By Mukul Manku, B-Tech, MBA, WSET-3 (London)
Often cited as an important emerging market for wine, India’s immense and evolving consumer population presents a number of opportunities. Although traditionally and even today, whisky and rum continue to dominate alcohol consumption in India, the increasing availability of good quality wine over the last decade, has spawned significant consumer interest in wine. Also, the modern urban Indian consumer is well travelled and conversant with international wine culture and increasingly expects good quality wine of international standard.
As per a Vinexpo study (VINEXPO 2014), wine consumption in India is expected to rise to 2.1 million cases by 2017, 73 per cent higher than 1.21 million cases in 2013, further, the share of imported wine is also likely to increase from 0.28 million cases in 2013 to 0.48 million cases in 2017 (Indian Express, 2014).
All this has not gone un-noticed by global wine producer countries which now consider India as a potential wine market with huge margins. It is in this context that this paper aims to research the promotional strategies in the fast emerging international wine market segment in India.
Global Wine Industry Overview
Global oversupply of wine has defined the Global Wine Manufacturing industry over the past five years. As a result of increased global competition, the market shares of traditional European wine producers such as Italy, France and Spain have declined, while newer manufacturers in Australia, New Zealand, Chile and the United States have experienced rising demand. Overall, industry revenue is expected to decline over the next five years, and manufacturers have increasingly consolidated their operations over the period. Although rising wine consumption in emerging markets is expected to lead to stronger international trade in the industry over the next five years, revenue is expected to continue its decline, although at a slower pace (IBIS WORLD, 2015)
Emergence of International Wine Market Segment in India
Indian wine consumption is meagre as compared to global figures. While the global per-capita consumption of wine is estimated at 4 litres per annum, the Indian figure stands at 4.6 millilitre (SHETH, Hiral et al., 2014). The low per capita consumption level however, indicates a huge potential for growth in the Indian wine market.
Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its paper in 2014 had predicted that the wine consumption to be growing at 30% annually (ASSOCHAM, 2014). The study estimated the consumption much faster than global averages.
Thus, whereas the global revenuefrom wine industry is on a decline, the wine consumption in India is almost at a stage of breaking out. India’s huge population of around 1.2 billion with a large segment of population above the legal drinking age of 25 years and within the earning age bracket, rising disposable incomes, higher global exposure and economic independence of young and women translates into a huge market segment.
In addition the urban wine consumer in India is well read and travels extensively internationally and therefore is well exposed to the international wine culture and trends. Recent trends indicate a shift in preference of the urban Indian consumer towards good quality international wines. As already brought out above, the share of imported wine is likely to increase from 0.28 million cases in 2013 to 0.48 million cases in 2017.
Further, wine consumption which is presently largely prevalent in metro cities is expected to proliferate to tier II / III cities in near future and when this happens, the wine consumer base in India would expand exponentially.
All above points towards India as a fast emerging market for imported wines and the international governments and global wine producers and business houses have taken a note of this. The outcome is expected to follow the trusted demand – supply curve of modern economics, and in order to cater for the growing demand for international wines in India, the emerging imported wine market segment is poised towards a healthy growth rate in coming years.
Challenges in Promoting Sales of International Wines in India
Although there is a huge potential for marketing international wines in India however there are also many bottle necks, as Indian wine industry is nothing less than complex. Some of major hurdles any global wine company is likely o face while trying to access Indian wine market are enumerated in following paragraphs.
Scarcity of Market Research Data. As a first step in promoting their products in India, the International wine companies rely on local consumer research data to design their marketing strategies. However, research material on wines in India is limited and very less data is available which focuses on primarily the Indian wine consumer. This often leads to a situation here the international wine companies proverbially grope in the dark or at times even get mislead by local research firms which falsely proclaim domain expertise in field of wines.
The Elusive Indian Wine Consumer
Despite India’s growing importance in the world of wine, little is known about the Indian wine consumer. As the Indian wine industry gains momentum and wine is desired by a wider spectrum of Indian consumers, there is a greater need to understand them better.
Plethora of Regulations
Given the traditionally closed nature of the Indian wine import market, its high import duties, multitude of state taxes and complex state licensing / approval process, the existing market of imported spirits, exporting wine to India can be a regulatory adventure.
Various Taxes / Duties Applicable To The Wine Trade
There are twenty eight State and seven Union Territories, some of which formulate their own policies for the taxation of wines and spirits, and others operate under policies determined by the Central government. A limited number of Indian States also maintain a ban on the sale of alcoholic drinks. States which allow the sale of alcoholic drinks, wines and spirits are generally subject to a number of different indirect taxes. The structure and denomination of these taxes varies considerably across the States, as does the resulting overall level of taxation. Common denominations of taxes include excise duty, special duty, vend fee, import fee, transport fee, assessment fee, gallonage fee, litterage fee, development fee, octroi, sales tax and VAT. All this makes marketing and distribution of wines in India a tough proposition and the problem gets compounded for the foreign companies due to their inherent lack of in depth knowledge about the ground realities.
Restriction of Wine Advertisement
No advertisement, direct or surrogate, is permitted for promoting consumption of wine in India. Only, in order to enable consumers to make an informed choice and to promote responsible drinking, communication at the point of sale/consumption could be permitted. This again puts a restrain on marketing efforts of global wine companies which traditionally use extensive advertisements as an integral part of their marketing strategy.
Several States require safety holograms, approved by the Excise Commissioners to be printed on every bottle of liquor / wine. Safety holograms certify that duties/fees due on the particular bottle have been paid and the liquor is of prescribed standard. This is an additional burden which the foreign wine companies have to face as it entails extra effort and finances.
Constitution of India Promotes Prohibition
Article 47 of the Constitution of India decrees that State shall endeavour to bring about prohibition of intoxicating drinks and drugs which are injurious to health. This in addition to religious sentiment which again prohibits wine consumption leads to an environment which may not be considered very enthusiastic towards promoting wine culture.
Sate Control over Distribution and Sales
India is a federal nation like the United States, and the central government has empowered the state governments to generate revenue and control sales of many products which include wines. Therefore each state formulates its own excise policy which is declared annually between March and April. There are 29 States and nine Union Territories in India, which makes going difficult for global wine houses to sell their wines in the country.
A recent Food Safety and Standards Authority of India (FSSAI) notification require manufacturers to produce labels in English or Hindi that list all ingredients. Shipments have been rejected for saying “Prodotto di Italia” instead of “Product of Italy”. Earlier, anyone could import wines from overseas under an Open General Licence. However, now all importers have to comply with fresh labelling requirements laid down by FSSAI. A product also requires testing in ‘approved labs’.
Imported wines must be stored at a government approved bonded warehouse. The wines can be released from the bonded warehouse for distribution only after the importer / distributer meets all the mandatory requirements of the state where they plan to market the product.
Custom duty on import of wines into India is as high as 150% and this itself is one of biggest challenges posed to the global wine companies. This combines with various other taxes and levies make their end product so expensive that it becomes un affordable to the common Indian wine consumer.
Complex Marketing Regulations
Marketing of alcoholic beverages including wines is largely a state subject in India. The state governments heavily depend on revenues from the liquor / alcohol / wine industry. Each of 29 states and 9 union territories has its own excise policy on manufacturing and marketing of alcoholic beverages that included warehousing, distribution, retailing, labelling and disclosure requirements. Further, the state policy is reviewed annually and the state excise department monitors and implements the excise regulations. All this presents a complex marketing environment especially ot foreign wine companies which may not be used to such complicated regulations.
Constraints on Marketing
Certain additional constraints on marketing of wines in India are best explained with the example the capital city of New Delhi. In the state of Delhi there are four parastatal (govt supported but independent) retailers who dominate the alcohol sales sector. These four entities are DSIDC, DTTDC, Delhi Consumer Society and the DS Civil Supplies Corporation. Up till 2004, alcohol was only sold in these parastatal marts. Decentralization post 2004, has led to allowance to private retailers also. In Delhi there are approx 400 retail stores for alcohol products. 75% of these are govt owned while remaining 25% are privately owned. DSIDC has 86 stores that sell IMFL (Indian Made Foreign Liquor) and only 13 of these sell IFL (Imported Foreign Liquor). Thus it is evident that any foreign company trying to sell its product say in Delhi is not only required to be conversant with these marketing structure but it would also need expertise to manage it sales effectively in such an environment.
Review of Literature: Strategies to Promote International Wine in India”
Since India joined the WTO, import tariffs in the country have been remarkably reduced, thus enabling foreign exporters tap into India’s vast consumer market and this has had a positive effect on wine industry too. Although the custom duty on import of international wines into India is still extremely high (approx 150%) however, the global wine producing nations are actively engaging the Indian government to ease these duties and taxes. Indian wine community also stands to gain from availability of imported wines both in terms of access to good quality wines for consumers and trade benefits to business houses. However, to promote international wines in the traditionally closed and a complex wine market in India will require a concerted effort – both by global wine producers and the Indian wine industry stakeholders. Government of India will also have to play a facilitating role. Some of promotional strategies towards this end are enumerated in succeeding paragraphs.
Pre-requisite to any strategy to promote international wines is an enabling ecosystem for all the stakeholders. Government will have to play a major role in creation and sustaining of such an enabling ecosystem which would facilitate imports of these wines in a manner which meets the aspirations of all stakeholders.
As brought out above, government support in creating a sustainable environment to facilitate import of international wines is a dire necessity. Reduction in stamp duty, exemption from sales tax, reduction/waiver in registration charges, a uniform and reasonable GST etc are some measure by which govt at centre can facilitate.
National Wine Board
Proposed formation of National Wine Board which would be arranged as a Public Private Partnership needs to be finalized. This will support the growth initiatives for the Indian Wine Industry as a whole and facilitate import of quality wines from abroad too.
Government has to make provisions of faster time bound approvals to ensure that the global wine producers are able to market their products in Indian markets with ease in a faster timeframe which would reduce the end costs.
Single Window Clearance
Governments at centre and state need to implement single-window clearances system which would lead to timely and fast approvals. Contemporary concept of self certification need to be introduced mandatorily towards this aim. This would reduce both time and costs and contribute in a major way to make imported wines more readily available and affordable to the Indian consumer.
Membership of the International Organization on Vine and Wine (OIV)
India has accepted membership of the International Organization on Vine and Wine and this would entail adopting wine-related international rules, regulations and laws. The legislation is expected to help bring laws regarding manufacture of wine, quality, brand and marketing. Govt and the wine industry stakeholder need to avail benefit from the expertise held with IOV and use this to promote imported wines into Indian market.
Customer Relationship Marketing (CRM)
Marketing of International wines in India would calls for an innovative CRM. Innovative CRM techniques to reach out to prospective buyers as for example through social media newspaper etc would go a long way in promoting these wines.
At present there are a multitude of taxes and levies charged on import, distribution and sale of imported wines in India. TO add to such woes each state has a varied tax structure for wines. Govt needs to simplify this. A uniform GST at a reasonable rate could go a long way to facilitate this.
Focussing on Newly Emerging Economic Centres
Wine consumption being urban phenomenon has been largely been restricted to metropolitan cities of Delhi, Chennai, Mumbai and Kolkata. However, during recent years, the country has witnessed meteoric rise of cities like Gurgaon, Hyderabad, Bangalore, Pune etc as economic hubs. The near metro nature of such cities sustains wine culture. International wine houses and merchants need to exploit these nascent wine markets to enhance their presence and sales.
Tapping the Retail Marketing
Emergence of retail wine outlets in swanky malls is attracting more buyers and even making it accessible to women consumers. Retail sales of wine also reflect its growing popularity. According to industry estimates, in the organized liquor retail segment, wine now accounts for 30% of all sales as compared to 22% to 25% just a year ago. In a short span of time, wine is likely to emerge as the single largest segment in liquor retailing. Foreign wine companies should take a note of the retial potential and formulate their marketing effort towards this.
Targeting Women Wine Consumer Segment
Indian Women are increasingly becoming financially independent with increased participation in social events and more Indian women are now getting inclined towards wine. A lot of young women are into wine, something which was not seen a few years ago. International wine producers need to target this fast growing market segment and design their portfolios and marketing strategies to meet their needs. Some strategies may include launch of very low alcohol content wines, introduction of new and premium brands, focussing on light and crisp White / Rose wines which may appeal to Indian women consumer palates. etc.
Wine Promotion Events By Embassies / High Commissions
Each country have their Embassies or High Commissions in India. These invariable have trade cell which promotes the trade activity of their respective nations with India. Foreign wine houses need to coordinate with the embassy / High commission iof their country in India to facilitate promotion of their brands and wines. Often wine promotional events by these establishments are attended by the active wine community in the city including wine consumers, writers, bloggers and people from the wine industry.
Wine Tourism and Festivals
Wine tourism and wine festivals are becoming increasingly popular and are proving to be prominent drivers for growth.(INDIAN BRAND EQUITY FOUNDATION, 2015). For example, the Bangalore International Wine Festival, an annual affair, attracts as many as 35 wineries including international wineries. Global wine producers need to exploit these events to introduce and promote their wines to Indian consumers.
Building Awareness about Wine Portfolio
Wine clubs, wine magazines and wine training institutes are playing a stellar role in spreading awareness about wines. Each metro city in the country has a dedicated wine club which promotes wine information. International wine houses trying to break into Indian market need to strategically partner with these agencies and utilize their expertise to spread awareness about their wines portfolio.
The urban average Indian wine consumer is well travelled internationally and is exposed to global wine culture. He is excited and curious about the wine he drinks. Global wine houses have realized this and they often organize wine promotion events with their wine ambassadors educating the consumers about their wine – wine regions, winery, wine production etc. Education has to be a part of promotional strategy to market an international wine in India.
Bilateral Free Trade Agreement (FTA)
The FTA talks are between European Union (which is also a major producer of quality wines) are going on since quite some time now. As part of FTA, amongst other things, EU has been demands on elimination of India’s duties on wines and spirits. It is pertinent ot reiterate that custom duty on import of wines into India are as high as 150%. EU needs to pursue this with persistence and in case it is able to achieve a breakthrough and succeeds in its efforts to reduce the import duties, this would give a major shot in the arm to the marketing of global wines into Indian markets.
Marketing Mix: back to Marketing Basics
At the concluding part the authors of this paper recommend adoption of the traditional The four Ps that are involved in the marketing of are good or service, and they include product, price, place and promotion. Often referred to as the marketing mix, the four Ps are constrained by internal and external factors in the overall business environment, and they interact significantly with one another. In contest of this paper these are briefly touched upon in succeeding paragraphs.
Product As brought out earlier too, the urban Indian wine consumer is well travelled internationally and is aware about wine culture and trends. A good quality product is what he desires as a pre requisite.
Price Whatever be the talk about origin, quality etc about the wine, the bottom line is that Indian consumer is most conscious about its price. Price it well along with innovative schemes, discounts etc and you stand a good chance of wooing the prospective consumers.
Place Place, which implies the location where the wine would be marketed, assumes a significant importance in Indian context. Wine consumption is still largely an urban phenomenon in India with maximum sales in Metro cities. In recent years however, the newly emerging economic centres like Gurgaon, Secunderabad etc also hold a big potential for sale of imported wines. Thus the global producer needs to chose the place for marketing his wines judiciously.
Promotion This is one of most crucial yet difficult aspect in wine industry in India. Advertising of alcoholic beverages is banned in India as per the Cable Television Network Amendment Bill which came into effect on 8 September 2000. Private channels often permit alcohol companies to advertise using surrogate means like selling the brand name for water or music but that is an unethical practice and nor recommended here. Some states do allow advertising through billboards, signboards etc but this also is subject to many restrictions. Therefore, the import wine companies need to plan their promotion campaigns judiciously keeping in view such restrictions. Promotion through wine events, festivals, local wine clubs etc may be incorporated in promotional strategy but again, as pointed out earlier this need to adhere to the regulation.
Wine consumption in India is growing exponentially, some analysts put the growth figure as high as 25% to 30% each year. The country’s economic growth over the past years, growing disposal incomes, increasing foreign travel and exposure to global lifestyles, younger demographics, etc are some of major catalysts for such fast growth in consumption and related demand for wines. This has not gone un-noticed by the global wine producing nations and international wine houses are now actively trying to break into the Indian wine market.
However, to say the Indian Wine market operates with a lot of complexities. Varied taxes and levies at Centre and State level, a ban on advertisement, unique storage and labelling requirements are some of factors which make marketing of imported wines in India as a tough proposition. However, the market per se and the ensuing opportunity is huge.
With this as a backdrop the paper has attempted to highlight certain issues and promotional strategies to market global wines in Indian markets. A concerted effort by all stakeholders including wine producing countries, Indian government at centre and states and the wine community as a whole, is certain to produce a viable marketing environment.
The end consumer – the elusive Indian wine consumer certainly stands to benefit from these endeavours.
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