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Confounding Assocham Study on #Wine Consumption in India

According to an industry analysis by ASSOCHAM , the Indian wine market stood at Rs. 800 crores (Rs. 8 billion) in 2008 and is likely to grow over three-folds to touch Rs. 27 billion by the end of 2012, based on the information supplied to the chamber by various wine producers. But the figures seem to be too conflicting with an unrealistic and an unlikely growth rate projection and a very pessimist estimate for 2008, opines Subhash Arora.
The report on sales value also does not clarify whether the figures are first point sales by the producers and importers and whether they include customs duty, excise duty, VAT and other government taxes or they are estimates based simply on the MRP of wine sold, or are the ex-factory prices.

Wine consumption in India is likely to reach a volume of around 14.7 million liters by the end of 2012 from around 4.6 million liters in 2008 registering a growth of 35 per cent during the course of 4 years 2008-2012, indicates an analysis of the Associated Chambers of Commerce and Industry of India (ASSOCHAM), reported today by the stack market brokerage and services company, Indian Infoline.

The estimates translate into the consumption of only 510,000 cases of 9-liters in 2008 scaling up to 1.6 million cases in 2012. It does not clarify whether this includes low end ‘port’ and other cheap wines being made in Goa, Pondicherry and Tamil Nadu etc. Perhaps the detailed report gives the sector-wise details.

The study on “Emerging Industry trends in Indian Wine Market” carried out by ASSOCHAM confirms the widely held view that cities like Delhi, Mumbai, Chandigarh, Bangalore, Chennai etc. account for majority of wine consumption in India and that the emerging trends indicate that non-metros and tier I & tier II cities will also form a significant part of wine consumption in India during the next few years.

Releasing the findings of the ASSOCHAM analysis, D.S. Rawat, Secretary General of ASSOCHAM said, “If stats are anything to go by, India’s wine industry is bubbling with activity at the moment. The per capita wine consumption in India is going to reach 30 ml from a mere 9 ml in 2008.”

“Favorable government policies, suitable tax structures, rising disposable income, growth in tourism sector etc. are certain reasons for burgeoning Indian wine market. Besides, rapidly changing lifestyle and drinking habits of people (‘people from the middle and higher middle class no longer prefer hard drinks’) especially, the younger lot are paving the way for growth of wine industry”, added Rawat.

According to the ASSOCHAM analysis, the wine consumption pattern in India is- Mumbai (30 per cent), Delhi (20 per cent), Goa (20 per cent), Bangalore (15 per cent), Punjab (5 per cent) and rest of India accounts for 10 per cent. Shameless though it appears, the drop in consumption in Delhi which stood around 28-30% a few years ago is mainly due to the high excise duties imposed on imported wine during the last couple of years and the unfairly high license fee and minimum label registration charges on the domestic wines, restricting the choice to consumers. A few recent progressive policies like sales in super markets, special lower-fee license for wine and beer-only license and sale through outlets in the malls are expected to negate the regressive policy of high taxes in the next couple of years.

An interesting aspect that emerged out of the ASSOCHAM study was that around 65 per cent of the total volume of wine consumed in India is produced locally in states like Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu, Punjab etc. as these regions are booming with a number of wineries. The study fails to name Goa which produces over 200,000 cases (1.8 million liters) of low end fortified wine the majority of which are consumed within Goa.

The study indicates that wine industry in India is looking up but in its interaction with the various wine producers in aforesaid states ASSOCHAM observed that the industry is facing certain grave problems to further develop the domestic wine market. Major wine importers and domestic producers are awaiting a change in domestic excise policy that would make the imports cheaper and ease availability of Indian wines throughout India.

ASSOCHAM endorse the strong view of delWine and the Indian Wine Academy that wine sector in India has immense growth potential and with proper government support together with guidance, the sector can certainly become hugely lucrative and generate employment too.

Due to lack of authentic data, it is neither pertinent nor desirable to comment or criticize this or any other study, until the government wakes up to the fact that its job is not only to collect the huge revenues from the central customs duty and the state excise duty but accept the responsibility of collecting centralized data which is already being accurately presented in most new world countries including Australia, New Zealand. Chile, south Africa and the federal US where states enjoy a relative autonomy.

However, there seems to be a basic lacuna in the figures. Whatever the figures of 2008 have been assumed, 2009 was a disaster and 2010 barely reached the level of 2009. Current year is showing the buoyancy and 30-35% annual increase is most likely in 2011 and 2012. But if the figures of 2010 are assumed to be close to 2008 (many producers and importers would claim this to be an optimistic estimate), it would be far-fetched to expect an almost three and a half times growth during the next two years. DelWine expects the growth to be much lower than predicted, although we are optimistic of the next few years- the Delhi Excise policy for 2011-12 will tell us a lot about the shape of things to come.

The volume figures for 2008 that work out to be 510,000 are too pessimistic even from the standard of the biggest pessimists-unless they referred to premium wines. I have perhaps missed out the reported boom in wineries in Tamil Nadu, Punjab and Andhra Pradesh. Karnataka, no doubt is the new kid on the bloc, thanks to the vision shown by its government but the sales results may not be earth shattering till 2012.

‘People from the middle and higher middle class no longer prefer hard drinks’ seems to be the most profound statement of the decade. If and when that happens, we would be consuming over 50 million cases, not liters- annually! It is true that there is a small section, a very small section of middle classes who prefer wine to hard liquor and many of the new drinkers in this category take to wine only. These relative miniscule numbers out of an estimated middle class of 300 million and perhaps 30-50 million alcoholdrinkers have undoubtedly added to the 25-35% annual growth in wine consumption during the last 5 years or so. But to say that ‘People from the middle and higher middle class no longer prefer hard drinks’ is purely a wishful statement and a distant dream, a paradigm for the next century or optimistically speaking, the next generations.

Subhash Arora

 

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