The R400-crore wine industry is facing a crippling problem of excess production, with 25 million litres lying unsold at the end of April, the close of harvest season this year.
This has forced some of the wine makers to eye the premium grape brandy segment to wriggle out of this situation. A lot of the unsold wine of the last two years has also gone bad, they say.
While the number appears to be a little better compared to the same period last year when 32 million litres of wine remained unbottled and unsold, market analysts say the oversupply situation could continue for at least another year, or until some of the wineries are consolidated.
The domestic wine industry has seen a phenomenal growth over the last decade and according to various reports, the number of wineries jumped from about six in 2000 to over 70 by 2010. On the flip side, the demand couldn?t grow as fast and the economic slowdown of 2009 proved disastrous.
Grape brandy, which is produced from distilling wine, can potentially mop up the excess supply over time. Brandy is also a bigger market for winemakers to play in. While sales of locally produced wines may have remained flat at one million cases (one case contains 12 bottles) over the last two years, the brandy market totals around 46 million cases, most of it consumed in south India.
The brandy market, growing at more than 20%, however, is dominated by those made from molasses and not grapes. Winemakers feel the higher-priced grape brandy could fill in a gap.
?Converting wine into grape brandy or other spirits will stabilise the industry. First, it will give wineries value addition. Second, it will help if there is surplus production of grapes and third, if the wine gets spoiled, it can be easily converted into spirit,? Jadgish Holkar, chairman of Flamingo Wines, said.
The All-India Wine Producers? Association (AIWPA), which Holkar leads, has been trying to get a distilling licence for winemakers. Maharashtra, where most of the wineries are located, could be notifying a policy within a fortnight, Holkar said.
About 25% of the group?s 90 members may opt to make grape brandy given the licence, he noted. Another alternative would be to make the Indian equivalent of the Italian Grappa, a spirit that is made by distilling the skin, pulp, seeds, and stems of grapes ? or the left over from wine making called pomace.
?There is unfortunately an oversupply of low quality wines from the many small wineries that have sprung up over the past few years. The situation is likely to persist for another year at least. The other problem here is that the grape growers have not been paid by these wineries. However, there is no oversupply of quality wine as there are very few wineries that are producing this,? founder and CEO of Sula Vineyards Rajeev Samant said.
Converting excess wine capacity into grape brandy is definitely an excellent solution, he added.
?Grape brandy is a higher-quality spirit than that made from molasses. It would lead to a big boost in grape processing capacity and therefore vastly boost farmers? incomes. It has been neglected in the country until now and it should be encouraged strongly,? Samant said.
Kapil Grover, director of Grover Vineyards, noted that governments should not encourage farmers to start making wines themselves. In Maharashtra, farmers began investing in wineries resulting in the current oversupply.
?Farmers will not know how to grow the right kind of grapes, forget making the wine and then distributing it effectively. There is a vast difference between growing table grapes and wine grapes. Farmers should tie up with experienced people who already run wineries and know the distribution model. That is how the industry works all over the world,? he said.