will soon challenge China in terms of opportunity, growth and development. By 2045, India’s population is expected to surpass that of China to become the most populous country in the world (Datamonitor, 2009).

While it is irrational to think that India was unaffected by the global economic recession, India's minimal economic reliance on exports aided in minimizing the impact of global fluctuations; more so than other more export-reliant emerging markets. However, some sectors such as the tech industry are expected to face challenges. While India’s GDP growth was expected to decrease in 2009 to a rate of 3.5%, the economy is expected to begin recovery in 2010 with growth of 5.2% (EDC, spring 2009).

Although there is further room for the Indian Economy to recover in growth and development, the country provides an intriguing and opportunistic market for a number of commodities. An evolving consumer population with an already high level of food and beverage expenditure, and expanding consumerism combined with increasingly distinguished international tastes has led to a burgeoning wine market. Still in its nascent stages, the past decade has shown skyrocketing growth in India’s wine market with similar high predictions for the future. Although regulatory and cultural barriers remain present in the Indian wine market, there are immense growth opportunities that look promising for Canadian exporters.

India Wine Market

The wine market in India a decade ago was virtually non-existent. Since then, it has become the fastest-growing wine market in the world. Fundamental changes including government regulations, consumer behaviour, higher incomes, industry advancements, media and increased globalization have contributed to this sector growth. While wine consumption remains low the market has grown and developed considerably, experiencing growth of approximately 25-30% annually (Tiwari, 2009 and Samant, 2009). In 2009, the size of the Indian wine market was estimated at approximately 1.5 million cases. However, an estimate by the United States Department of Agriculture of the 2007 Indian wine market was at the same level: 1.5 million cases (Tiwari 2009, and USDA, 2008).

Although unit prices experienced a marginal drop from 2007 to 2008, sales volume grew a noticeable 35% from 2007, amounting to 11 million litres. From 2003 to 2008, the


2

sales volume common average growth rate (CAGR) for wine was 33.2%, while the sales value CAGR was 33.6%. The proportion of wine imports in the market has been increasing, from approximately 13.3% in 2003 to 16.7% of the market in 2007 (Arora, 2008).

The global economy did have an impact on the Indian wine market, with wine sales in 2009 decreasing for the first time since 2001. Higher-priced premium wines were particularly impacted as domestic consumers traded-down and the hospitality and tourism industry experienced a downturn (Gryphon Brands Inc.). Despite this downturn, some 2009 trends displayed a recovery for India’s tourism industry. Both foreign tourist arrivals and exchange earnings from tourism showed positive signs (Delhi Wine Club, 2009). Strong wine growth in sales value and volume are expected to continue in the future, with sales estimated to reach 38 million litres by 2013; experiencing growth of 241% from 2008 for both sales value and volume.

Challenges

Despite certain advancements, challenges still remain in the industry with regards to consumer culture, importing and state regulations. However, with continued estimates of future growth for the wine industry in India, and a growing middle class, there are considerable possibilities for opportunity in this market. The future of the market, at least in the short-term, appears to lie in providing wine that is affordable and accessible, thus increasing consumption within the mass market (Dubey, 2007).

India Wine Market Value: 2003-2013

0

5000

10000

15000

20000

25000

30000

2003

2005

2007

2009

2011

2013

Mil

lio

ns

Rs Wine

Still wine

Sparkling wine

Champagne

Fortified wine

Datamonitor, 2009

Domestic Industry

In 2008, 60,000 hectares in India were cultivated for grapes, producing 1,600,000 tonnes. In 2007, India’s wineries produced an estimated 6.2 million litres; accounting for a total of 8.35 million bottles (Seth, 2007). In 2009, approximately 62 wineries were present in India (The Hindu Business Line, 2009). Unfortunately, weather patterns from both extremes in India can pose challenges to the domestic industry. Both unseasonable rains destroying grape crops and very dry conditions resulting in water shortages pose threats. Virus attacks such as leafroll and rugose have also been concerns for grape producers (The Hindu Business Line, 2009).


3

Regions

Maharashtra is the largest wine producing state, with 40,000 hectares of grape cultivation and 1,100,000 tonnes of annual production. Despite these numbers, 98% is used for table grapes and only a mere 2% is used for other types of production, such as dry fruits, grape juice, syrup, jam and wine. This results in only approximately 3,237 hectares of land being cultivated for wine grape varieties in Maharashtra, where red, white, rose, and sparkling wines are produced (The Hindu Business Line, 2009 and Dubey, 2008). Not surprisingly, the majority of India’s wine production occurs in Maharashtra, which accounts for more than 85% of the country’s total wine production. In 2008, Maharashtra possessed 45 wineries with more on the way; significant growth from only approximately six wineries in 2002 (Arora, 2008, The Hindu Business Line, 2009). Within Maharashtra, the highest concentration of wine producing takes place in the regions of Nashik and Sangli, followed by the Pune district (Kothari, 2009). Nashik is known as the wine capital in India, possessing the most beneficial climate for grape production, and thus is also the largest grape producer (India Wine Show, 2009). Other main districts for grape growing in Maharashtra are: Solapur, Ahmednagar, Latur, Osmanabad and Satara (The Hindu Business Line, 2009).

Varietals

Chenin Blanc, Sauvignon Blanc, Clairette and Viognier are the most common varieties of white grapes cultivated in India, while Shiraz, Cabernet Sauvignon and Zinfandel are the most common red grape varieties. Some companies have begun experimenting with new types of varieties, such as Sangiovese and Riesling (Euromonitor, 2009, and Gryphon Brands Inc.). Increasing market demand has also led to a rise in the price of grapes. In 2005, the price of red grapes was approximately Rs25 ($0.57*) per kilo, increasing to Rs35 ($0.80*) per kilo in three years time (Arora, 2008). *Bank of Canada Exchange Rate November 30, 2009

Quality

The quality of wines is another area for development in the Indian wine industry. While there is a strong demand for wine products, pressure has not been placed on producers to further improve the quality of the wine. There are no specific laws governing wine production, quality definitions, grape varietals, or content ingredients (Arora, 2008). However, with the growing presence of new educational wine schools and institutes in India, the industry will continue to develop along with the quality of wine being produced. An Indian Grape Processing Board has been launched by the Minister for Food Processing Industries. As an autonomous and independent body, the function of the Board will be to set standards and promote India’s wine industry, thus providing significant support in the development of India’s industry and collaboration among states (USDA, 2009).

Industry Classification

Wine producers in India have also been trying to make in-roads with regards to the classification of the wine industry, and working to have wine-making granted the status of being agro-based. With an agro-based industry status, duties and taxes could be reduced drastically; likely resulting in reduced costs and thus reduced prices (Kothari, 2009). In the state of Karnataka, where the government is considering giving wine the status of a non-alcoholic product, the designation would allow for easier availability of wine allowing for it to be sold in more retail formats and alongside other food and


4

beverage products. Producers in the city Nashik are also trying to have the government of Maharashtra designate wine-making as a cottage industry (Tiwari, 2009).

In Maharashtra, the most liberal state regarding the wine industry, the Maharashtra Grape Processing Industrial Policy of 2001 designated grape wineries the status of the food processing industry, and thus eligible for the same types of benefits available to this industry (Dubey, 2008). Maharashtra has significant development plans for boosting the wine industry, including more wine institutes in the state, joint ventures with other global institutions, and a separate horticulture board (The Hindu Business Line, 2009). The government of Karnataka’s new wine policy “Karnataka Grape Processing and Wine Policy” of 2007 also declares grape wine production units as part of the horticultural and food processing industries. By including wine production under this status, further industry growth will allow for increased ease in establishing wine parks and obtaining financial assistance. A number of other states have also been undertaking regulatory moves to support the wine industry. Haryana has reduced its excise duty to Rs20.50/proof litre ($0.47/proof litre*), while Chandigarh has decreased its licence and brand registration fees for wine (Dubey, 2008). *Bank of Canada Exchange Rate November 30, 2009

Regulation

The liquor industry remains highly regulated by the government, particularly with regards to manufacturing, storage and distribution (Dubey, 2007). There has also been a movement toward favourable government policies that promote the industry, which has significantly helped to foster growth. Several states including Maharashtra have been undergoing regulatory changes to further promote the wine industry and involve international wine companies, which are expected to further boost wine consumption among consumers. Among India’s states, Maharashtra has the most liberal liquor policy, with wine duties either 200% of the assessed value or Rs200/bulk litre ($4.55 bulk litre*) (Dubey, 2008). The state has also commissioned the sanctioning of wine bars to aid in increasing wine consumption (Reuters, 2009). The Maharashtra government has made further progress toward a more open wine industry, recently announcing a reduction in the excise duty on BIO (bottled-in-origin) wines. A value added tax (VAT) reduction for BIO wines, ranging from 20-25%, and a reduction for domestic wines from 4-25% was also announced (Ahuja, 2009). In order to further stimulate wine consumption and help the domestic wine industry recover from a difficult 2008-2009, the state has also extended an excise duty holiday on processed grape wine, which will now continue until 2021 (Kothari, 2009). *Bank of Canada Exchange Rate November 30, 2009

Current Situation

The global economy has had an impact on the Indian wine market, affecting established industry players, such as Chateau Indage. Even in light of this global economic slowdown, the industry continued to grow at 25-30% in 2009; a positive sign for the future of the wine industry. Domestic wineries have also been facing increased VAT and excess wine volumes due to decreased sales. This excess supply has resulted in lower prices in the market and a number of promotions, such as buy-one-get-one-free (Tiwari, 2009 and Samant, 2009).

Challenges placing constraints on the industry involve increasing costs (such as agricultural products, fuel and raw materials) which may place pressures on wine prices, potentially leading to higher pricing and fewer price promotions.


5

Challenges

Improving wine quality in India. The Wine industry needs support to further develop and grow, particularly in the development of wine quality. Currently there is a lack of Sommelier schools, technical know-how, and favourable government policy to foster this, however there are already improvements taking place in these areas. As the quality of wine produced in India increases, so will the competition facing Canadian wine exporters providing high-quality wines, but who must also face high import duties and pricing. Domestic wine growth is estimated at 35% (Dubey, 2007).

Product Positioning

Domestic wine companies appear to have done well with their positioning in the marketplace, thus increasing brand awareness and providing economically-priced brands that are easily accessible through numerous locations. Sales of domestic brands have been surpassing those of imported brands. Easy availability in off-trade channels and promotions of price discounts, sampling, and food-pairings account for this success (Euromonitor, 2009). However, wine in India is still considered to be fairly fragmented, with various wine types available only in specific regions (Euromonitor, 2009).

Promotions

Promotional communication at the point of sale, is particularly important for growing awareness and brand consumption, as no advertising of wine (or alcoholic beverages) is allowed in the media. Moreover, the state of Delhi does not allow in-shop advertising and on-premise promotions (Seth, 2007). In off-trade channels, sampling and promotional discounts such as buy-one-get-one-free are popular, while promotions such as wine and food pairings are more common in marketing wines at on-trade channels (Euromonitor, 2009). In the planning of promotions that involve food-pairings, companies should be mindful of the prevalence of vegetarians and the seasonal availability of fresh foods in India when determining food choices (USDA, 2008).

Pricing

Generally, imported wines in the market can reach over Rs700 ($15.93*) a bottle, while domestic premium wines are present in a wide price range from Rs150-700 ($3.41-$15.93*) a bottle, and cheap (generally domestic) wines are available at under Rs150 (Gryphon Brands Inc.). Traditionally, Indian wines have been in the sale price range of Rs350-550 ($7.97-$12.52*). However, cheaper wines, ranging from around Rs280-300 ($6.37-$6.83*), have increasingly been introduced to the marketplace. With the 2009 drop in prices, typical Indian wine is generally value-priced at around Rs200 ($4.55*). A growing number of wine varietals, such as Chenin Blanc and Shiraz are also expected in the market at prices lower than Rs300 ($6.83*) (Arora, 2008, and Samant, 2009). With regards to wine type, still red wines priced between Rs300 and Rs499.99 ($6.83-$11.38*) accounted for more than half of total still red wine volume sales in 2008, while still white wines priced between Rs300 and Rs599.99 ($6.83-$13.66*) comprised more than half of sales for their category. Sparkling wines priced from Rs750 ($17.07*) and higher accounted for nearly 80% of total sparkling wine sales (Euromonitor, 2009). *Bank of Canada Exchange Rate November 30, 2009

Low pricing and other promotions have been significant factors in fuelling sales. Future growth may be somewhat diminished if rising costs are passed on to consumers.


6

Consumer price inflation has also been placing upward pressure on prices, and is expected to average 6.2% in 2009; a slight decrease from 7.7% in 2008 (AAFC, 2009). Despite these possibilities, the unit price of wine is actually forecast to decrease as competition increases (Euromonitor, 2009).

Product Varieties

In 2008, the greatest growth occurred in both the still red and white wines. Still light grape wine continues to be the fastest growing type of wine in the Indian market and is expected to remain the growth leader. Volume sales are projected to increase 254.3% and value sales 260.9% from 2008 to 2013. The success of still light grape wine among the Indian marketplace can be partly attributed to the marketing of the product as a drink for regular, every-day consumption; resulting from food pairing promotions combined with an economy-price and easy availability. Still light grape wine is widely accessible in the marketplace and can be found at all price-points at off-trade or on-trade channels.

Although sparkling wine is projected to continue growth of around 150%, it has yet to gain significant awareness among consumers, has fewer brands, and is often regarded as a “special occasion” wine. Non-champagne sparkling wines have had success in the market, as a result of the increasing presence of domestic brands that are more economically-priced. Fortified wine and vermouth are predicted to be the slowest growing category, but still with growth of over 100%, ranking close behind sparkling wine. (Euromonitor, 2009).

When comparing “old world” and “new world” wines, new world wines dominate volume sales, accounting for 87% of wine sales in 2008. This dominance has been fuelled by easier accessibility to mass Indian consumers, as they are more available in off-trade outlets and cater to newer wine consumers searching for sweeter, less complex wines. However, volume sales of old world wines still grew a considerable 42% in 2008 (Euromonitor, 2009).

Positioning within Alcoholic Beverages

Wine has been gaining an increasing presence in India’s social culture, with considerable growth in wine bars, wine shops and wine tourism. The increasing presence of wine-related organizations will also aid in creating higher visibility of wine within the mass-consumer market, the development of higher quality wines and the integration of wine into consumer palates and lifestyles (Euromonitor, 2009). With regards to other types of liquor, wine consumption is still low, comprising only 0.14% of total liquor consumption compared to beer which represents 52.6% of consumption and distilled spirits 47.3% (The Hindu Business Line, 2009). However, evolving attitudes regarding the distinctiveness of wine compared to other types of liquor is creating unique perceptions among consumers.

Challenges

The high prices placed on imported wines in India may be a barrier to mass consumption of imported wines and the success of imported wines in off-trade channels. These high prices also place further importance on the successful conveyance and recognition of the high quality of Canadian wines.


7

Product Development

With a market that is still in the nascent stage, product development continues to evolve as companies try to reach more consumer groups. Convenience has become one area of focus; driving new product developments. New innovations in the marketplace involve bottles with screw caps (as opposed to the traditional cork) and 375 ml single-serve bottles. To increase regular consumption, cheaper wines and plastic bottles continue to be introduced to the market, The first low alcohol content wine was introduced to the market in 2008; priced economically and targeted toward women, particularly first-time wine consumers. There have also been launches of premium and mid-priced wines by domestic companies in 2007 and 2008. In order to compete with imported wines, boutique wineries may also launch these premium brands (Euromonitor, 2009). Nonetheless, decreased wine sales and lower prices in the Indian market will likely have an impact on new product launches and their positioning. One of the most popular launches in 2009 was Samara, a wine priced at less than Rs200 ($4.55*). New wine varieties, such as Viognier, Riesling, Malbec and Grenache are also expected to be entering the market (Samant, 2009). *Bank of Canada Exchange Rate November 30, 2009

Consumer Market

India’s already immense and evolving consumer population presents a number of opportunities for a burgeoning wine market. Although 80% of India’s more than 1.1 billion population follows Hinduism, with alcohol strictly forbidden in Orthodox Hindu society, the western culture has begun to influence and alter the perception of alcohol consumption to varying degrees (Johnsen, 2002). These cultural factors have shaped demographic trends, as the average wine consumer in India is typically a young, urban professional who has an international orientation (Guinand and Marti, 2007). Growing consumer demand has helped fuel huge growth in this nascent wine industry in the last few years.

During the global recession in 2008 and 2009, domestic consumers began to reduce their wine purchases. This is particularly due to increasing wine taxes in key markets such as Mumbai, Bangalore, and Goa, thus increasing the retail price of wine. However, for the most part, alcohol consumption remained an area in which Indian consumers appeared to not significantly trade down their preferences; desiring to still have their “affordable luxuries”. While many consumers continue to enjoy their preferred alcoholic drinks, a large majority is looking at the value of a product relative to its cost and is watchful of the amount they are spending. Despite this, consumer habit and brand continue to have a large influence on alcohol purchases, affecting almost one-third of those who consume alcohol. While there has been an overall decrease in brand loyalty among the consumer market, the presence of private label alcohol in India remains quite low (Datamonitor, 2009).

Demographics

Emerging from a population of more than 1.1 billion, India’s expanding middle class is one of the fastest growing in the world and predicted to reach 583 million in 2025. This evolution presents a promising consumer market for wine (IFE India, 2007). Combine this with the fact that India’s demographically “young” population, ranging from the 20-49 age segment, continues to grow, is resulting in an increasingly large proportion of the population being of the eligible drinking age. From 2005 to 2015, the number of people added to the alcohol drinking age population will be 95 million, providing for a larger


8

consumer market for adult beverages (Datamonitor, 2006 and Krishna, 2007). Along with this, rising disposable income and consumerism in India have aided consumer wine growth in the country (Reuters, 2008). The food and drink market is one of the fastest growing segments of India’s retail industry. With the increasing disposable incomes, this bodes well for consumer splurges on food and beverage delicacies, such as wine. As consumer affluence grows and a higher quality of life is sought, more consumer emphasis is expected to be placed on the sensory experience of food and drink, particularly for products such as wine. Consumers are thus expected to be more willing to pay premium prices for quality goods and products (USDA, 2008).

India is geographically diverse, with different resources and living standards spread across the country’s 28 states. Combined with different food habits, cultures and lifestyles, diets can vary considerably by region, and strong divisions between socio-economic classes continue to exist. When targeting a specific consumer market for wine, all factors must be taken into consideration, as each impacts wine consumption.

India’s vibrant urban centres are a key component of the country’s economy and, not surprisingly, are an area of concentration for India’s wealthier consumer segments and increasing middle class. India’s growing urban centres benefit from a population of educated individuals, particularly in technical and software services, and are driving growth in the economy (AAFC, 2009). These are India’s key wine consumers and they are growing. Although 72% of India’s population currently resides in rural communities, 40% of the total population is projected to be living in urban locations by 2025. (USDA, 2008 and AAFC, 2009).

Consumers’ eating habits are undergoing a shift in the urban markets, being affected by both the age and income demographics that reside in these areas. The younger generation centered in India’s urban markets is leading the shift toward a more western-style cuisine. Accordingly, urban consumers represent a more realistic target market for processed and imported food items from the perspective of small and medium enterprises (AAFC, 2009).

Consumption

India is one of the fastest growing markets for alcoholic drinks in the world, with a CAGR of more than 9% during 2009-2013, and wine is the fastest growing within the alcoholic drinks segment. However, similarly to the growth of the wine market, part of what makes for this substantial growth is a low per capita consumption rate (IFDE INDIA, 2009).

While current wine consumption is relatively low (estimates range from 4.6 ml to 9.0 ml per capita), and there are only approximately 1.5 million wine consumers, this is significant growth from what consumption in India was a decade ago (Reuters, 2008 and Tiwari, 2009). When compared to per capita wine consumption in countries such as France (60-70 litres) and the U.S. (20-30 litres), the low consumption but also the growth possibilities of the Indian market are further evident (The Hindu Business Line, 2009). India’s consumption is also low compared with China’s 400 ml per capita consumption. Estimates of the number of wine buyers in the Indian marketplace were 700,000 in 2007, with the possibility of increasing to 20 or 30 million buyers in upcoming years (Guinand and Marti, 2007). In 2008, India ranked 77th worldwide for wine consumption. India is also part of Asia’s wine market which is expected to account for a growing share of the world’s wine consumption: 4.8% by 2011 (Menon, 2008).


9

With regards to consumption and wine origin, it has been estimated that 41% of wine consumption is of premium domestic wines, 37% is comprised of domestic wines that are not premium, 18% is of bottled imports, and 4% of consumption is bulk imports (Guinand and Marti, 2007).

Preferences and Perceptions

In India, religion plays a large role in consumer eating habits, with wine being no exception. The history of wine in India has had a dichotomous relationship culturally. While it has long been present; used for past religious festivals, it was also considered to be a forbidden, taboo drink for the greater society. However, with wide availability of affordable wines, wine consumption is beginning to spread across the mass-population, leading to new wine consumers in the marketplace (Euromonitor, 2009). Increasing the perception of wine as a separate type of drink from other spirits is also aiding in making it a more socially accepted beverage, particularly for the segment of young professional women looking for something different from the fortified liquors consumed by previous generations (Seth, 2007, and Guinand and Marti, 2007). This separate perception from other spirits such as beer, whiskey and gin, which are thought of as representing the traditional British Empire, has gained wine the status of being a fashionable and modern drink among younger consumers (Guinand and Marti, 2007). While there has been increasing growth in consumption, India is still seen as an ‘untapped’ market where the majority of consumers do not consume wine regularly, and thus there is the potential of a growing market. The majority of wine consumption currently remains with corporate executives and international travelers; however consumption is increasing throughout the domestic consumer market (Ceretto, 2009).

There is a shift occurring toward a more Western model for health and consumption. As this model is increasingly incorporated, the acceptance and consumption of wine in the consumer market will likely continue to increase (Datamonitor, 2006, AAFC, 2009). Not surprising, the evolving drinking habits of the substantial and growing Indian population have already resulted in sizeable growth for the Indian wine industry. Growing wine tourism, wine clubs, magazines, and web communities related to wine are also fostering an increasing “wine culture” in India, with wine increasingly accepted among consumers and viewed as a lifestyle drink (Dubey, 2008).

With a growing market for wine, tastes are developing and consumers are increasingly looking for more variety and good quality wines. Consumers’ tastes for different types of food and beverages have also been evolving and there has been a move away from traditional beverages toward fine wines, beers and spirits (Datamonitor, 2009). Wine has also been growing nearly three times faster than other alcoholic drinks, such as beer, whisky and rum (Seth, 2007). Increasing interest and consumption of wine in India, along with growing tourism, have helped to provide the increasing demand for international wines in the market (Euromonitor, 2009). Some say that the overly-high prices of imported wines and the poor quality of domestic wines have left an unfulfilled demand in the market place (Tiwari, 2009). Opportunities may exist for new entrants that can provide consumers with affordable wines of increasing quality. Industry support in the form of learning institutions and associations will also aid in providing the Indian marketplace with higher quality domestic wine. Moreover, demand for specialty and high-quality food products is particularly high during the festive season in the fall (October to December, which includes Diwali) and is often the most advantageous time to introduce new products to the marketplace (USDA, 2008).


10

There is a lack of consumer awareness when considering the health and social benefits of wine (Kothari, 2009). Despite this lack of awareness, there has been a growing perception among consumers that wine is healthier than liquor; helping to make wine more popular among women and the younger population (Dubey, 2007). This increasing penetration among the younger population will only help to further grow Indian wine consumption, as the younger demographics are already the larger wine consumers. The greatest alcohol consumption value has been occurring among the age segment from “legal drinking age” to 24 year olds (30.6% of market value), followed by 25-34 year olds (27.2%), and then the 35-44 age-range (25.4%). The 55 and over age group, which is already a decreasing segment, accounted for the least amount of consumption at less than 4% of the country’s total. Males also continue to dominate the alcoholic drinks consumer market in India, accounting for 70.9% of the total value consumed in the country (Datamonitor, 2006).

Apart from the effects of the global economic slowdown, a trend toward increased eating outside of the home has been occurring in the consumer market. While traditionally dining out was perceived as a vice and something more common among uncultured classes, attitudes are now shifting toward a more favourable view of dining out (AAFC, 2009). As on-trade channels are the more realistic channel for imported wines, a large consumer shift in dining out may aid in increasing the consumption and market for imported wines. The increasing middle class with higher disposable incomes should also aid in fuelling this trend. There is also an increasing amount of consumers interested in sampling recently introduced foods, which bodes well for the introduction, and at least trial, of new types of food and beverages by Indian consumers (AAFC, 2009). Finally, there is a growing trend toward convenience. The increasing accessibility of wine in the market will aid in meeting this consumer demand (Datamonitor, 2006).

Challenges

Sustaining the high, double-digit growth rate of wine in the market will be a challenge to the domestic Indian market, as well as to Canadian companies looking to enter the market, and must be taken into account in business plans and growth projections. While contemporary views toward wine drinking have been slowly evolving, the traditional cultural values and perceptions toward alcoholic beverages are long ingrained in the foundations of Indian society. These longstanding foundations pose a threat to the growth of the wine industry (Dubey, 2007). As wine consumption spreads throughout the population, social and cultural barriers that limit the mass consumption of wine, such as the large Hindu population, will also be a challenge to continued strong growth. With ethnic and religious conflicts continuing to be a complex issue facing India, the wine industry will likely be faced with challenges for some time to come.

Key Markets

Growing urbanization, combined with India’s large population, has resulted in numerous cities of a noticeable size, with 27 cities possessing a population of more than one million (USDA, 2008). The most affluent consumer segments in India, clustered in seven cities, account for over 80% of India’s most affluent households (USDA, 2008). These cities are Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Ahmedabad and Bangalore, and are also the locations for a large portion of India’s emerging middle class (Datamonitor, 2009).


11

Maharashtra is the largest region for wine-consumption in India, with the greatest proportion of national wine sales. The Nashik region in Maharashtra is particularly popular and a growing area for wine tourism. Numerous vineyard and winery tours, as well as wine resorts are present (Euromonitor, 2009). However, Mumbai, the capital city of Maharashtra, has the greatest wine activity in India. Delhi is the second largest region for wine activity, also experiencing significant growth in the wine market. The majority of wine consumption comes from embassies and hotels, as bottled-in-origin (BIO) wines can only be sold to hotels, bars and clubs (Seth Associates). Bangalore represents the fastest growing and third largest wine market in India, consuming approximately 31,000 cases a year, compared with 100,000 cases in Mumbai and 54,000 cases in Delhi. An increasing population of international visitors is also helping to fuel wine market growth in Bangalore (Srivatsa, 2007). The greatest wine consumption is centred in India’s main cities. In 2007, four cities accounted for 80% of India’s total wine consumption: Mumbai with wine consumption accounting for 39% of the country’s total, Delhi (23%), Bangalore (9%), and the tourist-centred Goa (9%) (Seth, 2007). In 2005-2006, only four cities in India accounted for 90% of the sales of BIO wines and 66% of bottled-in-India (BII)/Made-in-India (MII) wines. For BIO wines, these cities are Delhi (in part because of the large number of embassies), Mumbai, Bangalore, and Goa (Krishna, 2007). (While Goa is a state, it was likely compared to the other major cities due to its small market size and population.)

Access

National Versus State Regulations

The Constitution of India gives the Central Government the power to collect excise duties on a number of products. However, the liquor industry (specifically, alcohol liquor for human consumption, which includes wine) is regulated on a state-level by the State Governments, with each state maintaining their own separate system for taxation. The states are each responsible for the rules and regulations regarding the manufacturing, possession, transporting, purchase and sale of intoxicating liquor. Thus, it is the state governments that levy excise duties and determine the rates on wine and spirits (Dubey, 2008). As a result, the regulations for intoxicating liquor in India vary throughout the 28 states and seven union territories in the country.

The Government of India also recently announced plans for another state (Telangana) in the country, which will be created from part of southern region of the current state Andhra Pradesh (BBC News, 2009). This varied state regulation has resulted in discrepancies in duties and taxes, restrictions on advertising and inter-state movement, as well as the prohibition of wine in certain states (Sommelier India, 2009). Prohibition remains in Gujarat, Lakshadweep, Mizoram, Nagaland, and Manipur (Seth Associates).

Liquor requires a transit pass in order to travel from state to state (Seth Associates). The two levels of taxes, which include customs duties on imports of wine into the country as well as the state-level taxes, is a notable factor limiting market access for imported wines (Sommelier India, 2009). As a result of the significant regulatory, and social and cultural variations across states, it is recommended that each state in India be treated as a separate market, as opposed to looking at the country as a whole (Guinand and Marti, 2007).

Industry has been calling for more market openness, particularly with regards to decreasing barriers between states, and is supportive of implementing a country-wide


12

policy for VAT and excise duty (Kothari, 2009). Industry sources have reported that the Indian government has been aiming to create a country-wide, uniform duty structure for alcoholic beverages in the form of a new policy for state excise, as well as a uniform maximum retail price (MRP). This proposed uniform duty structure would cover four categories: excise and CVD (countervailing duty), sales tax, licence fee, and a label registration charge (Dubey, 2007 and 2008). A uniform structure across the country would help to alleviate what can be a very detailed tax and duty calculation, due to the variety of common taxes.

The common taxes that are levied in India’s main states and impact the wine industry are: excise duty, additional duty, distillery/brewery license fee, bottling fee, litterage fee, assessment fee, franchise fee, permit fee, gallonage fee, raw material excise, availability fee, brand/label fee, transportation fee, import pass fee, export pass fee, welfare cess, vend fee, sales tax/surcharge, license fee, and toll tax (Dubey, 2008).

For a general listing of India’s import duties, visit the Appendix of the Agri-Food Past, Present & Future Report on India at: www.ats-sea.agr.gc.ca/asi/4574-eng.htm#l

Regulatory Environment

Generally, the Indian market is becoming increasingly accessible to imports, with food and drink imports rising 25% annually (IFDE India, 2009). However, with regards to wine, the market remains somewhat guarded. Wine in India falls under the category of alcoholic beverages; however, the Food and Safety Standards Act of 2006 also includes alcoholic beverages under the definition of “food”. This categorization shows a significant shift in the government’s approach to the wine sector, and could help to simplify the industry (Dubey, 2008). This could greatly ease market access for both the domestic industry and foreign wine in the country.

With the de-regulation of the wine sector in 2001, when alcoholic beverages were taken off the restricted import list and quantitative restrictions were lifted, sales of imported wines increased significantly (Chandra, 2007). Upon the removal of this restriction, a number of major international players entered the market, including the world’s second largest winery, E&J Gallo (with a joint venture with Radico Khaitan, the second largest spirit company in India), as well as Moet Hennessy and Pernod Ricard (Padmakshan, 2009). However, while India has been making progress in opening its borders to trade, decreasing overall import tariffs and becoming more accommodating to foreign investment, there are still significant changes needed to further open accessibility of the wine market to foreign companies, particularly for small and medium sized enterprises. While domestic wines that are offered at low-price-points have done well in the marketplace, there has been some increasing regulatory pressure placed on imported wines, with some states making alterations to regulations rapidly. Despite this, imports of wine have continued to grow significantly, as have exports of Indian wine. Similarly to China, who once had high excise duties for wine, but has since opened up market access, India may have an increasingly open market for wine in the future (Menon, 2008). Overall, federal and state wine polices and restrictions continue to favour and support the domestic industry, with wine imports still facing considerable tariffs (AAFC, 2009).


13

Import Policies

Currently, imported wines to India face assessment charges and basic customs duties. While assessment charges are only 1% for imported wines, basic customs duties are a significant 150% (Gryphon Brands Inc.). In the past, there have been complaints regarding wine import policies. The European Union formally complained to the World Trade Organization (WTO) regarding taxes and restrictions placed on European wine and spirits by the states Maharashtra, Goa, and Tamil Nadu (Sommelier India, 2009). Complaints to the WTO have also arisen from America. Due to the Government of India’s commitment to the WTO, there has been a gradual reduction in wine duties and taxes in the past few years, including a discontinuation of an Additional Customs Duty (ACD). This discontinuation appears to be a positive step for the import market; as the duty had been adding more than 150% to the original customs duty for import. However, with the discontinuation of the ACD, the original/basics customs duty was increased from 100% to 150%, which is the WTO bound rate (Arora, 2008). It was estimated that these changes would result in a 30% decrease in the pricing of inexpensive imported wines, but no noticeable decrease in the pricing for more premium/expensive imported wines (USDA, 2007). Despite such changes, current import duties, taxes, and value added tax (VAT) for wine continue to result in imported wine costing nearly four to six times more than their actual value. However, this cost does represent a decrease from what used to be eight to ten times more than the product value before the reduction in taxes.

Labelling

The Bureau of Indian Standards is responsible for alcoholic beverage standards, with labelling regulations set-out in The Standards of Weights & Measures Rules for Packaged Commodities (1977). According to these rules, labeling must incorporate the following information: name and address of manufacturer, common name of commodity, net quantity when packaged, month and year of manufacture, and maximum retail price (MRP). However, an exception can be made for the MRP for alcoholic beverages if the retailer prominently displays the retail sale price of the package at the sale location. Some states also require a safety hologram, certifying the payment of duties and fees, and that the liquor meets necessary standards. The alcoholic strength of wine must also be declared as a percentage of the volume using “% Vol.” (Dubey, 2008).

Challenges

Variable regulation and infrastructure systems continue to pose significant market access challenges for Canadian exporters. These include: high tariffs, an unclear tax system, breach of contracts, incomplete infrastructure and distribution, and state variation.

Local Wine Importers & Distributors In the past, the growth of the import market for wine has been hindered by strict and complex laws limiting the number of importers. In recent years, these laws have evolved and the number of importers has grown from approximately 30 importers several years ago, to approximately 90 importers; the majority of whom are based in either Delhi or Mumbai. Although new importers continue to enter the market, high bonded warehouse costs can prove challenging for smaller importers. In a move to open the Indian market to liquor, Indian wine and spirits importers recently formed an association, currently named the L1F1 Licensees Association (Indian Wine Academy, 2009).


14

The three largest importers (by volume) operating in the market in 2008/2009 are Brindco Ltd, Moet Hennessy India, and Sonarys Co-op Brands (Gryphon Brands Inc.). Global Tax Free, Mohan Bros, Pernod Ricard India, and Diageo India are other main importers in the market. Some local wine players including Sula Vineyards and United Breweries, and Champagne Indage (Indage Vintners) are also involved in importing. This is expected to contribute to further changes to the import distribution of India (Gryphon Brands Inc., and Arora, 2008). A list of Indian wine importers can also be found on the Indian Wine website: http://indianwine.com/cs/blogs/about_wine/archive/2006/10/09/1104.aspx The Sommelier India website also provides a list of wine importers: www.sommelierindia.com/magazine/wineimporters.html However, it is recommended that interested Canadian exporters contact the Canadian Consulate General offices in India to obtain market information, identify new markets, find qualified trade contacts, and obtain assistance in successfully exporting abroad. Detailed information on customs procedures, documentation, tariffs and labelling requirements can also be found on the Trade Commissioner Service Web site at www.tradecommissioner.gc.ca, with personalized trade resources also available through the Virtual Trade Commissioner service at www.tradecommissioner.gc.ca/eng/virtual-trade-commissioner.jsp.

Distribution Channels

Any individual is able to import wine into a Customs Bonded Warehouse without an import license. However, these bonded warehouses can entail significant investment and bank guarantees for importers. Because of these high associated costs, importers generally use the services of existed bonders, with commission for services generally 10-20% of the wine cost (Arora, 2008). However, in order to distribute wine, a liquor license must be obtained (Dubey, 2007). Wine brands must also be individually registered for each label. Importers and distributors sell their products via wholesale licensees, who are required to each have their own excise license. However, in some states, large importers may take on the role of wholesalers (Arora, 2008). As each state operates independently with their own wine regulations, the inter-state movement of wine also results in “export” and “import” fees. All brands must also be registered with excise authorities of the state, with registration fees ranging from Rs5,000 – 20,000 ($113.80 $455.20*) per year for each label. Trade margins are approximately 10% in wholesale channels and 12-20% for retail channels. *Bank of Canada Exchange Rate November 30, 2009

As a result of varying state regulations and a lack of infrastructure and distribution throughout the country, it may be useful to have a number of sources located in several cities or regions of the country to achieve nationwide distribution. Thus, a local-level approach to the market that focuses on a regional plan can be a good approach for accessing the India wine market (AAFC 2009). Due to the challenging nature of the business environment, it is also recommended that companies looking to enter the market partner first with an Indian winery, which helps to ease the distribution process (Guinand and Marti, 2007).

Typically, the majority of imported food products are shipped through regional hubs that possess more liberal trade policies, such as Dubai and Singapore (USDA, 2008). There are generally three types of distribution structures available in the Indian market, which


15

vary throughout the states and union territories. Free, auction, and government controlled markets. With free markets, channel ownership is licensed to private owners and pricing and margins are based on market factors such as brand strength and loyalty. In auction markets, channel ownership is auctioned to private owners (generally cartels) which also influence pricing and margins, while government controlled markets are owned and controlled by governments; including pricing and margins (Krishna, 2007).

Retail Infrastructure

Food and grocery retailing already hold a prominent role in India’s retail industry, representing a notable 62% of the total retail market. The retail market in India has been undergoing an evolution; expanding from the more than five million retailers already present in the market. At the core of this revolution are new organized retail formats (such as supermarkets and hypermarkets), which are growing 40% annually, and by 2010 are expected to account for 22% of the market (IFDE India, 2009). However, with the economic downturn and consumers increasingly careful with their spending, many retailers have placed a hold on large expansion plans (USDA, 2009). The presence of supermarkets and convenience stores can predominantly be found in large cities. This presence is expected to continue to grow along with increasing consumer demand for convenience and food quality. However, infrastructure remains a challenge for the fast-growing country and is one of the key factors restraining the future of sustainable growth for India. This limited availability of infrastructure also impedes distribution in the country; making nationwide distribution difficult to achieve (AAFC, 2009).

In 2007, the sale of wine through supermarkets was conditionally allowed in states such as Maharashtra, Karnataka, Punjab and Haryana, who have the most liberal retail policies (Arora, 2008). This increasing availability of wine means that it now can be found in supermarkets, hypermarkets, and food courts, as well as shops which only sell wine. Liquor shop chains have also been emerging, leading to greater access across the marketplace. While, shopping malls can gain a license to sell wine, these channels tend to sell specific brands of their own choosing (Kothari, 2009). The sale of wine in locations such as supermarkets has also meant greater accessibility to female consumers, as it is traditionally seen as inappropriate for a woman to visit a traditional Indian drink specialist or liquor shop (Euromonitor, 2009).

The greater accessibility of wine is continuing to expand throughout India. In Delhi, the excise department regulates imports and the supply of liquor, and allows imported wine to be sold through any wine shops or outlets, provided the seller is registered (Dubey, 2008). In the future, Delhi may see department stores and other locations, aside from the current wine and beer shops and private wine outlets, allowed to sell wine (Sommelier India, 2009).

Off-Trade Versus On-Trade

In 2008, off-trade channels (where wine is consumed outside of the channel) accounted for 65% of wine volume sales, while on-trade (wine consumed on premise) accounted for 35%. However, with regards to sales values the ratio is reversed, with off-trade representing 35% of total sales and on-trade 65%. This is likely attributed to the landscape of the industry, with off-trade channels selling cheaper wines to a much larger population base, while on-trade channels traditionally sell the more expensive wines to a


16

smaller foodservice/hospitality consumer base. Due to excessive excise duties, imported wines are considerably more costly in off-trade outlets, and thus significantly less popular with consumers at these locations. As a result, these drinks are too costly for mass consumers and mainly attract an older and more affluent consumer. Not surprisingly, off-trade channels cater more to consumers that prefer the sweeter and less complex domestic and “new world wines”. However, regardless of sales distribution both of these channels have experienced considerable growth, with volume and value sales increasing approximately 300% from 2003 to 2008 (a CAGR of 33%) (Euromonitor, 2009).

Premium domestic wines, including sparkling wine, as well as “old world wine” and other imported wines, are generally sold through higher-end on-trade channels, such as five-star hotels and restaurants. These channels have the benefit of not having to pay a custom duty and only low excise duties. However, the high selling prices of these products, due to considerable markups, has often been an issue. In 2008, the government advised hotels to limit the selling price of imported wines to no more than 220% of the hotels’ purchase cost (Euromonitor, 2009). The premium hotel segment dominates the hotel industry in India. Hotels are often located in major metropolitan and tourist areas, with international business travellers accounting for a significant portion of clients. Hotel food buyers tend to use consolidators as a product source and have established business relationships with a few consolidator exporters who are located in countries such as Dubai, Amsterdam, Singapore and Australia (USDA, 2008).

Challenges

Lack of exposure and knowledge of Canada and Canadian capabilities poses a challenge to Canadian companies when trying to enter the market, particularly for hotels that already have established business relationships with certain consolidators (AAFC, 2009).

Competition

Three companies dominate the marketplace: Champagne Indage (now known as Indage Vintners), Sula Vineyards (Samant Soma Wines), and Grover Vineyards. These companies also dominate the domestic premium wine market, accounting for 36%, 33%, and 12% market share in 2008-2009 respectively (Gryphon Brands Inc.) However, large spirits companies (such as United Spirits) entering the market are also notable players as they have considerable distribution networks and budgets for promoting their new wine brands (Euromonitor, 2009). The Indian market is comprised of a number of prominent global wine and alcohol companies who have been attracted by the rapid expansion, including E&J Gallo, Moet Hennessy, Diageo, and Pernod Ricard (Dubey, 2008). Despite the slowing global economic situation, companies with high-end luxury brands, such as Ceretto Wines from Italy, have also been looking to enter the India market. Lack of regulation in the Indian wine market has also enabled some wine makers to import bulk foreign-made wine that can be converted and sold as Indian wine (Arora, 2008).

Wineries have grown dramatically in the past six years, with at least 50 wineries present in 2008, the great majority of which (at least 45) can be found in Maharashtra. However, this great increase in wineries does not necessarily mean a greater segmentation of market share, as many of these wineries become suppliers to the larger players already operating in the market (Euromonitor, 2009). Supply chain expansions have also been occurring in the industry, as many companies operating in the market


17

also own distribution outlets, such as wine bars and shops, and are expected to continue to increase their distribution holdings in the future, as well as their production capacities. Expansion is also occurring in the opposite direction, with multinational companies already present in the global market, such as Diageo and Pernod Ricard, beginning to produce Indian wines to further their product line and the presence of their imported wines in the Indian market (Arora, 2008). Movement is also occurring away from the Indian market, with Indian wine producers entering the global market, promoting their products around the world, and taking part in trade events (Reuters, 2008).

Wine imports into India have been growing, and from 2002 to 2006, increased significantly from 0.1 million litres to 1.4 million litres (Euromonitor, 2009). Estimates for 2007-2008 place the number of imported wine cases at 180,000 – 210,000 (Arora, 2008). India’s three largest import sources for wine are France, Australia and Italy. In 2008, the three countries accounted for 39%, 16% and 13% respectively of India’s total imports of “wine of fresh grapes”, followed by the U.S., United Kingdom, and South Africa. All of these countries have experienced significant wine import growth into India from 2003 to 2008. Out of India’s top ten import sources for wine of fresh grapes, Italy, New Zealand, Australia, Chile and South Africa experienced the greatest growth, ranging from 1,037% to 2,406%. With regards to vermouth and other grape wine, India imported $155,424 worth in 2008 from eleven countries; value growth of nearly 200% from 2007. India’s top five import sources were Germany, United Kingdom, Italy, France and the Bahamas (Global Trade Atlas). The Indian market share for imported wines has been evolving, with traditional market leaders such as France losing share, and “new world wines” gaining prominence. France held a market share of 80% approximately a decade ago (Arora, 2008).

As a case study and “new world wine” comparison market for Canadian wine exporters to India, the U.S. has been increasing their exports to India in past years. While U.S. wine exports to India decreased to $0.5 million* in 2008, from $1.7 million* in 2007, it still marked notable export growth from 2004. During the 2004 to 2007 period, U.S. wine exports to India increased a substantial 282.2%. Even with the dip in exports in 2008, the market still grew 21.7% from 2004. Despite the 2008 fall in exports, U.S. wine exports to India appear to have already begun to rebound in 2009. From January to July 2009, U.S. exports of wine to India were valued at $216,730*, up from exports of $188,045* for that same time period in 2008. A 2008 Annual India Exporter Guide by the United States Department of Agriculture’s Foreign Agricultural Service also lists wine, whiskies and other alcoholic beverages as one of the best prospects of high-value products destined for the Indian market (USDA, 2008). *Bank of Canada Exchange Rate: 27 Nov. 2009

Companies from numerous countries continue to further their interest and long-term plans for the Indian market, particularly as their more traditional core markets slow their growth prospects (Euromonitor, 2009). For example, South Africa appears to have a proactive, long-term strategy for the Indian market, with South African liquor exporters planning to launch 30-40 new wine labels throughout the next three years. Chilean wine firms are also targeting the Indian market and have been ramping up their focus on the market, with a first time presence at the International Food and Drink Expo of 2009 and ProChile opening a new trade office in New Delhi in 2009 (IFDE, 2009). Numerous other countries also continue to enter and increase their plans for the Indian wine market. A popular marketing tool being used by a number of exporting countries is to have a representative or well-known personality representing a foreign company’s wine in India, often in the form of local wine aficionados living in India (Guinand and Marti, 2007).


18

Challenges

Competition from global wine connoisseurs originating from Europe, as well as other suppliers with more advantageous geographic proximity, provide strong opposition for Canadian wine exporters interested in the Indian market.

Canadian Wine Industry

Canadian wine production can be minimal in comparison to traditional wine producing countries such as France and Italy, and new world wine producers such as Australia, Chile and the U.S. who have a larger wine production capacity. Nonetheless, that does not stop Canada from continuing to compete on an international scale. Total Canadian wine exports to all countries have continued to grow, reaching $20.3 million in 2008 compared to $19.2 million in 2006. Ontario was by far the largest exporting province, accounting for 78% of total Canadian wine exports in 2008, followed by British Columbia at 10% and Québec and Alberta at 6% each. As of October 2009, total Canadian wine exports to the world for 2009 were $14.6 million (Canadian Agri-Food Trade System, CATS).

Canada’s main export destinations for wine in 2008 were the U.S., China, South Korea, Japan and Singapore. Asia is an increasingly popular region for Canadian wine exports, with six Asian countries comprising Canada’s top ten export destinations in 2008. Five countries were from the Asia Pacific region while one (Singapore) was located in Southeast Asia. Canadian wine exports to these six countries grew 27.8% from 2006 to 2008. Canada’s wine exports to Asia (includes 36 countries) in 2008 reached a value of $9.2 million, with wine exports to India accounting for 0.1% of total exports. In 2008, Canada exported a value of $5,330 in grape wines to India, all of which were from Ontario. This value ranked India as Canada’s 31st largest export market for grape wines (and represented 0.02% of Canada’s global exports of grape wines). These exports were also comprised completely of icewine, specifically in containers holding 2 litres or less. In 2007, Canada’s exports of grape wines to India had totalled $7,310 (CATS). *“Wine” in the above paragraphs includes HS codes 2204 and 2205.

Canada’s exports of icewine (in containers holding 2 litres or less) to all countries in 2008 totalled $11.6 million. The top five export destinations were the U.S., China, South Korea, Singapore and Japan, with India ranking as Canada’s 27th largest export destination.

Canada Wine Exports to Client Countries ($CDN)

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000

2006

2007

2008

2009-July

United States China, P. Rep. Korea, South Japan Singapore Other

*Includes HS codes 2204 and 2005: Canadian Agri-Food Trade System


19

India’s imports of grape wines/“wine of fresh grapes” from Canada in 2008 were negligible. However, in 2007, Canadian imports into India of “wine of fresh grapes” were valued at $22,164, ranking Canada as the 33rd largest import source for India (Global Trade Atlas).

Opportunities for Canadian Wine Exporters While import duties for wine remain significant, Canada and India have been moving toward a partnership that strives to progress bilateral trade on priority sectors, one of which is agriculture and agri-food. Progress is also being made to expand bilateral investment flows, with barriers to Canadian imports being a topic of discussion between Canadian business leaders and India’s top CEO’s. Success in these areas will aid in stronger commercial ties between the two countries and may lead to fewer import barriers. Due to such high current wine import duties, a decrease would significantly benefit Canadian exporters and reduce the risk and difficulty associated with entering the market. Below is a summary of opportunities which may exist for Canadian companies trying to enter the Indian marketplace (AAFC, 2009).

While there has been significant growth in past years in India, this growth has occurred from a very small base, with wine almost completely absent from the market a decade ago. Growth in all areas of the industry, from production, imports and competitors, to institutes and education, reveal a rapidly developing market. The expansion of this market so far, and limited but growing consumption, provides for significant growth opportunities for wine among Indian consumers (Ceretto, 2009).

The demographic projections for the country’s population make this an opportunistic consumer market. The remarkable growth projections of the Indian population, which is demographically “young”, and the evolving population income distribution which is leading to a large emerging middle class, combine to create a very compelling consumer market.

The proportion of income and spending that is put toward food and beverages provides a strong market for agriculture and agri-food, but particularly for more “indulgence” products, such as wine. India’s growing hospitality and foodservice industry also provides an opportunistic channel for the growth of imported wine. The domestic consumer trend toward eating out will likely also fuel foodservice and wine import growth, as on-trade channels provide the largest majority of value retail sales for imported wine.

Although the wine market is still in the beginning stages, competitive growth has already increased considerably, and new competitors from a variety of backgrounds continue to enter the marketplace. As the market develops and continues to grow, this competition will only increase in intensity. While there are still several challenges to entering the market, now may be the most opportunistic time for entry, as the competitiveness will only further increase in the future when the market’s full potential gains the attention of more companies.

The lack of wine quality available from domestic producers can be opportunistic for Canadian exporters who can provide high quality wines at competitive prices compared to other countries exporting wine to India. The success and growth of Canadian wine exports to other Asian countries, as well as the successful export growth of other “new world” wine countries, demonstrates an advantageous and growing Asian market for imported wines, of which India will likely comprise an


20

increasingly large portion. Estimates place growth for imported wines at 30%, (Dubey, 2007). The United States Department of Agriculture estimated in a 2008 annual report that expected average annual import growth for wine, whiskies and alcoholic beverages in the Indian market at 15% (USDA, 2008).

Contact Information

India - New Delhi, High Commission of Canada Address: 7/8 Shantipath, Chanakyapuri, New Delhi, India 110021 Postal Address: P.O. Box 5207, New Delhi, India, 110021 Tel.: (91) (11) 4178-2000/2100 Fax: (91) (11) 4178-2020 E-Mail: [email protected] Internet: www.international.gc.ca/New-delhi

India - Chandigarh, Consulate General of Canada Address: S.C.O. 54-56, Sector 17A, Chandigarh 160 017 Tel.: 91 (172) 505-0300 Fax: 91 (172) 505-0320 E-Mail: [email protected] India - Chennai (formerly Madras), Consulate of Canada Address: 18 (Old 24), 3rd floor, YAFA Tower, Khader Nawaz Khan Road, Nungambakkam, Chennai 600 034 Tel.: 91 (44) 2833-0888 Fax: 91 (44) 4215-9393 E-Mail: [email protected]

India - Kolkata (formerly Calcutta), Consulate of Canada Address: c/o RPG Enterprises, Duncan House, 31 Netaji Subhas Road, Kolkata 700 001 Tel.: 91 (33) 2242-6820 Fax: 91 (33) 2242-6828 E-Mail: [email protected] India – Mumbai (formerly Bombay), Consulate General of Canada Address: 6th floor, Fort House, 221 Dr. D.N. Road, Mumbai, 400 001 Tel.: 91 (22) 6749 4444 Fax: 91 (22) 6749 4454 E-Mail: [email protected]

India – Bangalore, Canadian Trade Office Address: 103, Prestige Meridian 1, 29 M.G. Road, Bangalore Tel: 91 (80) 2558 1116, 2559 9418 Fax: 91 (80) 2559 9424 E-Mail: [email protected]

India – Hyderabad, Canadian Trade Office Address: ITC Hotel, The Kakatiya - 6-3-1187 Begumpet, Hyderabad, 500 034 Tel: +91 40-2340 4518/19 Fax: +91 40 2340 4523 E-mail: [email protected]


21

For more information, visit the Trade Commissioner Service: www.tradecommissioner.gc.ca/eng/trade-offices.jsp

Key Industry Events

IFE India www.ife-india.com

India Wine Show 2009 www.indiawineshow.com

India International Food and Wine Show (IFOWS) www.ifows.com

INDSPIRIT 2009 www.indspirit.in International Food and Drink Expo INDIA 2009 www.indiafooddrinkexpo.com TASTE www.taste-expo.com For further listings of industry events taking place in India, visit the Agri-Food Trade Service at: www.ats-sea.agr.gc.ca/eve/eve-eng.htm

Key Resources Agriculture and Agri-Food Canada (AAFC). (2009, January). Agri-Food Past, Present & Future: India. Retrieved

November 25, 2009, from http://www.ats-sea.agr.gc.ca/asi/4574-eng.htm

Ahuja, Hans Raj. (2009, July 30). The Maharashtra Govt has finally announced reduction in excise duty on BIO

wines. Indian Wine. Retrieved November 25, 2009, from http://indianwine.com/cs/blogs/indian_wine_news_and_messages/archive/2009/07/30/the-maharashtra-govt-has-finally-announced-reduction-in-excise-duty-on-bio-wines-ahuja.aspx

Arora, Subhash. (2008, August 1). Top Ten Importers of India in 2007 – 2008. Indian Wine. Retrieved

November 25, 2009, from http://indianwine.com/cs/blogs/indian_wine_news_and_messages/archive/2008/08/01/top-ten-importers-of-india-in-2007-2008-by-subhash-arora.aspx

Arora, Subhash. (2008, March 3). The Booming Market of India. Wine Business International. Retrieved

November 25, 2009, from http://www.wine-business-international.com/156-bWVtb2lyX2lkPTI3NSZzdWNoZT0xJnN0YXJ0PTAma2V5d29yZHNlYXJjaD1JbmRpYSZidG5fU2VhcmNoPXRydWU--en-magazine-magazine_detail.html#

BBC News. (2009, December 10). India to create new southern state of Telengana. Retrieved December 16,

2009 from http://news.bbc.co.uk/2/hi/south_asia/8405146.stm Canadian Agri-Food Trade System (CATS). Retrieved from database. Ceretto, Frederico. (2009, August 30). Wine market in India still untapped. The Financial Express. Retrieved

November 25, 2009, from http://www.financialexpress.com/news/wine-market-in-india-still-untapped/508777/


22

Chandra, Alok. (2007, January 30). Top 10 Indian Wine Importers in 2006. Indian Wine. Retrieved November 25, 2009, from http://indianwine.com/cs/blogs/indian_wine_news_and_messages/archive/2007/01/30/top-10-wine-importers-in-india.aspx

Datamonitor. Export from Interactive Consumer Database: Market Value by Category for 2003-2013 in Millions

of Local Currency. Retrieved September 8, 2009, from Datamonitor database. Datamonitor. (2009, September). The Global Economic Crisis: The Impact on Consumer Behaviors in India.

Retrieved from Online Database. Retrieved September 16, 2009 from Datamonitor database. Datamonitor. (2006, December). Targeting Profitable Consumer Trends in The Brazil, Russia, India & China

Region. Retrieved September 16, 2009, from Datamonitor database. Delhi Wine Club. (n.d.) Foreign Tourists Return to India. Retrieved November 25, 2009, from

http://www.delhiwineclub.com/NEWS/Foreign_Tourists.aspx?serialwise=846 Dubey, Neeraj. (2007, May 20). Wine in India – a travel through time. Indian Wine. Retrieved November 25,

2009, from http://indianwine.com/cs/blogs/about_wine/archive/2007/05/20/wine-in-india-a-travel-through-time-neeraj-dubey.aspx

Dubey, Neeraj. Priti Suri & Associates (PSA). (2008, January). Growth & Opportunities in Indian Wine Market.

E-Newsline. Retrieved November 25, 2009, from www.psalegal.com/pdf/E%20Newsline%20January%202008.pdf

Euromonitor International: Country Sector Briefing. (2009, February). Wine-India. Retrieved September 8,

2009 from Euromonitor database. Euromonitor International. (2009, October). Global Opportunities for Leading Spirits Players Despite the

Economic Downturn. Retrieved November 25, 2009 from Euromonitor database. Export Development Canada (EDC). (2009, Spring). Restoring Balance: Global Export Forecast Spring 2009.

Retrieved November 25, 2009, from http://www.edc.ca/english/docs/ereports/gef/country_information_efindex.htm

Global Trade Atlas. Retrieved September 22, 2009, from Global Trade Atlas database. Government of India. Department of Information Technology, Ministry of Communications & Information

Technology. National Informatics Centre. (2009, September 29). States and Union Territories. Retrieved November 25, 2009 from http://www.india.gov.in/knowindia/state_uts.php

Gryphon Brands Inc. (n.d.). Wine in India. Retrieved November 25, 2009, from

http://www.gryphonbrands.com Guinand, Laurent, and Rafael Marti. (2007, January 1). Should you export to India? Wine is avant-garde in the

cosmopolitan, thriving country. Wines & Vines. AllBusiness.com, Inc. Retrieved November 25, 2009, from http://www.allbusiness.com/wholesale-trade/merchant-wholesalers-nondurable-goods/3942893-1.html

The Hindu Business Line. (2009, January 16). Maharashtra plans more wine institutes. Retrieved November

25, 2009, from http://www.blonnet.com/2009/01/17/stories/2009011750581700.htm IFE India. (2007, May 30). India to outstrip Italy and Germany in consumption by 2025. Retrieved November

25, 2009, from http://ife-india.com/ife2008/latestdet.asp?pressid=pressRe130 Indian Wine Academy. (2009, July 23). Wine Importers Form Association…Finally. Retrieved November 25,

2009, from http://www.indianwineacademy.com/item_5_317.aspx India Wine Show 2009. (2009). International Exhibition & Conference on Wine Industry: 26th - 30 November

2009. Retrieved November 25, 2009, from http://www.indiawineshow.com/india_wine_industry.php International Food & Drink Expo (IFDE) INDIA. (2009, August 14). African wine set to enter India with 40 new

labels. Retrieved November 25, 2009, from http://www.indiafooddrinkexpo.com/news/african_wine_set_to_enter_india_with_40_new_l


23

International Food & Drink Expo (IFDE) INDIA. (2009, August 24). Chilean Wine Firms Target India. Retrieved November 25, 2009, from http://www.indiafooddrinkexpo.com/news/chilean_wine_firms_target_india

International Food & Drink Expo (IFDE) INDIA (2009, September 7). Indian Alcoholic Drinks Market to Grow

over 9% CAGR during 2009-2013. Retrieved November 25, 2009, from http://www.indiafooddrinkexpo.com/news/indian_alcoholic_drinks_market_to_grow_over_9

International Food & Drink Expo (IFDE) INDIA. (2009). Why Exhibit. Retrieved November 25, 2009, from

http://www.indiafooddrinkexpo.com/pages/why_exhibit Johnsen, Linda. (2002). The Complete Idiot’s Guide To Hinduism. Indianapolis, IN: Alpha Books. Retrieved

November 25, 2009, from http://books.google.ca/books?id=jcSuMJAbUk8C&dq=The+Complete+Idiot's+Guide+to+Hinduism&printsec=frontcover&source=bl&ots=o8fOJ4htyD&sig=aFF_jTowv3Zl5PAN26Zc6Hsnwq0&hl=en&ei=aLfdSueAL4_KlAek-YFC&sa=X&oi=book_result&ct=result&resnum=1&ved=0CA0Q6AEwAA#v=onepage&q=&f=false

Kothari, Vishwas. (2009, August). State extends excise duty holiday on processed grape wine till 2021. The

Times of India. Retrieved November 25, 2009, from http://timesofindia.indiatimes.com/news/city/pune/State-extends-excise-duty-holiday-on-processed-grape-wine-till-2021/articleshow/4942628.cms

Krishna, Dr. Mohan. (2007, January). Wine Market – India. Paris & Partners: Alcohol and Beverage Desk.

PowerPoint Presentation. Retrieved online November 25, 2009. Menon, Bindu D. (2008, March 13). The Hindu Business Line. Retrieved November 25, 2009, from

http://www.thehindubusinessline.com/2008/03/13/stories/2008031351950500.htm Padmakshan, M. (2009, July 20). Wine lovers will soon have more brands to choose from. Economic Times

(ET) Bureau. Retrieved November 25, 2009, from http://economictimes.indiatimes.com/News/News-By-Industry/Cons-Products/Liquor/Wine-lovers-will-soon-have-more-brands-to-choose-from/articleshow/4796593.cms

Reuters. (2008, June 26). Wine Market in India Has Been Growing at Around 30% Annually over the Last Ten

Years…. Retrieved November 25, 2009, from http://www.reuters.com/article/pressRelease/idUS110695+26-Jun-2008+BW20080626

Samant, Rajeev. (2009, July 31). India's Wine Woes Now Will Benefit Consumers Later. Wall Street Journal

India. Retrieved November 25, 2009, from http://online.wsj.com/article/SB124901716244096199.html Seth Associates. (n.d.). Marketing Wine in States of India. Retrieved November 25, 2009, from

http://www.sethassociates.com/marketing-of-wine-in-india.html Seth, Karnika. Seth Associates. (2007, February 1). Multiple aspects of Indian Wine Industry. Indian Wine.

Retrieved November 25, 2009, from http://indianwine.com/cs/blogs/indian_wine/archive/2007/02/01/looking-at-multiple-aspects-of-indian-wine-industry-karnika-seth.aspx

Sommelier India: The Wine Magazine. (2009, February 26). Indian Grape Processing Board launched in Pune.

Retrieved November 25, 2009, from http://www.sommelierindia.com/blog/2009/02/indian_grape_processing_board_1.html

Sommelier India: The Wine Magazine. (2009, September 8). EU Commissioner finds tax situation

unacceptable. Retrieved November 25, 2009, from http://www.sommelierindia.com/blog/2009/09/eu_commissioner_finds_tax_situ.html

Sommelier India: The Wine Magazine. (2009, September 13). Reprieve for Delhi Wine Lovers. Law Relaxed.

Retrieved November 25, 2009, from http://www.sommelierindia.com/blog/2009/09/reprieve_for_delhi_wine_lovers.html

Srivatsa, Sharath S. (2007, January 1). Wine consumption going up. The Hindu. Retrieved November 25,

2009, from http://www.thehindu.com/2007/01/01/stories/2007010123090400.htm The Hindu Business Line. (2009, January 16). Maharashtra plans more wine institutes. Retrieved November

25, 2009, from http://www.thehindubusinessline.com/2009/01/17/stories/2009011750581700.htm


24

Tiwari, Rojia. (2009, September 8). Indian Winery Industry, A Pulse Check. Indian Wine. Retrieved November 25, 2009, from http://indianwine.com/cs/blogs/indian_wine/archive/2009/09/08/indian-winery-industry-a-pulse-check-rojia-pandy.aspx

United States Department of Agriculture (USDA), Foreign Agricultural Service. (February 13, 2009). India

Agricultural Situation – Weekly Highlights & Hot Bites, #7, 2009. Retrieved November 25, 2009, from http://gain.fas.usda.gov/Pages/Default.aspx

United States Department of Agriculture (USDA), Foreign Agricultural Service. (February 27, 2009). India


United States Department of Agriculture (USDA), Foreign Agricultural Service. (2008, September 26). India


United States Department of Agriculture (USDA), Foreign Agricultural Service. (2008, October 1). India

Exporter Guide: Annual 2008. Retrieved November 25, 2009, from http://gain.fas.usda.gov/Pages/Default.aspx

United States Department of Agriculture (USDA), Foreign Agricultural Service. (2007, July 6). India Trade

Policy Monitoring – The Government of India abolishes the additional duty on imported liquor, wine and beer. Retrieved November 25, 2009, from http://gain.fas.usda.gov/Pages/Default.aspx

United Stated Department of Agriculture (USDA), Foreign Agricultural Service. (2009, April). Wine: World

Markets and Trade. Retrieved November 25, 2009, from http://www.fas.usda.gov/htp/horticulture/Wine/wine.asp

Date post:	03-Apr-2018
Category:	Documents
Upload:	vanbao
View:	217 times
Download:	1 times

The Wine Market in India Opportunities for Canadian...

Documents