Indian-made liquors have the potential to cater to global markets and engage in a bigger international platform but the industry faces a number of challenges, including high taxes, illogical levies on certain imports and red tape.
By Vaishali Dar
When Fratelli wines launched its flavoured limited edition in India last year, little did the co-founder know what was to follow. To think of an illustrious collaboration between the two — Fratelli and acclaimed French vintner and proprietor of Boisset Collection Jean-Charles Boisset (also known as JCB) – was a matter of great honour. “We weren’t sure about the Indian terroir to deliver the French-style wine but JCB saw the potential to create and deliver a premium Indian wine brand well-acclaimed for its benchmark quality to cater to the global market,” says Kapil Sekhri, the co-founder of Fratelli Wines in Akluj— a town in Solapur district of Maharashtra, located on the right bank of the Nira river.
The diversity of soil, the hot climate and procurement of plants from the best nursery in the world were among a few factors that made this collaboration possible. That’s when the team got excited and unanimously decided to put Indian wines on the world map. Fratelli launched ‘J’NOON’ – a range of wines skillfully crafted by JCB with the collection of sparkling JCB No. 47, J’NOON white and red — all subtle and intense. “We named the sparkling wine as ‘No. 47’ in honour of India’s independence as a tribute to the love JCB felt for India when he visited for the first time,” adds Sekhri.
Proprietors like JCB, which operate 24 wineries in California, France and Canada, and whose Boisset Collection is France’s 3thIRd- largest wine group and Burgundy’s largest wine producer, have expanded their reach in India and are betting big on the potential of the country’s produce to compete in the global market. “It seemed like a wake-up call for us that Indian-made spirits can be well-received in the world. And that we can produce a quality product from India as well,” says Sekhri who has exported 10,000 J’NOON bottles in the launch year itself.
“Due to the phenomenal response in the first year, we have maintained limited circulation in 2019, but we plan to bottle a 30% increase for the next five years,” confirms Sekhri who has set an audacious goal to make people globally take notice of Indian wines. “We will gradually increase the quantity with each passing vintage in existing markets like Italy, Gibraltar, Cyprus, Malta; Japan will be a new addition to the Fratelli family in 2020,” he reveals.
Today, wine is an integral part of the urban Indian lifestyle and India has steadily progressed as one of the new world wine countries. The ensuing efforts by companies like Fratelli Wines, Sula Vineyards and Grover Zampa Vineyards have placed India on the global wine map. With active participation at international trade fairs that results in world-wide recognition, Grover Zampa’s exports team travels internationally to educate trade partners and consumers on the quality of Indian-made wines and efforts put in to achieve exceptional results. Ever since Chandon forayed into India in 2013, the consumption pattern has steadily increased, creating space for sparkling wines within the industry. At its state-of-the-art production facility spread across 21 acre in Nashik, a team of international and local wine-makers and viticulturists closely work with grape growers from the region to craft the finest sparkling wines. Chandon launched its latest offering My Chandon in Mumbai last December with its first variant – the Brut. Recently, the limited edition Chandon Rosé, with the ‘Think Pink’ campaign, has built the Rosé as a strong second pillar for Chandon in India.
The Indian alcoholic beverage industry is behind only two major countries such as China and Russia. Growing demand for
alcoholic beverages in India is largely attributed to a huge young population, a demand for alcohol in this generation, as well as rising disposable income. With a population of 1.3 billion, India is one of the largest consumer markets across the globe. It is also demographically one of the youngest with around 50% of its population below the age of 25 and around 65% below the age of 35. Goldstein Research analyst forecasts the India alcoholic beverages market to grow at a CAGR of 7.4% during the forecast period 2016-2024. Further, the market is anticipated to reach $39.7 billion by the end of forecast period as alcohol consumption is growing in urban areas.
Take for instance the case of whiskies. Spurred by innovation in whiskey cocktails and highballs, the global whiskey category increased by 7% in 2018, driven in large part by a strong Indian economy (whiskey grew by 10.5% in India, as consumers continue to trade up in the category). The US and Japan posted 5% and 8% growth, respectively. The International Wines and Spirits Record (IWSR) forecast whiskey to grow by 5.7% CAGR from 2018 to 2023, to almost 581 million nine-litre cases.
However, the Indian spirits industry has a great deal of complexities and opportunities for engagement. Recently, celebrated whiskey critic and writer Jim Murray was in India. In an exclusive interaction with FE on Sunday, he observed that Indian distilleries need to work on their wood management skills to find their due place on the global map. “Indians tend to suffer from an inferiority complex in terms of their whiskey, much like the Canadians do,” he said.
According to him, single malt whiskey has been present in India for a long time. The oldest one is probably from Kasauli in the Himalayas. “Kasauli malt was coming into a lot of blends, so the quality went down, and since it’s a tiny distillery, they never really pushed it as single malt. Even enhancing the quantity made the quality fade out. Therefore, the emphasis is on the high quality of distillation, and the type of barrel put in. To be honest, there are other distilleries in India that can catch up but they must get their barrels right,” he said.
India’s best known single malt whiskey, Amrut Fusion Single Malt, manufactured by Bengaluru’s Amrut Distilleries, is the first of its kind from the Indian market to do well overseas. Established in 1948, the family-run business has been manufacturing Indian-made foreign liquor (IMFL) for more than five decades. Today, it has an estimated net sale (export plus domestic) of `310 crore in 2019 with volume sale of 4.7 million cases in 2018-19 and a projection of close to 5 million in 2020. It was in the 1990s, when lighter malts were in demand and many other big liquor brands had entered the market, managing director of Amrut Distilleries Rakshit N Jagdale, doing a project for his management course in the UK’s Newcastle University in 2001, decided to test the single malt and supply a sample to the local pub. “I did a recce of different bars and restaurants in Scotland to find out why Indian made liquor had no success in the market. My father Neelakanta Rao Jagdale, business colleague Ashok Chokalingam and I stood under the Mahatma Gandhi statue in central London, thinking of taking up the next challenge. We got inspired by Gandhi’s spirit and decided to give it a shot. It was a blind-tasting at one of the oldest pubs in Glasgow and Amrut was appreciated and compared with the best found in Scotland, and the rest is history,” recalls the 41-year-old entrepreneur, whose ‘Fusion’ won the title of world’s third best in whiskey expert Jim Murray’s ‘Whisky Bible’. “It gained 97 points in Murray’s most extensive collection of tasting notes ever published in 2010 and the tide turned in our favour,” admits Jagdale. In 2018, Amrut Distilleries net sales grew by 6%. In 2019-20, Jagdale expects 10% increase in value and 3-4% increase in volume. “There’s a large section of the industry moving into ‘premiumisation’ as consumers want to ‘drink better’ and we are moving to upscale the single malt whiskies and offer consumers good product and packaging,” he adds.
Perception vs quality
Many spirit brands in India are being perceived as good quality and it has helped the industry to a large extent. Just the way the Scots know how to make their whiskies and the French know how to make wines, Indian made liquor is also being recognised to an extent. “We might have the best services, infrastructure but if we do not have the zeal to do things better, we can never outperform the art of whiskey and wine-making. Hence, improvisation is the key aspect to growth,” says Garry, Mumbai-based mixologist at Tygr and Kode. Indian brands have often been the first to downplay the intelligence of the local consumer, churning out sub-standard products simply because the audience was perceptibly naive. “So the distrust that we see today stems from this bad treatment meted out to consumers by older brands and unfortunately new brands that are extremely quality conscious and international in their outlook suffer for it,” says sommelier Magandeep Singh.
Indian consumers still don’t ubiquitously hold Indian spirits in high regard. “The tag ‘imported’ needs to change. If consumers don’t respect the produce of their own country, it is difficult to make global consumers do the same,” says Sekhri who sells his premium cases at fine wine spirits boutique called Hedonism in London’s Mayfair. From his experiences, blind tastings have always proved successful in making Indian brands come on top.
Grover Zampa Vineyards (GZV) has invested in new technology for sorting the right grape bunches, optical sorting machine, imported concrete tanks and amphoras that help in better fermentation, ageing and enhance the flavour profile of wines. For a wine producer to efficaciously run the business, two factors must be kept in mind: ensure that the producers use good quality grapes and technology is given utmost priority. GZV practises contract farming across the grape-growing belt and train farmers in international standards on techniques of maintaining vineyards to suit growing wines for the different grape varietals. “We have our own vineyards, which guarantee superior harvest for premium wines, as we can control all the viticulture practices. In this regard, we are on a par with most international wine producing companies,” says Sumit Jaiswal, VP-marketing, GZV.
Despite all the advances made in the sector over the years, major players complain about systemic constraints and heavy regulation that pose a big challenge. “The respective state governments must deregulate, to an extent. Excise rules are archaic and modern permit system is laborious. I don’t say that this is not necessary but with new-age technology and software, the government must do away with the paper system and get on to e-procurement system. Modernisation is important,” says Jagdale, whose company has presence in 40 countries.
Established in 1996, John Distilleries owns a strong portfolio of brands across categories, including whiskey, brandy, rum, premium wines and single malts. It sells single malt whisky under the Paul John brand made at a company distillery in Goa and retails in over 35 countries. John Distilleries also has a range of wines — white, red, rosé and dessert — under the brand, Big Banyan. It has a few vineyards in Karnataka and sources the bulk of grapes from Maharashtra. The founder-chairman of John Distilleries, Paul P John, has spent about 25 years in the industry and still complains about problems like irregular power supply. “There are power cuts for up to 10-15 times a day and, along with this, there are occasional surges of high power. The challenge is to get interstate permit, deal with multiple tolls, poor quality roads. In some cases probably there might be just one good viable port to ship out of India,” rues John.
According to Jaiswal, India lacks cold room facilities in the logistics chain since wine needs to be stored and transported at a certain ambient temperature once it leaves the winery. “Environmental factors have a direct impact on our farms and are beyond control. In a world where a consumer is exposed to countless brands, Indian brands have to create special memories,” says Chaitanya Rathi, COO of Sula Vineyards.
A few factors such as lack of understanding of what the sectors need, high taxes, illogical levies on certain imports, which are crucial to qualitative production, and a lot of red tape in allowing the smooth set up, operation and execution of business plans and goods retard the progress, feels Singh.
Also, investment tends to be high on technology and equipment such as crusher, pneumatic wine press. Bottling lines can be expensive and a majority of these need to be imported as these are not easily available in India. Poor technology could affect the final quality of the product, opines Amrut Vare, winemaker at Chandon India.
In addition to this, Amrit Kiran Singh, executive chairman of International Spirits & Wines Association of India, thinks India is one of the biggest whiskey markets in the world and there is adequate infrastructure to support this. “In the case of wines, the climate in even the best locations (Maharashtra and Karnataka) is not really ideal for growing superior wine varieties of grape which is a huge disadvantage. As far as whisky is concerned, Japanese, Irish and American whiskies have made their mark besides Scotch. So, connoisseurs have an open mind,” he says.
Quality India produces
Sula is the first Asian winery outside China to sell 1 million cases a year. “Nashik Valley is now on the world wine map as one of Asia’s major wine producing and tourism regions. Today, the area is known as ‘the cradle of India wine’ with 80% of India’s wine being produced here,” says Rathi. In fact, Diageo India has invested in building great local insights and that’s helped in understanding both the local culture and consumers’ choices across their socialising occasions.
“There’s a clear shift in young consumers’ preference for a smoother whiskey experience. India offers multiple opportunities due to its inherent diversity. As more women are starting to enjoy the category so it’s becoming an important consumer cohort to understand and plan for this segment. Our lead brand McDowell’s No1 is the most preferred brand for social gatherings and everything the brand does is to help consumers celebrate their special occasion better,” says Amarpreet Anand, EVP & portfolio head, marketing,
Scope to better
Indian alcobev brand owners have understood the importance of not cutting corners in this industry. They have gradually realised the importance of trials and how word of mouth helps in good traction in the export market. Indians’ exposure to new cultures and new destinations because of their travelling preferences , sustainable practices, growth in foreign tourists, and a rapidly changing demography are helping the brands drive wine consumption in the country. “It is vital to focus on quality rather than quantity. Closely working with farmers and exporting a good batch of produce will certainly help the industry,’ says Vare.
John is currently focusing on two initiatives undertaken to help change the perception of Indian customers – the liquid on lip programme and the country’s first whiskey visitor centre in Goa. He explains, “We are educating Indian consumers on the methods of tasting single malts such as either drinking it neat or with a very small quantity of water, which is a completely different experience from the current methods used by Indian whiskey drinkers where they prefer to top up their glass with water or soda. Our efforts have helped consumers understand the difference between good quality single malts and regular whiskies, thereby converting them to fans of single malts.” Currently, Paul John is planning to release a premium brandy for international and select domestic markets, as well as a couple of more new Paul John single malt expressions.
From simple fruit forward wines to more complex and deeper ones, Sula has become one of the pioneers of sustainability in India by reducing the impact on environment, waste generation, water consumption and carbon emissions at all operational locations.
“In 2018, half of the energy we used was generated through solar power. Hundred per cent of the waste water generated is reused at our sites. Our supply chain emissions have also reduced by using lighter bottles and biodegradable materials. In 2017, we launched our first premium wine from our Karnataka vineyards Kadu for a cause that benefits tiger conservation in India,” says Rathi.
Future brand wagon
Though the business largely depends on the quality of the product, branding and
marketing play a big role in getting recognition. For exports, GZV makes mono carton boxes which have the story of the brand on the inside indicating the superlative quality of the wine accepted in over 22 countries and listed in a couple of Michelin star restaurants. “Branding exercises do help in breaking the clutter and position the brand in the mind of the consumers,” says Rathi.
“A brand is about a good product and then the marketing has to be solid enough to proliferate the message. Without a good product, marketing will fall flat eventually,” agrees Magandeep Singh. For alcobev products, it is ultimately taste that matters.
Amrit Singh feels that the big budget brands at times fail as consumers do not relish the taste. “Make a good spirit and put it in good wood – the barrel is important because it is here that the alchemy happens. This is not an FMCG product – brands take longer to build and if quality is maintained, it lasts longer,” he concludes.