Insight – Uncorking the growing wine market in India

In a country with a population of 1.3 billion and where around 700 million people are above the legal drinking age – a number growing by 19 million a year – India is a market with many opportunities for Australia’s winemakers.

Exposure to new cultures, growth in foreign tourists, overseas education, and rapidly changing demographics are driving wine consumption in India. Despite high tariffs, wine imports registered 14% growth (by value) from last year. This reflects evolving Indian consumer palates over the past decade, making a case for international winemakers to expand their business in India.

With a young population, increasing urbanisation and the perception of wine as a ‘status choice’, India has parallels with other Asian markets where there is a growing acceptance of and preference for wine among the upper and middle classes. As Indian cities attract greater numbers of increasingly sophisticated residents, exclusive wine bars have emerged and the number of restaurants and higher-quality hotels have increased.

The Indian wine market

The number of wine importers in India has been estimated at between 50 and 100 over the past few years. The five largest importers account for around 60% to 70% of imports, with the balance of active importers, perhaps 30 firms, each handling fewer than 10,000 cases per year. Several importers started as distributors of alcoholic beverages other than wine and subsequently added wine to their portfolios. Additionally, some Indian wine producers who seek to offer their customers a full range of options are importing wines that complement their domestic production.

In 2018, India imported 5.2 million litres of wine with an admittedly low value of US$27.4 million (approximately A$40 million). The country imported approximately 550,000 cases of wine, an increase of 75,000 on 2017. While there is a strong market for bottles priced below A$30 at retail, high duties and taxes on imported wine mean importers ideally look to pay a low FOB price – around A$2 to A$3.50 FOB per bottle.

Australia continues to be the leading exporter of wines to India by value and by volume. According to Wine Australia, for the year ending December 2018, Australian wine exports to India grew in volume and value by 50% and 52% respectively. However, this is coming from a fairly low base – 1.5ML with an FOB value of A$5.3 million. Australian wine exports to India were worth US$6.35 million (approximately A$9.3 million) in 2018–19 (April–March). This represents a 22.64% market share of imported wine in India.

There are over 40 Australian wine companies with a presence in India including established brands such as Penfolds, Lindeman’s, Westend Estate, d’Arenberg, Jacob’s Creek, De Bortoli, McWilliam’s and Wines by Geoff Hardy.

The largest exporters of wine to India are Australia, Spain, France and Italy, who combined supply almost 75% of the country’s wine imports. Secondary exporters include Chile, South Africa and Argentina. The European Union previously supplied over half of India’s wine imports yet over the past two years, Australia has surpassed the EU through more competitive prices and lower logistical costs.

India has its own domestic wine industry too, with Sula Vineyards and Grover Vineyards among the top Indian vineyards and wineries. Collectively, they have 90% of the market and are perceived as ‘better value for money’.

Based on trade sources and available sales data, national wine consumption is over 30 million litres per year. Most of India’s wine consumption takes place in urban centres, including Mumbai (32%), Delhi (25%) Bangalore (20%), Pune (5%) and Hyderabad (3%). At present, consumers have a strong preference for red wines followed by fortified, white and sparkling wines.1

The hospitality sector (hotels, restaurants, catering, clubs and pubs) has a larger market share than the organised retail sector, as the Indian Government allows hotels to import alcohol duty-free (equivalent to 5% of the average foreign exchange earned). This means much of the imported alcohol consumed in India is in five-star hotels in major cities.

Wine’s softer image has also made it more attractive to female consumers. Indian women view wine as classy, healthy and a socially more civilised drink to be seen drinking among family members. These trends suggest a dissolving of social taboos and cultural inhibitions related to alcohol especially for women, and wine is increasingly viewed as an acceptable drink within Indian society.

Market barriers

Alcohol sales have been problematic for certain state governments in India for some time. Alcohol is banned in Gujarat, Bihar, Nagaland, Mizoram, and Lakshadweep, with additional restrictions in many other states.

Each state government controls the taxation, distribution and sale of alcohol. Brand/label registration is mandatory for the brand to be sold in the respective states. Separate licences are required to produce, bottle, store and sell all liquor products. Alcohol advertisements are also banned, making it hard for companies to promote their brand(s) directly.

Australian winemakers should note that customs duty on wine is 150% on cost, insurance and freight (CIF). Thus, the final cost to the consumer is around 9 to 11 times FOB in Mumbai, around 7 to 8.5 times FOB in Delhi and around 6 to 7 times FOB in Bangalore.

Despite the sector’s accelerated growth over the past few years, wine penetration is still low with an estimated two to three million consumers consuming 24 million litres.

Many of the established Indian importers carry Australian wines within their portfolios and prefer not to carry similar varietals of wine from the same state. Wineries from new regions or with new varieties may find greater interest among Indian importers. Importers appreciate the superior quality and range of Australian wines but are keen to explore opportunities at entry-level prices.

Opportunities for Australian winemakers

The growing Indian wine market offers Australian winemakers an opportunity to engage at a mid-tier price level. Growth factors – including the rising middle class, a trend towards wine rather than spirits, and the status associated with wine – mean the market is on a strong upward trajectory, regardless of the significant tariff and non-tariff barriers to entry.

Although Australian wineries shouldn’t compare the Indian wine market with China and expect similar growth patterns in the short term, India is a stable and longer-term opportunity for Australian wines.

Austrade is welcoming a ministerial-led trade mission to India in the third week of February 2020. This mission will include B2B meetings with wine importers and retailers and opportunities to showcase Australian wines through tastings in Delhi and Mumbai.

Austrade has a team of eight full-time staff working to promote Australian food and beverage in South Asia across India, Sri Lanka and Bangladesh. Contact Austrade for more information on the trade mission and wine opportunities in India.