BACKGROUND

The Indian alcoholic beverages market is gradually opening up as quantitative restrictions are being lifted, import duties are being lowered and domestic regulations are being simplified. These developments are attracting the attention of foreign players, who are faced with a slowdown in developed markets. According to some recent reports, by 2005, the total supply of liquor in the world will be close to 282 hl but consumption will be only about 198 hl. In such a scenario, India would be an attractive market for international players.

An estimated 10 million people consume alcohol in India, out of a population of about 1.2 billion. The liquor industry in India is highly government regulated in terms of constraints on manufacturing, storage as well as distribution. The industry faces threat of prohibition in several states, high taxes, restrictions on advertising, restrictions on inter-state movement, etc. However, the deep-rooted social conditioning against alcohol consumption is gradually starting to change. Consumer attitudes are relaxing as people are exposed to the Western lifestyle through the media and overseas travel. The per capita consumption of liquor in India averages 0.2 litres per annum. It has remained constant throughout the 1990s, while the consumption of beer has risen steadily since 1988 to about 0.8 litres per person per annum.

There are two major market segments for spirits in India – branded and unbranded. Total branded sales are about 70 million cases (one case of 12 bottles of 750 ml each), while ‘country liquor’ (unbranded, low-priced alcohol) sales are about 200 cases. The branded segment has grown at around 6% annually for the past three years.

Alcohol is a broad term that covers three categories: spirits, beer and wine. Spirits include whisky, rum, vodka, brandy and gin. While the focus of our presentation is to promote Californian Wines in the Indian market, let’s concentrate on the wine industry in India.

Wine making is not new for India, it has been made here for as many as 5000 years. It was then called ‘Somrus’. It was the early European travellers to the courts of the Mughal emperors Akbar, Jehangir and Shah Jehan in the sixteenth and seventeenth centuries who reported tasting wines from the royal vineyards. Red wines were made from the arkesham grapes and white wine from arkawati and bhokry grapes. Under British influence in the nineteenth century, vineyards were established in Kashmir and Maharashtra and a number of Indian wines were exhibited and favourably received by visitors to the Great Calcutta Exhibition of 1884. However, Indian vineyards were totally destroyed by phylloxera in the 1890s. It took nearly half a century to replant them.

PRODUCTION
Today, India has about 123,000 acres of vineyards, but only one per cent of this acreage is actually used for wine. Only three wine companies are currently producing wines in India, namely -
Chateau Indage Limited, Pune
Grover Vineyards Limited, Bangalore
Sula Wineyards, Mumbai

The overall production of these units is approximately 150,000 cases. In addition, they also import about 20,000 cases of wines in bulk and bottle them in their plant. About 100,000 cases of inferior quality wines are produced by small local winemakers which is called ‘port wine’.

Chateau Indage Limited - Pioneer of French-style wines in India, CIL produces a variety of exquisite still and sparkling wines under the watchful eye of Californian winemaker, John Locke. CIL makes 12 types of wines, and their most popular chardonnay-based sparking wine Omar Khayam is in the British market for over a decade now. CIL holds 75% share of the premium still wine category and virtual monopoly in Sparkling wines.

Grover Vineyards Limited - Grover Vineyards exclusively use French wine grapes selected from the original 35 varieties of the Vitis Vinifera species to produce world-class wines under the advice of two top French winemakers, Michel Rolland and Georges Vesselle. GVL also export wines.

Sula Wineyards - Sula is relatively a new entrant into the Indian wine market. They make wines of Californian sophistication

DOMESTIC CONSUMPTION

The overall consumption of wines in India is about 400,000 cases a year of which 85 per cent are table wines and the remaining are the expensive varieties. Out of the 400,000 cases, about 50,000 cases are imported from various sources. The trend in consumption of wines is steadily increasing. Today, the consumption per head is roughly 0.0030 litre per annum. The day it becomes one litre, the market will become over a billion litres or over 111 million cases.

SOURCES OF IMPORTS

The major sources of imports of wines into India are - France, Australia, Chile, Italy, South Africa, California, Spain, etc. Of late, Canada has also supplied small quantities of wines, particularly ice wine to India.

IMPORT DUTIES

The present rate of import duties on wines and beer is very high ranging from 149.6% to 264 %. See the attached annexure I for details. When wines are sold in other states (provinces), the states also levy excise duty and other local taxes, which make the total taxes quite exorbitant.

IMPORT REGULATIONS

Import of liquors including wines is allowed under the Open General Licence (OGL). However, each label, each size of bottle and each manufacturer has to be registered with the Department of Excise & Customs against a fee. All together it is a cumbersome procedure, which the agents/distributors/importers have to complete before importing wines.

ANNEXURE – I

Product	Applied Tariff (or Basic Duty)	Other Duties	Effective Duty
Wine / Beer (CIF value up to US$25 per case*)	100%	75% additional duty 4% special additional duty	264%
Wine / Bear (CIF value greater than US$25 but less than US$40 per case)	100%	50% additional duty (min US$37 for applied tariff plus additional duty) 4% special additional duty	212%
Wine / Bear (CIF value greater than US$40 per case)	100%	20% additional duty (min US$40 for applied tariff plus additional duty) 4% special additional duty	149.6%
Spirits (CIF value less than US$10 per case)	166%	150% additional duty (min US$40 for applied tariff plus additional duty) 4% special additional duty	591.6%
Spirits (CIF value more than US$10 but less than US$20 per case)	166%	100% additional duty (min $40 for applied tariff plus additional duty) 4% special additional duty	453.28%
Spirits (CIF value more than US$20 but less than US$40 per case)	166%	50% additional duty (min US$53.20 for applied tariff plus additional duty) 4% special additional duty	315%
Spirits CIF value of more than US$40 per case)	166%	25% additional duty (min US$53.20 for applied tariff plus additional duty) 4% special additional duty	245.8%

For any further information,contact:

Canny Overseas Pvt. Ltd., Delhi, India
or
BK International, LLC, 2398 Woodlake Circle, Lodi, California 95242
Ph: 209-333-0301, fax: 209-365-7260