| The Indian wine industry seems to be jinxed. ‘While the rumour mills have been working overtime to ‘announce’ the reduction of import duties from 150% to 40%, thus possibly hitting the sales of premium Indian wines, our producers should take solace from the fact that due to the continued rupee devaluation, the import costs have increased by almost 30% and even with the producers and importers absorbing the impact partially, a minimum rise of 15-20% is imminent,’ reported delWine in June, 2013 issue. Unfortunate but true, the price increase would have to be even more and there is still no way of knowing where the free fall will end.
Adding to the price increase is the uncertainty of how long it would be before the government might announce stringent steps including the suspension of free imports that has been the government policy since 2001. The statement by the Finance Minister PC Chidambaram was loaded and seemed to be all-encompassing when he said that the luxury and non-essential products being imported might not be allowed anymore. One can only hope that we don’t fall into the regressive and controlled policy restricting free trade that would be harmful to the national economy and we can say goodbye to the dream of a powerful India.
An article by the Economic Times, preceded and followed by a couple more articles, firmly validates our premonition. It took no rocket science for us to predict that the prices would have to be raised, except that barely 2 months later the situation has become much worse and unprecedented and the current prices of imported wines may still not be truly reflective of the current situation.
The importers may not be able to pass on the complete cost escalation to the consumer without fatally knocking themselves. In cities like Delhi, the excise rules don’t allow increase or decrease in the prices during the current financial year once the tariff rates have been established. Many importers had generally assumed the price increase of 10-12% except Brindco which had waited till the last minute to decide on the price increase before getting the wine lists accepted. This has helped them to some extent in announcing price increase of about 15%.
Although the Indian producers would do well to keep the prices in check and consolidate their position, even increasing their share in the market, a unilateral increase of 5% has been doing the rounds. Of course, this is an unexpected opportunity for them to increase the export share and those with vision and quality of their wines might be doing just that.
Sridhar Pongur, Joint MD & COO of Bangalore-based Big Banyan with a winery in Goa says, ‘There seems to be a growing trend and acceptance towards Indian wines that are being exported. At the current currency levels it gives us a good opportunity to compete and showcase our products on an international platform. The price increase owing to the dollar fluctuation will help the domestic industry only to a certain extent. However, our margins will have an impact, as we still import winery equipment, bottles, corks, etc and also send our wines across to labs in Italy for testing to maintain the standards and quality of our wines. Any further increase on the consumer price will affect the overall volumes.’ Big Banyan produces wines in collaboration with Italy and has been expanding base in the Southern and Western belt.
Mumbai based Riona wines is an exclusive importer of wines from Moncaro and Enzo Mecella in the Marche Region in Italy. It is also setting up a winery to produce domestic wines in the winery in Sangli as a joint venture. K T Mane, CEO and Director feels ‘the sliding of rupee will affect the import of wines in India as the landing cost will be increased and will affect the MRP by 15-20%, thus slowing down the sale of imported wines. The fluctuating rupee does not allow us to finalize the MRPs of wines. The fall will also result in increase of prices of domestic wines though it will help exports.’
No matter what the outcome, Indian industry is a net gainer and the imported wine consumers consuming 330,000 cases would bear the brunt of the unavoidable price increase and instead of making the 10-20% of increase over the previous year, they would be lucky to reach last year’s sales. Blame the havoc on the hammered rupee!
Subhash Arora
Tags: Rupee, Indian wine industry, PC Chidambaram, Delhi, Brindco, Sridhar Pongur, Big Banyan, Riona, K T Mane |