Unrestricted Import of wine and other alcohols has been allowed by the Indian government for over 5 years now. The number of importers has increased from about 35 a couple of years ago to nearly 80 , soon to touch 100 if one considers many new arrivals and the old ones who had stopped importing wine due to stringent laws, heavy duties and a restricted market which is now expanding at over 30% a year.

Distribution Restrictions

The procedure to import remains tightly controlled. The bonded warehouses-public and private, are the initial barriers involving considerable financial investment and bank guarantees.

Excise bonded warehouses and a license is required in each state where the brands have to be registered individually for each label after paying hefty annual  license fee. In Delhi alone, the license to sell wine, beer and liquor costs Rs.5.0 lakhs (about € 8,000) annually for the fiscal year which is from April-March. Even if the license is taken for a month the same amount has to be shelled out, before a single bottle can be sold. The re is no separate, cheaper license for wine only.

The two restrictive measures set a sufficient barrier to the new entrants who are generally forced to use the services of existing bonders. The commission payable for these two services alone varies between 10-20% of the cost of wine. This affects the viability of the small importer who is obliged to rent these services.

Yet, the new importers are making a place for themselves for the future expansion. At the break even of 1200-1500 cases annual sales, there are few exits and the number of importers is steadily going up, though there is  not enough market for all the labels to thrive.

Leaders in Distribution

Primarily due to the two factors, the new importers have not been able to make a significant dent so far and the old order remains. Brindco, the biggest importer, took the pole position and maintained its leadership; it  increased its sales by more than 70% during the last two years, at about 51,000 cases.

Sonarys leapfrogged into the second spot as its own facilities of bonded warehouse  helped it  reach the number of 24,000 cases annually. Moet Hennessy has been promoting aggressively its Champagne and other wines. With the branding created for Moet  & Chandon it has pushed the volumes to 21,000 cases  and pipped Global Tax Free Traders to reach the third spot. Global has been stagnating at around 13,000 cases.

Assumptions

The figures and position of the importer in the hierarchy has been determined by conducting a survey among about 40 of the known importers. A major difficulty in assessing the sales in volumes (value is not a feasible criterion,  as no official figures are available and there are lots of re-exports. In this nascent stage  no importer-big or small  is willing to reveal his revenues).

The import figures based on volume are also not easy to come by. Reliability has been made on the figures disclosed by the importer. Each importer was also asked to estimate the volume of the competitors based on their market reach, brand popularity, market penetration etc. Wherever feasible, different staff members and partners were quizzed at different times.

Another tricky factor to consider was the unsold stocks of imports during the year. Although the left-over  stocks from previous year would have been sold in the current year too, a factoring was done based on the market conditions  to allow for excess left-over stocks this year especially due to the slow down in sales due to Maharashtra imposing heavy excise duties at 200% resulting in practically no sales during July-Nov 2007.

The bulk wine imports have not been included in these statistics. A majority of such wines are bottles as Indian wine and sold as such. Recently Champagne Indage has started importing wine and this will reflect a significant share in the next year's statistics.

Some Interesting Statistics

The total sales of imported wines through legal channels was about 210-220,000 cases in 2007-08 including duty free sales of around 7000 cases nationally. The survey showed higher sales than the generally presumed sales of 180,000-210,000 cases.

The top 3 importers accounted for 96,000 cases which accounted for 44 % sales as compared to 60% about two years ago. The top 5 importers were able to sell a total of 121,500 cases, a share of only about 55 %. It took Top 6 importers to control 60% of the market which the top 3 managed two years ago.

The Top 10 were able to sell 159,000 cases, a 72% share. A further estimation of the next 30 (details not a part of the article) showed a sale of 29,000 cases (13%).

Distribution Pattern

The sales are controlled by each state individually and that will continue due to the constitutional powers. More and more states are allowing the sales through easier channels like supermarkets and stores that sell only wine and beer are given cheaper licenses. Maharashtra, Karnataka, Haryana, Goa and Punjab have a liberal retail policy paving for a continuous growth through these channels. Delhi is still restrictive due to political expediency. Such policies are likely to change the market trends with Retail sector expanding in a big way during the current year

Each state requires wholesalers to have their own excise license. The importer/ distributors must sell their products through these wholesale licensees. Bigger importers like Brindco and Sonarys act as wholesalers in some states while others rely on local wholesalers.

Haryana allows retail sales through a license issued annually through draw of lots. But the retailer must buy through wholesalers who have to get a separate license. The Distributors have to sell through these wholesalers, adding to the cost of distribution.

During the coming years, there will be more sales through the retail channels. With big giants like UK's Berkmann Cellars, UB, and Diageo entering the market and the Indian wine producers like Champagne Indage and Sula stepping up their import activities, the Distribution hierarchy is expected to undergo an overhaul and the next couple of years will be interesting to watch.