Puneet,

I recently started exploring possibilities of starting my own winery in India.  I was thinking either in Nasik or near there.  I basically want to start a small winery next to existing wineries such as Sula... who knows, I may be able to help create a community of wineries in one area where people could then visit and tour the different sites like they do in Napa.  Are there already areas like this in India, and if so, which ones?  I am from Kutch and have relatives in Mumbai.  I am looking for a spot between these two places.  

 I would appreciate some basic info on what start up costs might be and what are possibly yearly expenses.  I want to start with two grapes and grow from there.  I think the wine business will take off in India and I want to start now before bigger players enter the market and take over.  

 Regards,

Rahul

Dear Rahul, Many thanks for your question. Your vigour and enthusiasm is admirable. The task you have set you self is a big challenge. Step carefully in this arena. If you have capital to Invest tread carefull, or you will become a very poor man very quickly. If you are looking to raise Capital, you will need to show some sort of Track Record.

Regarding costs, Establishing a Winery is a very asset intensive excercise and Paybacks are Lengthy. There are two sides to the business that you will need to consider

1. Sourcing Grapes / bulk wine / juice

2. Making Wine from Grapes / bulk wine / juice including bottling

3. Channels to Market

For a feasible commercial winery, at the very list you will need to consider crushing 200 Tonnes per Year of Grapes, and if targeting the Rs 300 MarketSegment, these volumes will need to rise rapidly. Your wish is to cluster, and with your experience this is probably more advisable than pioneering into new areas. In the early days you are more likely to purchase grapes than grow them, so Around Nashik becomes a more sensible option.

These numbers are extremely ball park, but they begin to point you in the right direction. 

If you were to start at a couple of hundred tonnes, purchase grapes, outsource the crush at harvest time, ferment in your own tanks (manufactured in India) and outsource bottling you would be looking at approx Rs 10 - 25 Million for a small operation. You could get away with Rs 5-10 million but this would be a very amateur operation and you would be performing very little value add, and there would be very little for marketing your new product.

Once you wanted to plant your own grapes at these volumes you can double this figure. If you don't possess the expertise to Make Viticultural Analyses this will have to be a bought in expense. Expect to start cultivating grapes for wine making in theirsecond season of fruitful growth, and be aware that fungal diseases such as powdery mildew are a serious issue in and around Mahrashtra.

What are your thoughts at this point?

Kind Regards

Puneet

 Thanks Puneet for these initial points.  I am still in the researching phase if and how I am going to do this.  With only about 50 wineries in India, and 3, 650 alone in the US, if the soil and climate are right,. I cannot see why India's wine buisnees will not boom.  In terms of India's wine market, foreigners are comming selling their wines to retailers/restaurants/hotels because demand is going up.  Wine from India so far does not have a good rep, but the players are so young and just haven't gotten it perfect yet.  

I would invest about rs20,000,000. which is about $500K for start up costs and land aquiring.  How much does I acre generally cost

I am assuming 3 tonnes of grapes per acre and if I own 60-70 acres, I will be able to produce this.  It would take a few years before i saw any monetary returns I am sure.  I do like your suggestion of buying grapes first to immediately start production.  Once my grapes grow and are harvested, I will have the barrelling and bottling process in full motion.  So now I am researching basic costs and potential revenue. 

If 60-70 acres yields 200 tonnes and that yields about 200,000 bottles.  That seems like a lot of wine.  With bottles selling at $5, that is $1M in revenue a year.   If my start up costs, land, operations, winery all cost me $400K, bottling for $200K, distribution for 300K (all over three year period), then in rough terms I am looking at a profitable business granted my wine tastes good.  

 I still have to do a comprehensive study to get more realistic numbers,and line items, but in general it looks pretty lucrative.   If you have a simple business model done, please let me know.  I can also draft up a very simple one and maybe you can tell me if it looks reasonable

 Depending on the quality of wine, I would distribute locally, to retailers, hotels, etc.  Potentially export 10% as demand for Indian wine increases globally.  

 This is what I am thinking now.  Please advise any more input and I will draft a simple business plan.  Any help in terms of basic costs for specifics, like barrells, machinery, any of that sort would be appreciated.  

Thanks again,

Rahul 

Puneet,

 I have come up with a very general b-plan for this operation.  This plan does not include outsourcing grapes just yet for intial product or blends for future.  

My costs are in dollars using 40 ruppees to the dollar.  My concern is to get the timeline right, better estimates in major expenses, and proper line items.  

 The dollar amounts I have included are quite high with a capital injection of initially about $1M.  Raising this money is not such an issue as getting the right plan and understanding the challenges.  I want to streamline my costs and add a 20% contingency.  

I know that money coming in would start after year three or so, I understand that my money will be tied up in this operation for a few years before I see some revenue.  

 I have pasted model below, but can send you excel doc to your email which is easier to read if you like.  

 Thanks for your interest and sincere help. 

Rahul 

Dear Rahul,

1. Regarding Land Costs - Say 5-10 Lakhs per Bigha, and land for winery on a zone with infrastructure for electricity/water etc up to 15 Laks per Bigha

2. 3 Tonnes per acre would be about right

3. Shifting 200,000 bottles per year is a tough call without decent channels to market and a strong launch and continued marketing push. To put it in perspective thats over 1,000 cases per month - so at least 100-200 multi case orders per month from day 1 if you are going direct to End Customers.

4. I can put you in touch with equipment suppliers if you do not wish to go direct to equipment manufacturuers yourself [I would recommend this as they have already covered the difficult import considerations]. There are two main established suppliers for equipment in India and I know both of them.

Kind Regards

Puneet

Hi Rahul,

Your numbers are impressive and you are walking in the right direction from what I can see. Some of the numbers are a little out, and there are some items that have not been considered and need to be included. I have been closely involved with the Initial setting up of one winery in Karnataka, which is still in its very early phases and use this experience to answer your questions.

One common issue that I notice with many smaller Indian Wineries establishing themselves is that the Product in discussion is almost of secondary importance. Most people establishing wineries are Business Men/Women first, and in reading their Business plans, the products could be sugar/wheat anything really. The assumption is hire a viticultaralist and winemaker, and world class bottles of wine will pop out of the other end. This is a sure fire way of spending hunderds of thousands of dollars to make things that taste more like vinegar (and currently there are as many bad wines in India as good - As well as tasting many very well constructed wines, I have tasted wines that are like paint stripper, vinegar and one Rose wine which tasted like Sugary firewater. One could argue that These wines are having a greater impact on the perception of Indian wines than the great wines being produced in the country.

My point is this - You need to ask the following questions first when setting up your model.

1. Who are my customers?

2. What do they want?

3. How can I make wine that meets their needs?

4. Choose your Styles, Varieties, Price Points according to these needs

4. Following from this will be your site selection and micro climate requirements and Equipment and Chemical Needs.

For example you have placed the need for Barrels in your business plan...Why? - Do you know why? Have you worked through the above points and reached the conclusion that you need this amount of barrels? Have you looked at the alternatives - Staves - Non Oak? Do the customers actually want Oak???

The same applies to many other parts of the model. The model represents a physical market need and should be constructed according to that need - Not according to what you are able to push onto the market.

Let me know yout thoughts at this stage and we can see if we can begin to mould your model according to market needs

Kind Regards

Puneet

 Puneet,

 Sorry for the late reply, I had trouble accessing the site for a few days.  

 Yes, I understand what you are saying completly.  While I am coming at this from the business angle, I do understand that winemaking is not easy and not good winemaking is not well established in India.  Even Sula wines are ok, not spectacular.  My Father and Grandfather are farmers and experiment with organic farming and drip water irrigation in Kutch.  We do have a bit of a green thumb in the family, but of course winemaking is a whole new ball game.  

 I am looking for something longterm and full aware that it will take time and energy to get it right.  I will answer your questions:

1) I want my customers to be upper class wine drinkers who usually are accustomed to drinking great expensive foreign wines.  I would sell to the growing number of wine tasting restaurants that are popping up in the major cities.  Basically,  I would want my wine to be a boutique wine.  I fine secret wine from a small but well run winery.  The estate would also consist of a wine tasting experience and accomodations for a peaceful and luxurious time on  the estate.  I would get a couple celebs to endorse the wine to help with buzz.  This is the ideal.  

If the wine is not of such high caliber in terms of taste, then I would target local retail liquour stores in 5+ major cities.  Market it still as a high end Indian wine at an affordable price.  Perhaps market to the growing middle class.  

2) Maybe you can help me with this answer!  I don't know what Indians want, but there seems to be a growing demand for wine.  People who never drank alcohol before are starting with wine.  I want to play on the idea that wine is not about boozing on hard liqour or beer, but rather an acceptable regal experience that should be enjoyed in moderation.  I think Indians want to create a feeling of success and prestige and nothing better to set this tone but a fine bottle of Indian wine... a sign that India is on its way up.   

3) Making a tasteful wine with a robust flavor from and Indian winery at an affordable price would be what I perceive they want.  This means that this wine would have to be accessible to them, and introduced to them in a wine tasting bar that they then buy bottles and bring home with them.  Pushing product out to retail liquour stores may not be the right outlet.  Basically, I would need to sell wine bars on my wine so they would have them and promote them in their bars.    

4) Varieties... this is yet to be determined based on climate and soil and then match with suitable grapes.  I would love a pinot grigio and a petite syrah, and even one sparkling wine... but this would have to be determined through lots of consultation and testing.  

5)  Yes this is the biggest thing I need to research, investigate, and determine.  site selection based on climate, soil, and proximity to other wineries. 

6) I want to offer a robust wine that is difficult to make and not easily reproduced.  Therefore storing and aging wine in oak barrels seems to add an element of complexity and therefore prestige.  I have not looked at the alternatives, but will be doing this of course.   

 Last thought, while my start up capital is roughly $1M US dollars, I could also start off on an even smaller scale to get learn the process and produce good wine before I expand.  Perhaps buy land in an area where I could always buy more as the business grows.  

Ideally, I want to market to upper class Indians... If they get a good local boutique wine, I believe they will pay for it while also purchasing their regular French, Italian, Chilean, foreign wines etc.   This is only the right market if the wine is really that good.  Otherwise I am better of marketing to the growing Indian middle class in the large cities. 

Over the next month, my research will deepen, and I will have a better idea of the process, costs, and hopefully market... I understand that I cannot create the market, I have to cater to  what it is people are looking for.  

Regards,

Rahul 

Hi Rahul,

One phrase that struck me was 'I don't know what Indians want' - More work needs to be done here at the start of any project - Focus groups, questionnaires, feedback - from here we can begin to derive the ideal wines for the market in question

If you are aiming at the Upper class market, then your statement of 'Robust, Affordable' wines may need revision - from my experience running a business in the fine wine trade, quality, brand and rarity have as much a deciding influence to this market as price

Regarding varieties, pinot grigio and petite syrah may be your favourite, but they are the world's favourite by a long straw with very little Glabal Market Penetration. If you choose varieties like these be very careful and precise with your marketing strategy. You should know preceisely where your customers are.

Do let me know how your research develops and what interesting facts you may find which you are able to share - I look forward to hearing

Puneet

Puneet,

 Thank you for generously answering my questions.  I do have much research to do and you have given me good insight on the initial areas I need to focus on.  

 I am not a wine expert by any means, but I do like the country life and agricultural business.  Knowing the potential of this growing industry in India, I am very attracted to this business.  

 I don't know what Indians want and it is hard to achieve this data from the US.  If you have any sources and trend analysis regarding the Indian market, please share.  Any resources or contacts who may be good to talk to about the current and range of market would be great. 

 Also, while I am a business man, my goal would be to make good wine and not to push out poor quality wine.  So I have a lot of work to do on grape growing and the winemaking process specific to India.  Please let me know if you have any more insight on locations and types of grapes or even any other contacts that I could speak with regarding this.  

 Many people have told me to start big, but I think I want to start with what I am comfortable with.  I may downscale my operations and go for making two boutique wines.  Buy less land in area where I can buy more if I expand.  Here in the US, people make their own wine all the time.  Running a small operation first may educate me on the process and challenges and potential rewards with very little risk.   

 Regards,

Rahul 

Rahul,

Here is my 2 cents..

 Locations: You should have the same location where other wineries are located near by based on the several resource/experts availability of all the resources to build and run the vinyards. At this point Nashik or around 200 KM from Nashik and pune are the best locations.  I would say, not all the places are best near nashik. It is better to hire viticulturist/wine maker and go for soil and analisys also find out the best grapes suited for that location. Also how others are doing at the same place.  Generally Cab, Shiraz, Chenin, Sauvignon Blanc are produced by all the vineards near Nashik.

You should start the vineards and it will take 3 years to bring the first batch of good wines in to the markt. At the same time you should also start import some bulk wines US, bottle it and market it to fullfill the first 3 years of activity. It will generate some money to while building the vineards.

You can start your vineards what ever the land available (even 10 acres) and based on the growth you can outsource/rent vineards from other farmers. Several of them are doing that. I would say some of the wineries only supplying to big companies like Chatea Indage, Sual, Diageo or UB currently. Or even just register as a winery you can oursource every thing to some other winery to produce bottles for you based on your requirements. Like mountain view vineards producing everything for Diageo. Diageo is just marketing only.