India’s largest winemaker, Sula Vineyards, is expanding its production capacity and counting on a pricing sweet spot to fend off foreign rivals in its home turf.
Last year, the Indian government slashed import duties for some Australian winemakers as part of a foreign trade agreement (FTA) between the two nations.
“India cannot stay protected forever, and more FTAs will be signed. But among all the Indian wine companies, Sula has the least to fear,” Chief Executive Officer Rajeev Samant told Reuters. “We are ready to compete with foreign brands.”
He is counting on Sula’s pricing strategy to thwart rivals.
“Seventy-five percent to 80% of our sales comes from a price point below a 1,000 rupees ($12). Even if their thresholds come down lower, the pricing of those brands is not going to come down much below 2,000 rupees,” Samant said.
The winemaker plans to expand its production capacity to 18.5 million litres per year by next year, compared with about 16 million litres per year currently, he told Reuters.
Mumbai-based Sula, which competes with smaller unlisted rivals Grover Zampa and Fratelli, has more than 50% of the market share in India, according to Kotak Institutional Equities.
Sula’s stock is up about 30% from its December listing, compared to an about 10% rise in the blue-chip Nifty 50 over the same period.
Much of Sula’s popularity comes from its premium brands, such as Dindori and Rasa, which accounted for about 90% of the company’s total revenue in its last quarterly results.
Wine consumers are getting “turned on” by the 800 rupee-plus category, he said, adding that the rise in demand for premium wines was largely limited to India’s big cities.
He is optimistic about its smaller cities too.
“If a Black Label bottle is available in a store in any city, our premium wines should be there too – that’s a straightforward diktat to our sales force,” Samant said, referring to Sula’s growth in second-tier cities.
Wine accounts for less than 1% by volume of all alcoholic beverages in India, which strongly prefers spirits and beer, as made evident by the successes of Diageo-owned United Spirits and Heineken unit United Breweries.
Globally, wine consumption accounts for about 14% of alcoholic beverages, according to Kotak.
“Wine won’t compete with spirits or beers anytime soon. But in India can we get to 2% or 3% of the market? Sure we can,” Samant said.
Reuters