Potential and constraints in Indian wine sector

Several New Zealand wine producers are taking advantage of growing Indian affluence and aspirations.

There is kudos in having wine knowledge and people are eager to explore new tastes and keep up with the latest fashions and health trends, according to Alok Chandra, Bangalore-based wine commentator and consultant of Gryphon Brands.

Although advertising alcohol is forbidden in India, wine gets disproportionate media space, where it is portrayed as a low-alcohol, healthy beverage with a certain cachet, as opposed to the more widely drunk spirits.

It is seen as glamorous, up-market and high society, a trend reinforced by Bollywood stars.

Many women who would not drink spirits or beer are happy to have a glass of wine, Mr Chandra says.

Australian Craig Wedge, wine consultant at J. W. Marriot in Mumbai, is excited by the burgeoning market.

"India is like the last frontier; it has the capability to be the biggest wine market on the planet in volume.

There's a youthful population - there are 65 million people below 25."

Young, upwardly mobile business people are keen to learn more about wine - wine clubs are springing up in the cosmopolitan cities of Delhi, Mumbai and Bangalore, and new fine wine stores and specialist imported food stores with wine departments are opening.

Last year, British wine writer Robert Joseph established the Indian Wine Challenge, a competition to promote wines on the subcontinent.

Wine consumption in India is increasing by 25% compounded year on year, according to Mr Chandra.

He predicts the market will grow from a million to 10 million cases in 10 years and perhaps 50 million cases in 20 years, but warns it is not an easy market to enter.

"You can't just trade wine, you have to invest in it, so normally you try to do it in partnership."

Neal Ibbotson, of Saint Clair Family Estate in Marlborough, said the key was to have a good distributor as well as a good product and competitive pricing.

His wine is distributed by Vishal Kadakia, of Wine Park.

Educated in the United States and a graduate of the United Kingdom wine and spirit courses, Mr Kadakia decided to get into the market early and specialises in wine from leading international producers.

Imported wine is still mostly focused on five-star hotels which buy it duty free, and the prices are international - we saw Cloudy Bay sauvignon blanc at $150 and Villa Maria pinot noir for $100 on hotel wine lists.

Middle-class Indians tend to drink locally grown and produced wine, another booming industry attracting overseas investors and consultants.

But, despite the glamour hedging wine, there are many constraints to entering the Indian market.

Every state has its own rules, regulations, duties and taxes for alcoholic beverages.

State excise departments have contradictory roles: one is to raise revenue from tax on alcoholic beverages, and the other is to discourage consumption.

Some states, such as Gujarat, are dry, and others have restrictive regulations such as Bangalore's 11.30pm curfew on restaurants.

Federal customs duty on wine is 150% and every state has its own taxation policies on top of that.

In Maharastra, of which Mumbai is capital, wines from outside the state attract excise duty which, coupled with the federal customs duty, effectively presents a tax of nearly 400%.

According to Mr Kadakia, it is a form of protectionism for the local wine industry, in which some government ministers are involved.

He believes the local industry cannot improve if benchmarks are too expensive.

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