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30-5-2008 | Other news

Little or nothing is known about the wine market in India and most people think India is a non-drinking country. Actually, India is the top alcoholic beverage market in the world, but wine is not the drink of choice. In February, Rabobank's Food & Agribusiness Research and Advisory published The Indian Wine Industry Uncorked where author and analyst Cherry Jacob discovered a wine industry and market in its infancy.

Not wine drinkers
India is not traditionally a wine drinking country. Commercial wine grape production in India has only been in existence since the 1980s. 

“Given the significant market for alcoholic beverages in India, changing lifestyle and increasing health consciousness, consumer acceptance is expected to be tilting in favour of wine,” says Cherry Jacob, Rabobank Food & Agri Analyst.

Finding the consumers
Across India, out-of-home consumption is on the rise which is important for the wine industry. “Pubs, bars, restaurants and five-star hotels are the primary wine selling outlets with 63% of sales volume coming from these channels,” the report states. Organised retailing in wine is also being increasingly introduced in key states.

For the health conscious drinker, the Indian press has widely publicised the health benefits of wine such as in reducing heart disease, and the antioxidant content that prevents cancer . 

Finding the vineyards
Most of the wineries in are located in Nasik in the state of Maharashtra in the south west of India. At present, India has about 60 wineries with an estimated investment of about USD 60 million, which is a 61% increase on 2006, states the report.

Small vineyards
The bulk of India’s current wine grape production comes from smallholding vineyards on just 1 to 2.5 hectares. The small size of these vineyards limits the required economies of scale in production. 

“Additionally, a government imposed regulation on land buying only up to 10 hectares restricts wine companies’ efforts to expand wine grape production,” says Jacob.

Quality standards
Between 80-90% of the quality of a wine is established by the vineyard. Wine market growth demands the adequate supply of high quality wine grapes for crushing.
 “One of the main challenges in production is creating standardisation and uniformity of the raw material produced from multiple vineyards,” says Jacob.

Contract farming
Currently, companies have production contracts with farmers for seven to 10 years and can plan quality checks. Jacob says, “Under contract farming, wineries appoint supervisors to visit the vineyards and provide farmers with technical assistance on agronomic practices, such as fertilizer management and crop protection.”

Favourable chance for growth
The Indian wine industry is on the threshold of growth, but still in its infancy. The increasing domestic demand and support from the government is expected to grow the industry at 25-30% and offers opportunities both for domestic as well as international players. 

“Foreign wine companies planning to enter the Indian market need to have a good understanding of its unique complexities,” advises Jacob.