Just a few years ago, India's glossies were celebrating a new wine industry that seemed to finally be bringing quality products to the table. Wine bars opened across the country to cater to the swelling numbers of customers. In Maharashtra, you could buy wine at any general store upmarket enough to stock it.
It's all gone south pretty quick. The apparently dazzling growth of the Indian wine sector has begun to plateau, with many vintners in debt and stuck with tens of thousands of cases slowly oxidising into vinegar.
Of India's 93 wineries, 50 are in financial trouble. Maharashtra, home to 75 wineries, is the country's largest wine producer.
Many in the industry blame the situation on the global financial recession, and on restrictive licencing policies across states that prevent them from expanding outside Maharashtra. However, some believe that the poor health of the industry can also be attributed to the collapse of the firm that was, until a few years ago, India’s largest wine company, Chateau Indage.
“The biggest reason for the state of the industry today, which nobody talks about, is Chateau Indage,” said Ashwin Rodrigues, owner of Rio Sparkling Wines. “When it collapsed [in 2010] it took a lot of the market with it," But even before that, Rodrigues said, the business practices of Indage – a contraction of "Industrial Agency" – caused distortions.
Chateau Indage, founded in 1979, was one of the first wineries in India. It peaked in 2006, just before the global financial recession, when it aggressively bought stakes in Australian and British wineries. Chateau Indage, which was listed on the Bombay Stock Exchange, had between 60 to 75 per cent of the Indian wine market at the time.
But four years later in 2010, the company found itself in debt, and the Bombay High Court ordered the company to liquidate its assets.
When the industry giant shut, it took down several other subsidiary companies with it. Farmers were left with wine grapes they could not sell profitably to the remaining vintners, and over the next year, over half of the growers returned to cultivating regular table grapes.
“That is why we are today facing such a shortage of wine grapes and we can’t bring our prices down,” said Rodrigues. “While the industry is now slowly recovering, we have inherited a lot of chronic diseases.”
One of these, claimed Prahlad Khandagle, chairman of Vinsura Wines, is that Chateau Indage flooded the market with cheap, poor quality wines. “Smaller wineries produced higher quality wines, but they were more expensive," he said. "That is why people went to brands like Chateau Indage.”
Around 2009, Chateau Indage also began a buy-one-get-one-free scheme. “To compete with them, all other wineries had to follow suit,” said Rodrigues. “It is a dirty habit you cannot shake off, and the only way we could sustain this was to fix our MRPs higher. So our wine became overpriced and under-consumed. And even after they shut down, we are now forced to maintain these high MRPs because retailers have become used to it.”
Retailers in Mumbai, he said, charge a minimum of a 50 per cent margin on all wines. This reduces the profits he might otherwise have spent on marketing, and also prevents them from selling cheaper wines.
The only company presently in a position to retail cheap wines is Sula Vineyard, which glided into the vacuum left by Chateau Indage and is now the largest industry player.
The industry's problems are also a function of supply far exceeding demand. At the height of the wine industry, vintners were bottling far more wine than the market was drinking, said Jagdish Holkar, the chairman of the Indian Grape Processing Board. In 2009, the year Chateau Indage began to teeter, the demand for wine was about 1.5 million cases. That year, vintners produced 35 million cases.
From a Chateau Indage vineyard in 2009. CC by Ipshita B.
“All of Chateau Indage’s stock has turned into vinegar because there was no electricity where they were stored,” he said. “After all these years we have finally been able to match supply to demand and we are producing only what we can sell.”
Still, Holkar believes that Chateau Indage is not the only reason for the poor state of the industry. “Small companies have had to spend their capital to get out of their debt,” he said. “They don't have any money to spend on anything but staying afloat.”
He now hopes that the government will intervene to help ailing wine companies by restructuring their debts or instituting a central policy on wine.
“The problem is that the wine industry works on a cycle of 18-24 months,” Holkar said. “Banks, however, provide funding only for one year, after which wine companies have to pay back the sum at 14-15 per cent interest, before they have even bottled their wines.”
However, the Maharashtra government has done quite a bit already to promote the industry. The state saw its wine industry boom in 2001 after it passed its Grape Processing Industry Policy, which standardised taxes and licensing procedures to benefit the industry.
In 2005, when Union agriculture minister Sharad Pawar had wine classified as a non-alcoholic beverage, which greatly increased the range out outlets from which it could be sold. Pawar owned Maharashtra's oldest vineyard and the majority of wine-grape growers were located in Western Maharashtra, his stronghold.
Despite the problems, however, wine makers believe that this is only a temporary phase.
“Wine is a drink of the future," said Khandagle. "In the next decade, even more people will have developed a taste for wine. We will continue to work and be ready for them.”
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It's all gone south pretty quick. The apparently dazzling growth of the Indian wine sector has begun to plateau, with many vintners in debt and stuck with tens of thousands of cases slowly oxidising into vinegar.
Of India's 93 wineries, 50 are in financial trouble. Maharashtra, home to 75 wineries, is the country's largest wine producer.
Many in the industry blame the situation on the global financial recession, and on restrictive licencing policies across states that prevent them from expanding outside Maharashtra. However, some believe that the poor health of the industry can also be attributed to the collapse of the firm that was, until a few years ago, India’s largest wine company, Chateau Indage.
“The biggest reason for the state of the industry today, which nobody talks about, is Chateau Indage,” said Ashwin Rodrigues, owner of Rio Sparkling Wines. “When it collapsed [in 2010] it took a lot of the market with it," But even before that, Rodrigues said, the business practices of Indage – a contraction of "Industrial Agency" – caused distortions.
Chateau Indage, founded in 1979, was one of the first wineries in India. It peaked in 2006, just before the global financial recession, when it aggressively bought stakes in Australian and British wineries. Chateau Indage, which was listed on the Bombay Stock Exchange, had between 60 to 75 per cent of the Indian wine market at the time.
But four years later in 2010, the company found itself in debt, and the Bombay High Court ordered the company to liquidate its assets.
When the industry giant shut, it took down several other subsidiary companies with it. Farmers were left with wine grapes they could not sell profitably to the remaining vintners, and over the next year, over half of the growers returned to cultivating regular table grapes.
“That is why we are today facing such a shortage of wine grapes and we can’t bring our prices down,” said Rodrigues. “While the industry is now slowly recovering, we have inherited a lot of chronic diseases.”
One of these, claimed Prahlad Khandagle, chairman of Vinsura Wines, is that Chateau Indage flooded the market with cheap, poor quality wines. “Smaller wineries produced higher quality wines, but they were more expensive," he said. "That is why people went to brands like Chateau Indage.”
Around 2009, Chateau Indage also began a buy-one-get-one-free scheme. “To compete with them, all other wineries had to follow suit,” said Rodrigues. “It is a dirty habit you cannot shake off, and the only way we could sustain this was to fix our MRPs higher. So our wine became overpriced and under-consumed. And even after they shut down, we are now forced to maintain these high MRPs because retailers have become used to it.”
Retailers in Mumbai, he said, charge a minimum of a 50 per cent margin on all wines. This reduces the profits he might otherwise have spent on marketing, and also prevents them from selling cheaper wines.
The only company presently in a position to retail cheap wines is Sula Vineyard, which glided into the vacuum left by Chateau Indage and is now the largest industry player.
The industry's problems are also a function of supply far exceeding demand. At the height of the wine industry, vintners were bottling far more wine than the market was drinking, said Jagdish Holkar, the chairman of the Indian Grape Processing Board. In 2009, the year Chateau Indage began to teeter, the demand for wine was about 1.5 million cases. That year, vintners produced 35 million cases.
From a Chateau Indage vineyard in 2009. CC by Ipshita B.
“All of Chateau Indage’s stock has turned into vinegar because there was no electricity where they were stored,” he said. “After all these years we have finally been able to match supply to demand and we are producing only what we can sell.”
Still, Holkar believes that Chateau Indage is not the only reason for the poor state of the industry. “Small companies have had to spend their capital to get out of their debt,” he said. “They don't have any money to spend on anything but staying afloat.”
He now hopes that the government will intervene to help ailing wine companies by restructuring their debts or instituting a central policy on wine.
“The problem is that the wine industry works on a cycle of 18-24 months,” Holkar said. “Banks, however, provide funding only for one year, after which wine companies have to pay back the sum at 14-15 per cent interest, before they have even bottled their wines.”
However, the Maharashtra government has done quite a bit already to promote the industry. The state saw its wine industry boom in 2001 after it passed its Grape Processing Industry Policy, which standardised taxes and licensing procedures to benefit the industry.
In 2005, when Union agriculture minister Sharad Pawar had wine classified as a non-alcoholic beverage, which greatly increased the range out outlets from which it could be sold. Pawar owned Maharashtra's oldest vineyard and the majority of wine-grape growers were located in Western Maharashtra, his stronghold.
Despite the problems, however, wine makers believe that this is only a temporary phase.
“Wine is a drink of the future," said Khandagle. "In the next decade, even more people will have developed a taste for wine. We will continue to work and be ready for them.”