While consumer demand for wine stays healthy, the new supply dynamics have opened up an exciting range of possibilities previously out of reach writes Harshal Shah.
The changing drinking habits of domestic India changed the fortune of the Indian wine market over the last four years.
These dynamics were not purely economics but lifestyle. The recent India International Wine Fair in Mumbai was driven by the optimism of continued growth. 26/11 and the economic slowdown flipped these plans 180 degrees; for the wine trade at least.
Now we have a situation where inventory is backing up, compelling vintners and importers to finally consider new options in price and promotions. To some extent, the same can be said of restaurants.
For the foodservice trade, while consumer demand for wine stays healthy, the new supply dynamics have opened up an exciting range of possibilities previously out of reach.
The Indian market seems to be shifting to wine, but at an affordable price point. Along with domestic wines which sell at an average price point of Rs450 per bottle, middleclass consumers are willing to regularly spend up to Rs800 per bottle for imported wines. This is the ideal price point at which to market and sell imported wines in the major Indian cities.
There does not, as yet appear to be a definitive report with accurate, objective statistics on the Indian wine market. Almost all data is anecdotal and while vaguely accurate, is difficult to verify. From experience with importers, it is sometimes best to start off with data acquired from the source of the wine, the country exporting the wine.
So, for example, for accurate data about Champagne imported into India, it is best to approach the CIVC in France for data on Champagne exports to India. Furthermore, one cannot necessarily rely on data from wine importers in India without considering the proviso that not all the wine imported into India is necessarily sold, they never tell you this.
Depletion reports (Reports which show the outward movement of inventory from a warehouse) by importers are not necessarily accurate, as the importer is often under pressure from some principals to achieve certain growth targets. Short of undertaking a physical stock take, it is hard to know the true inventory position and depletions of any importer.
What is undeniable is that there is a heavy back-log of inventory sitting in the importers’ warehouses, which importers now more than ever are under pressure to sell to liquidate their locked capital.
So what wine buyers in the trade need to be wary of in the coming months is the quality of the wine they are purchasing. Do not rely only on the information you receive from the importer. Go online and check the latest vintages from the wineries that you list.
Importers now have a back-log of inventory that they cannot sell because you their customers, do not have the demand to justify the purchase. As a general rule, wineries only really increase their prices every 18 months or so, so be wary of prices going up from importers more frequently than this.
One thing that may cause prices to increase is the exchange rate fluctuations, but this usually should not occur more than once a year. If you can, insist on inspecting the ‘temperature-controlled’ storage facilities of your suppliers.
Currently one or two of the bigger hotel chains do so regularly, but nothing is stopping you from asking this of your wine suppliers.
It is really only worth adding wines to a wine list if you are sure that your stewards and sommeliers can sell them. The last thing you want have on your hands is an inventory problem.
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It significantly reduces your profitability and the overall experience of drinking good quality, fresh wine for the guest. The only true way to get people to drink more wine is to make it more affordable for them. Couple this with appropriate, targeted promotions and there is no excuse why the barriers of taxation and recession cannot be overcome.
It is worth knowing that the importers usually receive a marketing budget from the wineries they represent. The use of this marketing budget is usually at the discretion of the importer and what usually happens, unfortunately, is that instead of promoting the brand, the importer treats this budget as a ‘discount’ and incorporates it into their profit margin.
This is why, sometimes, wine importers are able to offer such large discounts to their large customers. They too are often under pressure from their suppliers to clear stocks and update the vintages.
As a buyer, what you need to be asking for is other forms of marketing support such as a specific wine-by-the-glass support system where your wastage will be covered. You have every right to make demands; you after all, are moving stock for your supplier.
Insist on hosting wine events with, if possible, representatives of the wineries to conduct training sessions for your floor staff and wine dinners and tastings for your top clients.
Price is not always the best way to get people to buy wine. Sure, there are high taxes, but everyone is in the same boat. If you can afford to, reduce your own margins on the selling price of the wines.
In the long run, you will sell more wines and develop a loyal customer base. At some point, you will receive competition from the retail segment, so keep this in mind when setting up your margins. Right now, maximum margins are regulated in many of the bigger cities. There is nothing stopping you from coming down.
In the current economic environment, importers want to sell. It is up to you to create this demand. There is no doubt that wine is here to stay.
The volume of wine imported into India is increasing every year, from a mere 76,000, 9-litre cases (12 x 750 ml bottles/case) imported in 2003 to approximately 185,000 cases four years later.
This will continue to grow, albeit at a slower rate. What needs to happen concurrently is that domestic production has to scrub up and start giving the entry-level imports a run for their money. The best way to do this is to involve overseas winemakers from more established wine-producing areas in the world to offer technical inputs into the local wineries.
Domestic wine will always be more affordable than imports. The defining feature is its taste, its quality. Until the domestic segment can compete with imports, those with that little bit extra disposable income will always choose imported over domestic.
