Key Insights on India's Wine Industry

India has around ~ 3 million wine drinkers. In a country with ~ 1.3 billion population, it is still modest. India's wine market is still in its infancy. The silver lining is that it is on an upward growth trajectory and there will be ample opportunities for both domestic manufacturers and foreign exporters.

Historically alcohol consumption has been associated with a lot of social taboos in the country. However, this is now changing. Moreover, the consumption of wine often resonates with a status symbol and elevated social class, thereby attracting men and women in big volumes.

 

Upward Growth Trajectory+ Mid-Ranged Markets

Two fundamental factors that define the existing wine market in India are- upward growth trajectory and preference for mid-range products. India's growing middle class, rise in disposable income, and shift in the middle class are helping the wine markets to grow.  The demand is more towards mid-ranged products with the share of high-end vintage wines less than 1.5%. This further explains the dominance of indigenous brands. 90% of the indigenous production is dominated by Sula and Grover Zampa. However, the popularity of international brands is also gradually rising fast. Major import destinations include Italy, Australia, France etc. This is followed by Spain, South Africa, and Chile.

Impact of COVID- Emergence of New Trends

The pandemic has been a destabilizing factor in an otherwise upbeat growth trajectory of the Indian Wine industry. Due to social distancing norms, businesses in hotels and restaurants plunged drastically. Likewise, events, MICE activities, and big weddings have nearly disappeared. These factors have significantly undermined the wine industry. In 2020, imports of wine fell by over 40%.

Meanwhile, COVID has also new trends in the market, some of whom have the potential to bring a positive tectonic shift in the consumption behavior.

  • Due to Downward pressure in the Hotel+ Restaurant+ Catering (HoReCa) industry in India, wine consumption has been hit hard. Any recovery in the sector is far-fetched and numbers are not going to revive before Q4 CY 21. 
  • Meanwhile, home consumption is increasing, in which retail will have to play a larger role. Also, in most of the states of India, liquor storage is capped at 9-18 liters for personal consumption. Industry players are urging the government to relax it a bit.
  • In the wake of the lockdown, major cities like Delhi and Mumbai have allowed online delivery of wines and other liquors through selected shops. Online retailing of wines is still in its nascent stage but holds tremendous future potential.
  • The tax and license fee barriers are high in India. To play successfully in the Indian market, foreign brands need to understand the volume game and position accordingly to rationalize the cost. For instance, the annual license fee for a single brand is INR 60,000 (USD 820). If export volumes are low then per bottle cost will naturally rise significantly.  
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