Wine Business in India – Opportunity or Dilemma?

Re-plugging this popular post on LinkedIn for the benefit of  the followers of this site.

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The Indian wine ecosystem is evolving and with the rising profile of wine there is a lot of interest in business opportunities available in the sector. But what are the challenges? More importantly, how feasible is it to enter a business whose target market is less than 1% of the total population?
I have always considered the Indian wine market an enigma – on the one hand there is a seemingly eternal and ceaseless optimism about its future, on the other, on-the-ground realities and challenges seem to be too big to overcome in realising its true potential. But this has not deterred many optimists to venture into this tricky market, achieving mixed results at best.

As an active member of the Indian wine community, I am often asked about business opportunities and the pros and cons related to various types of wine businesses here. Although most queries reflect the above mentioned quandary of a wannabe entrepreneur and existing businesses elsewhere, it is also interesting to notice that many feel that the time is right to be a part of the Indian wine story. A lot of this optimism can be attributed to the buzz created by media stories, a lot of which unfortunately is often recycled and are far from ground realities. Therefore personally, I always take a cautious approach in this matter, not because I am not hopeful of its future but due to a realistic assessment of the present market conditions that are far from being conducive for existing wine businesses, let alone new ventures.

So what are the opportunities of entering the Indian wine market?

Let’s explore three areas which attract the imagination of most people nowadays when they think of the setting up a wine business in India. A vast majority of the queries that I receive relate to these sectors.

Import/distribution: This remains the most sought after option of entering the market but also has a disturbingly high failure rate as the short and medium term returns in this business are disproportionately low vis-a-vis the initial investment. Those aware of the market know that in the last few years, many importers have shut shop in India, some incurring heavy losses.

The survival, scalability and subsequent success of import and distribution of wines is only possible if substantial volumes are generated in the on-trade segment, which remains the main source of wine consumption in India. With hotels offering a meagre 20 to 25% on of CIF (Cost, Insurance & Freight), the margins often get diluted in huge costs a bottle of wine incurs upon arrival on Indian shores – customs duties, bonding & warehousing, taxes to state governments, brand registration charges, renewal of registrations, transportation etc. This leaves very little at the hand of the importer, a reason why achieving volumes is the key. Since this poses a big challenge, many have added spirits and beers to their portfolio which offer better margins and certainly volumes. A point in case is Brindco, India’s largest importer and distributor, whose success can largely be attributed to the top brands of spirits & beers it represents in India, including those from the multinational behemoths like Diageo & Brown-Forman.

Then comes the complex task of creating and mastering the art of smoothly operating a distribution network. You can either create your own or use an existing network to reach your customers. While the first requires huge cash injection and fulfilling endless legal obligations, the latter will see your cost skyrocketing and margins plummeting.

Finally, there is always the competition to deal with. A new entrant will not only have to put in everything to grab a share of a highly sought-after pie, he also has to find ways to remain relevant for the long term – no mean ask in a highly competitive but very limited marketplace.

Wine E-commerce: Although India is witnessing an online revolution with eCommerce start-ups leading the way, wine is unlikely to be a benefactor of this boom in the near future, mainly owing to strict (and archaic) government laws related to alcohol consumption. Apart from plethora of hurdles in selling alcoholic products online, the logistical nightmares of lawfully operating such businesses can be too many. Take home delivery for instance, which is an integral component of an entire eComm cycle – a lot of state governments do not allow alcoholic products to be delivered at home making it extremely difficult to justify the very existence of such businesses. Some online wine sellers have found a way of circumventing this problem by routing the orders through retailers who in turn deliver the wines to customers, illegally in most cases.

One should also be mindful of the risks of online wine businesses due to the socio-political sensitivity to alcohol. It may not come as a surprise if one day the government cracks the whip and decides to ban any form of liquor sale on the internet anywhere the country. Many state governments have done so in the past and there is no guarantee that such a step will not become a pan India phenomenon in the future.

Retail: This, in my view is going to be the future of wine business in India. With rising awareness, coupled with highly restrictive prices in the on-trade segment, consumers will slowly drift towards buying wines from retail. It will also be in line with the trend in other wine economies where wine retail followed a natural progression to prominence and now contribute significantly to the local wine economy (Hong Kong & Singapore are good examples).

But there is a catch – since India is unique in terms of the challenges traditional alcohol businesses face, the key to success in any retail venture will also have to be unique. A typical brick and mortar and supermarket model has to be complemented by add-ons aimed at unwavering customer focus, mainly to educate and engage a loyal membership base. These may range from regular tasting & appreciation sessions, brand training, wine masterclasses, paired dinners etc.
The Indian wine story stands at the crossroads where it will either find a much anticipated relevance in the world of wine or will remain a laggard owing to the burden of strict laws and tax regimes. Any new entrant in the business will have to find a way through this ‘either/or’ dilemma to decide whether to set up shop in the country.

Cheers,

Niladri

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Common myths about the Indian wine industry

Acknowledgement: The following article originally appeared on the delWine website and I am reproducing the content as it appears on the site.

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Although there are several myths about wine in India that have been addressed from time to time, there are many common myths about its nascent wine industry that could give a wrong perspective to those wishing to enter the Indian wine market, writes Niladri Dhar who is associated with the industry as an educator and manager in the hospitality business.

The noted French philosopher Roland Gerard Barthes once said “Myth is neither a lie nor a confession, it is an inflexion”. It is extraneous what the myth actually is, what really matters is the way it is used to influence thoughts and ideas.

During my association with the wine industry, I have come across many common myths involving the beverage but the most prevalent ones related to the Indian context are worth looking at in detail to appreciate how they affect wine’s placement in our society.

Indian wines are mediocre: It is like saying all French wines are great. Whilst we should be modest to admit that most of our domestic wines have a long way to go in terms of their quality (and consistency, which in my view is by far a bigger issue), it is unfair to assume that there are no exceptions.

The likes of Fratelli-especially their Sette label, the earlier avatar of Grover’s La Reserva and newbies like York, Reveilo and Zampa are some examples which defy this myth, hands down. They have demonstrated that India is capable of producing good quality wines displaying regional characters and comparable to their peers from other parts of the world.

India’s wine market is booming: It will be naive to deny that India’s wine consumption is on a steady rise but at the same time it is also misleading to suggest that the country’s wine economy is experiencing an unprecedented boom (irrespective of different market dynamics, comparison to Hong Kong, China and even Brazil’s wine success is inevitable in this context).

This myth represents a classic example of riding the ‘India growth story’ bandwagon, the domestic wine news-starved media’s attempt to sensationalise an issue which does not have a credible source. The media is awash with all sorts of, mostly regurgitated, growth figures and we often come across them in wine stories. But are these scientifically derived? Who came up with such numbers and what is their basis? Can anyone take the onus of confirming them? Are these data derived from the HORECA sector only and if yes, how credible are the numbers, as it is a well-known fact that hotels as well as vendors are not known to share all their data with the outside world? These are some uncomfortable but relevant questions which need to be answered if one has to make sense of the growth stories.

Easing of tax and duties alone will take care of India’s wine woes: No doubt the atrocious tax and duty regimes have been the biggest impediment in the success of wine in India. But to think that once, if ever, these are liberalised the wine industry will see the dawn of a stupendous growth period, is overly ambitious. Let’s face it, the wine culture we blatantly brag about is still limited to the creamy layer of the society generally within the confines of five star hotels and to some extent, wine clubs in big cities and as long as wine does not have a wider reach, we cannot expect to be in the league of top wine performers.

Then there are obvious challenges in the form of limited number of credible wine training and education providers, absence of a robust retail sector and a general tendency to club wine with other alcoholic beverages and the associated stigmas attached to it. All of these have to be addressed to improve our standing in the world wine scene.

Big and premium is always better in restaurant wine lists: There is a general tendency in India to shower accolades on wine lists which contain hundreds of labels packed with high-end brands. The more Cru classé Bordeauxs, Grand & Premier Cru Burgundies, Cult Californians and Super Tuscans you have on a list, the more likely it is to be considered ‘Fabulous’ and ‘World-class’.

But in fact, an ideal wine list should be all about achieving the right balance of regions/appellations, grapes/blends, price points and compatibility with the restaurant’s menu, which in turn will allow the guests to make informed decisions without getting overwhelmed by the volume and prices. In short, a truly world-class wine menu should be a right mix of variety, balance, eloquence in its descriptions and matching the restaurant’s theme.

High mark-up in 5 star hotels is responsible for wine’s limited reach: Whilst this argument cannot be trashed altogether, it is unjustified to put the blame squarely on top hotels. 5 star F&B destinations normally cater to the wealthy lot of the society and most businesses are smart to price their products as per the spending capacity of their guests. Why should they lose out on revenues when those buying the wines are willing to pay the price? Also, it is misplaced to comprehend that those who cannot afford to dine in 5 star restaurants will start flocking these places once the wine prices are lowered. Apart from wine, the prices of every product and services in 5 star hotels are not affordable for the common man.

Wine does not go well with Indian food: This seems like a never-ending cliché. A time when new and unconventional practices are taking shape and food & wine pairing is bucking all the traditional trends, this age-old misconception needs to be looked at through a different prism.

Contrary to common belief, most Indian spices can be married with wine’s flavour components. The trick is to break down the dishes to the last spice so that the flavour characteristics become apparent. This knowledge is often enough to pair wines correctly although knowing the cooking process will also help in deciding the choice of wine – a smoky Kebab straight from the Tandoor will need a wine with some degree of matching smokiness to balance the overall profile. Lastly, the texture and body of the food should match the same in the wine.

The role of a Sommelier in India: This is by itself one of the biggest myths of our industry. ‘Sommelier’ in India is often an inappropriately overused and misconstrued designation alluded to anyone dealing with the beverage – be it a person simply pouring wine in a restaurant, so called a ‘Wine Taster’, anyone with any wine qualification irrespective of its relevance to a Sommelier’s profile or at times even a wine marketer.

In simple terms, a genuine Sommelier is a wine specialist who is capable of offering expert advice on a broad range of wine related topics. He should ideally also have a matching qualification to back-up his practical skills.

Insights into India’s most comprehensive wine training program

As mentioned in my last post, I was taking a break from writing on this site as I am totally immersed into the ITC Hotels wine program. But I am compelled to come back due to friendly suggestions that I should occasionally share my experience with the outside world. So here I am with my first update on what I’ve been up to so far. My first assignment was to put in place a unique training program for a chosen group of 18 front line F&B resources from across the ITC Hotels chain. This was a first of its kind initiative in India, not only due to the detail and comprehensiveness of the program but also because it was aimed at achieving the dual objectives of imparting world-class sommelier skills and meet the WSET Level 3 specifications.

Here are some snaps from the fun-filled training sessions. Click on the pics for larger images.

A session in progress

All poured and ready to be sampled

Intense concentration!

Green tea…palate cleanser?

Me lecturing!

We had a few birthdays during the training

The training was conducted at ITC Maurya and went on for 45 days. The trainees were taken through all the major wine regions of the world in relation to their location, wine-growing conditions, specialities in terms of styles and types of wine production, viticulture & wine-making, local wine laws, labelling regimes,  commercial implications of particular labels and styles on the world-wine trade, sommelier skills, food & wine pairing skills and wine appreciation sessions, among many other topics.

One of the highlights of the training was a systematic tasting of more than 150 wines over this period of time. These included as basic wines as mass-produced Jacob’s Creek to Prestige  Cuvée Champagnes  and Cru Classé Bordeauxs and almost every possible variants in between…lucky us!

At the end of the intense 45 day training the candidates went through a five-day orientation on Level 3 Advanced course by a WSET accredited tutor Charles Crawfurd, MW, followed by the exam. Tulleeho, the only Approved Programme Provider (APP) for this level in India arranged for the orientation as well as the final examination. The team at Tulleeho have been very helpful throughout the training program.

Due to its uniqueness and trendsetting nature in the Indian hospitality scene, the training also received a well-deserved attention in the country’s wine media. Sommelier India, Indian Wine Academy and Wineindia.in are few notable ones who covered this initiative. Check out the following links for the articles:

WSET Level 3 Certification Debuts in India

ITC Hotels raise the antennae for wine

India’s most comprehensive wine training program conducted at the ITC Maurya

Will be back with my next update on the creation of a new wine list for the chain. Until then…happy wining!

Quality Wine Education – key to success in unconventional markets

Vinexpo Hong Kong, the Asia-Pacific version of the parent event in Bordeaux and one of the most important annual fixtures of the international wine calendar, concluded recently with much fanfare and a bullish outlook for the region’s wine business. The grand occasion not only lived up to all the hype and expectations, it also reinforced Hong Kong’s stature as the world’s most desired wine destination.

In addition to the usual business protocols and showcases, this year’s event also highlighted the significance of wine education to succeed in new but hugely promising markets like China. The key message; consumer awareness along with a well-informed industry workforce is vital in developing and maintaining a robust wine economy. Here is the coverage of the news article on decanter.com.

Although the news dealt with the importance of wine education in mainland China, considering the enormous prospects it has to offer to the wine businesses world over, the core message is universal and holds equally true for a country like India where wine is increasingly making a headway as part of the urban lifestyle.

So, what are the options available for individuals (and businesses alike, for their employees) seeking to acquire/enhance their wine knowledge? Whether one is contemplating a serious career in the wine industry, the trade looking for well-structured courses to educate their staff or you are simply smitten by the charm of wine and want to demystify the intricacies related to its production and enjoyment, there are numerous options out there awaiting to be explored. Among these, there are only a few selected and trusted ones which offer the most innovative and world-class courses and provide the most comprehensive wine education. I have listed them below.

Please note that courses related to wine production (Wine-making & Viticulture) do not feature in the following list as their focus is markedly different from general wine education.

■ Wine & Spirit Education Trust – WSET, as it is commonly known, is by far the most reliable and effective wine education provider in the world. Recognised the world over for the quality and depth of the courses, it has to be the numero uno of all the dedicated wine education providers. The enormous demand for its certifications means that the WSET is also the fastest growing wine educator outside its original home, the United Kingdom. A rigorous selection process of the APPs (Approved Programme Providers) and a centralized examination control (in London) also make these courses very trustworthy.

The Systematic Approach to Tasting (SAT) wine, developed by WSET is also one of its indisputable USPs which has set a benchmark for many other courses around the world.

The four levels (plus an additional case study, the Level 5 Honours Diploma), each with their distinct theory and practical tasting papers, cater to the needs of different skill levels of the industry. The Level 4 Diploma is a challenging but enlightening two years’ expedition which covers all the wine regions of the world with an additional focus on the commercial and business side of wine-growing plus testing an individual’s ability to correctly identify wines after tasting them blind. The Diploma  is considered to be a vital stepping stone towards the holy grail of all wine qualifications; the Master of Wine (MW).

■ Court of Master Sommeliers – The CMS is a very highly regarded organisation offering wine courses at various levels like the WSET but with a strong focus on the beverage service sector, more precisely to groom professional sommeliers. It’s highest certification leads to the coveted designation of ‘Master Sommelier (MS)’. There are only 170 (till date) of these top wine professionals in the world and majority of them are responsible for running some of the most successful and critically acclaimed wine programs, not only in the hospitality industry but also in the wider wine trade.

■ Society of Wine Educators – Although not yet as internationally recognised as the previous two, the SWE deserves a mention solely based on the quality and clear-cut purpose of its three-tier wine certification program. These are; ‘Certified specialist of Wine (CSW)’, ‘Certified Wine Educator (CWE)’ and ‘Certified Specialist of Spirits (CSS)’.

■ Wine MBA from the Bordeaux Management School – A one of its kind MBA program designed for wine professionals aspiring to take the next big step in the world wine trade. This unique course is structured keeping in mind the dynamics of the present day global wine business. Students have the choice of pursuing this option from any of the four strategic locations – Bordeaux, Adelaide, London or the UC Davis campus in California.

■ Courses run by wine experts – A lot of individuals offer different levels of wine courses which can help you get a head start in the industry or enhance your wine appreciation capabilities. Most of them will either hold a wine educator’s certificate from a recognised institute (like the WSET) or should be adequately trained/qualified to be able to be both authoritative and informative in their teachings. In countries like the UK, USA and New Zealand, many such courses are run by Masters of Wine or Master Sommeliers.

■ Others – There are a number of other options which can be explored as means of laying a foundation for wine knowledge. Most cosmopolitan societies nowadays boast of institutes offering wine courses of various sizes and affiliations. These range from customized courses based on particular requirements like training restaurant/bar staff to laid back and fun events.

There are a myriad of factors that play crucial roles in creating and developing a healthy wine culture in an untraditional market, among which, quality education is probably the most key ingredient that helps in sustaining its popularity and commercial success. Therefore it is in the larger interest of a country’s wine industry to recognise this fact and assign it the pivotal role in all attempts to promote the beautiful beverage.

Cheers,

Niladri

‘Indian Wine Guru’? No Thanks

Recently, I came across a comment on an Indian wine website that “India is desperately in need of a wine guru…who can generate a mass demographic of wine followers”. Being a subject close to my heart, it instantly agitated my wine senses, forcing my grey cells to go in a hyper mode trying to empathise with this, rather lofty, imagination. The last time someone managed to ‘generate a mass demographic of followers’ in India was probably M. K. Gandhi!

On a more serious note, I am sure the statement is not meant to be as forceful to place this imaginary figure on a revered altar but it does give us an opportunity to discuss why India will be better-off sans a wine guru and still be a thriving wine-loving society.

To start with, let me clarify that this discussion is confined to the meaning of ‘guru’ as portrayed in the larger world nowadays as someone of authority and mass-following and not the literal Indian meaning; that of  a teacher.

Wine appreciation is a widely subjective as well as an individualistic matter. The mental perceptions and their physical counterparts (taste buds) respond in different ways in different people when it comes to wine enjoyment and hence vary immensely from person to person, one of the reasons which explains the existence of so many varieties in styles and types of wines. Now, being a ‘manipulator’ of all our actions, the human mind ultimately decides our preferences which in turn is instigated by many factors. One such influence can be an individual with a larger than life image and a clout so immense that it becomes ‘in-vogue’ and almost an obligation to try and relate to his/her ways to appreciate wines. No one embodies this cult-like status in the wine world more than the American wine critic Robert Parker Jr.

Parker is a wine guru in every sense of the word. Someone who wields the power to make or decimate a brand with a stroke of his pen. Someone whose 100 point rating system has almost become a benchmark for quality in the USA (and many other parts of the world). Someone who has singlehandedly created a national wine identity in the form of an ‘American Palate‘ for rich and powerful wines in response to the more, so-called elegant ‘British/European Palate‘. And most important of all, someone who manages to sway huge public opinion conforming with  his thoughts. Not to mention the mind-boggling impact of his ratings and reviews on wine prices worldwide. On the other hand, to his detractors, Parker is a media-created hype who has mastered the art of feeding on the paranoia, cynicism, indecision, confusion and lack of knowledge of the wine consuming public. This lobby believes that his influence has more been a negative one.

Whatever the fact of the matter is, it is not hard to imagine the effect such a personality can have on a particular demographic of a society. It becomes more relevant from an Indian context as we are still a nascent wine culture and any such influence can only hijack a wine lover’s ability to think independently and follow personal instincts rather than becoming hostage of somebody else’s opinions and preferences.

The Indian wine community will be much better served by qualified wine ambassadors who will share their knowledge and passion for the subject without harbouring the desire to ultimately become ‘the Indian wine guru’. It is also in the interest of the country’s wine sector to promote a collective learning and development through credible means to ensure a consistent and healthy growth of the industry, instead of relying on one person to act as their torch-bearer.

Cheers,

Niladri