Business, Finance & Economics

India's wine boom going bust?

An Indian wine enthusiast looks at a display of wines during the Bangalore International Wine Festival in Bangalore on April 10, 2010. The Karnataka State Wine Board together with The Karnataka Tourism Department organised the festival to promote wine cultivation and consumption. Wine is primarily sold in urban centres, the market for Indian wine is about 1.2 million cases (nine litres each) a year and the country also imports 200,000 cases from Europe and a small percentage from Australia and the United States. India, which is the world's largest whisky market, is a tempting target for both domestic and international wine sellers.



How do you make a million dollars in the wine business?  Start out with a billion.

Unfortunately, nobody told Indian farmers that old saw, and now it looks like India's wine boom has gone bust.

Barely three years after the grape-growing region of Maharashtra went wine crazy -- even ordinary farmers were supposedly sipping cabernet, it appeared --  more than 40 percent of local wineries have shut down and local farmers have gone back to growing ordinary table grapes, the Indian Express reports.

The failure comes despite high taxes on wine imports and other preferential policies for local wineries.  

To be honest, many local wines were virtually undrinkable, but local farmers insist that wasn't the only problem, according to the Express.

Almost all newly established wineries were owned by rich farmers from Nashik and Pune districts who had little or no knowledge about marketing. They had made a foray into the business with the aim to avail the benefits of government subsidies and make the most of the ‘wine boom’.

“Government assisted in setting up the wineries, it assisted in production, but gave no assistance in marketing. With increased number of wineries. the production exceeded the demand in the state. The consequence, obviously, was a glut,” said Mahindra Shahir, president, Maharashtra Grape Growers’ Association.

Whatever subsidies (or punitive import taxes) the government comes up with next -- and the agricultural minister, Sharad Pawar, hails from Maharashtra -- the boom ain't coming back, the Express warns:

Experts say that the chances of local wine industry gathering the lost momentum are bleak.

There are several hindrances. Firstly, Indian wine cannot compete at the international level and has a limited domestic market. In India, though wine-culture is slowly catching up, the per capita consumption of wine remains dismal, at 9 ml per person, as compared to 25 litres in the US and 20 litres in Australia.

The quality of most varieties of the wine produced in the country doesn’t match up to the quality of wine that is in demand in the international market.

“The basic rule in wine making is that lesser the yield at the vineyard, the better the wine produced from such grapes. On the contrary, the local wine-grape growers take as much production as they can to earn more profit. A high yield is a major reason for the low quality of Indian wine,” said Vijay Vangane, a winemaker for over 20 wineries in the state.

Another reason for the Indian wine not making the cut at the international market is the popularity of ‘reserve wine’ — the wine that is matured for many years by storing in oak barrels.

Almost no wine producer in India has the infrastructure to mature the wine for years. “Most of them are desperate to sell it off as soon as they distil it after crushing. They simply can’t afford to wait,” said Vangane.

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Tagged: AsiaIndia.