A few incomprehensible words from the New World of Harry Potter? Obviously not. Just a bit of info from what’s new in the New World of wines -India. Venky’s Hatcheries, the biggest poultry owners are merely extending their core business of dealing with health products, namely chicken into another health product- wine.
Popularly known as the Venky’s group, one of the group companies, Balaji Entertainment (not to be confused with Balaji Telefilms producing the popular K-word TV serials) is getting into wine business.
The company to be called Venky’s Rock has tied up with a South Australian Winery in McLaren Vale, near Adelaide, christened as Boar’s Rock. They plan to import primarily bulk, bottle and market it, primarily through restaurants and hotels. The announced JV also plans to import and market a variety of wines from this region.
Boar’s Rock is a small, relative new winery that was started in 1999 to provide service to small and medium wine producers and marketers with crushing, fermenting, filtering, bottling and storing of wine of any varietal and quantity and specifications. It does not have any wine label of its own; neither does it plan to have any. It also offers other services like barrel supplies and finance.
During the Australian boom peak year of 1999, Boar’s built another winery at Longhorn Creek to expand the scope of their services. Their core business remains contract wine making under Mike Farmilo, the Principal Winemaker. They do market beer under their label- Boar’s Rock Grunt, though curiously the brewing is contracted out.
Venky’s Rock is set to rock the Indian wine lovers with their marketing and distribution strength, and Venky’s brand image, like the Boar’s Rock Beer being promoted by their partners.
On the face of it bulk wine imports offer a lucrative business. I have frequently written about the glut of grapes and wine in most parts of the world, especially in the cheaper low-end wines. Price of Bordeaux wines have been down to less than Rs. 50 (US $1.20) a liter with the so called wine lakes of the South selling for less than half that price. An astonishing 150 million litres were surplus stocks this year in Bordeaux alone. Italy, Spain and Germany are in the same boat, with farmers sitting on the powder keg restlessly awaiting permission from EU to allow conversion of excess stocks into alcohol. Chile has been an aggressive and successful exporter even of the bottled wine which may well compete with bulk, but for the duties.
Australia has had its share of the slack in export growth but excess of grapes. After 1999 with sudden popularity of Shiraz grapes and a booming export market, the growers went berserk with planting new vines. Several areas are now suffering with excess quantities and are likely to hurt till 2007-8 only when some equilibrium is expected to be restored. Focus on aggressive export is the current ‘mantra’ with all stakeholders including the state are religiously following.
So, there is plenty of bulk wine available for as low as Rs.20 (50 cents) a litre. With lower import duties of only 100% on bulk wines it makes sense to import them, pay duty and still compete with domestic producers or even with imported wines under duty free license since all such wines still encounter excise duty add-on of up to Rs. 150 (US $3.50) a bottle.
Sula have created their national brand, Satori with the import of bulk, quaffable Merlot from Santa Rita, Chile. Industry pioneer and leader Indage has been contracting will all wine producing countries including France, South Africa, Italy, Australia to give the wine lovers a ‘taste’ of imported wines even during the days of license regime, against their export commitments. One producer has been bottling bulk wine and merrily supplying his entire production within Goa.
There has been one spoil sport though. In the new excise policy, progressive and pro-active Maharashtra State Government saw through this game plan and in order to help the farmers, increased the excise on bulk wine from Rs. 7 (15 cents) Rs. 100 (US $2.40) per litre, making bulk wine imports less remunerative though still viable. The grape growers lobby in Maharashtra is very strong. In a meeting last week with Mr. Rajeev Samant, the debonair owner of Sula Vineyards in Nashik and Dindori in Maharashtra he informed me, ‘anyone trying to bottle and market imported bulk wine is welcome but must do his homework thoroughly. The growers and government of Maharashtra will be watching the situation like a hawk and any action that goes against the interest of local growers will be strongly resisted.’ ‘People who propose bottling out of state must be prepared to be shut out by the Maharashtra market through various possible sanctions’ he opined.
Biggest sufferers will naturally be the grower wine makers. Coming barely with grips in handling the production and quality issues in a nascent industry, still grappling with marketing problems due to their inability to come under some sort of a joint banner to match the marketing clout of Indages and the sophistication of Sulas and Grovers, they may be left with huge stocks of unsold wine, perishing grapes and shattered dreams.
The fluidity and uncertainty of the current market scenario does not prevent several new proposals like Venky’s fermenting slowly and quietly. Seagram is already known to have entered the fray. Every week I hear of some big banner, especially in Australia and France planning to set up bottling bulk wine in India- from Kashmir, Uttaranchal and Himachal to Rajasthan, Haryana, Andhra, Goa and of course, Maharashtra and Karnataka. In a market where the growth is barely 25-30% and where people laugh at my suggested desirable growth of 50-60% with proper wine education and with a possible progressive government attitude how many of these projects will flourish in the miniscule market of 4 mill. litres is anyone’s guess.
So, whether Venky’s is really going to rock or hit the rock is something we shall wait and watch. Stay tuned for further developments. For any bricks or bouquets, views or news on the subject click here.
Subhash Arora
Aug 1, 2005
