Raising A Toast To Gloom
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Politics Of Policy

21 Apr, 2014 11:33 IST

Raising A Toast To Gloom

India has drowned its growth sorrows in wine and spirits. Even as growth rate almost halved in last five years, the consumption of wine and spirits in the country shot up between 2008 and 2013

Pranjal Sharma

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People bought cheaper phones, went to inexpensive restaurants and made sensible choices as stagnant incomes and rising inflation made them cautious spenders in the last five years. Sales of cars have fallen so have the sales of residential property. The rising interest rates swept away the heady days of unrestricted spending that ended after 2008.

While consumer products have shown a negative growth in the past years, marketers have been lamenting the fall in consumer confidence. Buyers traded down in all categories of consumer products.

All, except one category: alcohol.

The sobriety in general spending was fuelled by a spirited increase in consumption of alcohol. Between 2008 and 2013 the sales of wine and spirits in India rose from 1.73 billion cases to over 3 billion cases. (Each case has 12 bottles of 750 ml each. Nine litres per case.)

It appears that while consumers slashed their expenditure on cars and homes, they took to the bottle to mask their disappointment. And they chose well. There was a rise of 100 per cent in scotch whisky sales in India and the country emerged with the maximum increase in consumption of imported wine and spirits in all of Asia Pacific.

These fascinating figures have been revealed by a comprehensive market assessment done by VinExpo Asia Pacific, the world’s premier wine & spirits exhibition. The future looks better but the rate of growth of wine and spirits will be just over 20 per cent in the next four years compared to a 73 per cent rise in the previous five. 

In the overall Indian market, wine is barely 2.5 per cent of the sales. Though spirit sales rose in the last five years, wine sales fell marginally to 1.21 million cases. The prediction for 2017 is better at 2.1 million cases. It seems that the Indians preferred to have red wine since it went well with the colour of their bottomline. The profits falling and losses rising, it can’t be pure coincidence that Indians went for red. 

Not only did Indians go for red wine, but they remained staunchly nationalistic. Out of over a million cases poured, one in five were imported. The rest were Indian wines. The high price differential and the forex rate probably persuaded Indians to promote domestic vineyards. In sparkling wines, the trend was in favour of Champagne sales that grew. Though other sparkling wines did not find many takers.

If we take a deeper swig of the wine figures put together by VinExpo, the results are even more surprising. Despite the small market the surprising trend is that France no longer holds sway in the segment. The market for the old world wines from France has fallen by 22 per cent, while the consumption of new world wines is rising fast. There has been an increase in wines from USA (40 per cent), Australia (72 per cent), Chile (76 per cent) and Italy (104 per cent).

The growth in wine and spirits markets can be higher if the rules governing the industry are revamped, says Rajiv Singhal, representative of VinExpo in India. “It is not just high import duties that have held back the expansion of market. The domestic registration rules, sales conditions, licenses and taxes are restricting the industry,” he says.

Singhal says that domestic wines and spirits can compete well with imported products if the complex web of restrictions is removed. In Maharashtra, not just the seller but even the buyer of an alcoholic drink has to get a license. Usually, the restaurant arranges for such licenses in bulk and fills them on behalf of consumers.

Despite the rise in sales, the wine and spirits business is also gloomy about its restricted future. As the country expects an economic turnaround, the wine and spirits industry is hoping for freedom from licenses.

Even consumers will raise toast to that.

(Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com. You can also tweet @pranjalsharma)

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