Definition: Wine-producing India

In India, the wine sector is attracting more and more investors. On the initiative of the Ministry of Agriculture, two experts from VINIFLHOR and ADEPTA took part in an international symposium on viticulture in India in February 2006. During this event, they visited vineyards and cellars in the state of Maharashtra and, through these visits and meetings with local operators, gained an insight into the current situation of the wine sector in India. The following comments present the main information gathered during this exploratory mission.

Overview of vineyards and wine production in India:

Wine production: a new El Dorado? The state of Maharashtra is currently developing its wine production. It is a growing market, but one that is still difficult for foreign wines to access.

India is more of a continent than a country. Bordered to the north by the Himalayan mountain range, the Indian peninsula covers 3,287,590 km² (6.5 times the size of France) and is home to just over one billion inhabitants (2005). The country is a federation of 29 states and 6 territories. Per capita GNP is $600 (2004). Agriculture employs 60% of the population and accounts for 24% of GDP. Annual growth has been around 7% in recent years, but the percentage of the population living below the poverty line remains very high, at around 30%.

Indian viticulture is an ancient practice that has recently expanded. Vines have been cultivated and used in India since ancient times, with their presence (native species) mentioned in writings dating back around 3,000 years. Cultivated vines are thought to have been introduced to northern India in the 14th century by Persian conquerors, and then migrated southwards. Accounts by travelling merchants in the 15th century mention prosperous and numerous vineyards in the region of the present-day state of Maharashtra. From the 19th century onwards, Christian missionaries helped to spread vines to regions where they had not previously been present. Although viticulture is a tradition in India, it only became a commercial activity in the early 1970s.

Between 1990 and today, it has expanded rapidly, from 25,000 hectares to 58,000 hectares today (2006), dedicated almost exclusively to the production of seedless table grapes (varieties derived from the sultana, known locally as Thompson Seedless). Production was 1.47 million tonnes in 2004.

Geographical distribution of vineyards:

Vines are grown on a significant scale in six states, spread across three climate zones:

sub-tropical region in the north (east of Delhi),

hot tropical region (central zone between 15 and 20° north latitude, which accounts for 70% of vineyards),

tropical region in the south of the country, between 10 and 15° north latitude.

Changes in vineyard area and grape production:

Over the last 15 years, vineyards have grown by around 2,000 hectares per year, with the state of Maharashtra benefiting most from this growth (70% of the area, around 40,000 hectares). India ranks 12th in the world in terms of grape production. The quantities of grapes exported vary according to sources, from 22,000 tonnes to 45,000 tonnes, which remains relatively modest.

Over the past 30 years, Indian vineyards have been developed with an almost exclusive focus on table grapes, achieving very impressive technical results in this area. India's highly intensive approach to viticulture has enabled it to hold the world record for productivity per hectare, with an average of close to 25 tonnes/hectare. Qualified researchers, supported by highly effective development associations and the talent of Indian winegrowers, have jointly contributed to these results, despite difficult natural conditions, as Professor Boubals pointed out in his reports on his visits to India in 1995 and 1996. At that time, table grapes were the most profitable crop in India, hence their rapid development.

However, this rapid expansion of vineyards and production led to technical and economic difficulties. In recent years, there has been a proliferation of pests such as thrips and scale insects, requiring increasingly intensive use of plant protection products, which has led to a significant increase in production costs. The intensive use of mineral and organic fertilisers has also caused serious soil and groundwater pollution (chloride accumulation), with physiological effects on the vines (damage caused by salts present in the soil or irrigation water). Economically, the domestic market is saturated and exports are facing difficulties due to growing competition and quality requirements that are difficult to meet. The current context is therefore less conducive to planting new table grape vineyards.

Wine production: the new El Dorado?

Wine production currently offers Indian vineyards an alternative to table grapes, which are facing the difficulties listed above. After a slow start some twenty years ago, it has enjoyed strong support from the political authorities since 2001, with regulatory and tax incentives contributing significantly to its current growth. Production figures are still modest: 38 wineries, 1,200 hectares, with only 700 hectares in production. Local production is estimated at around 50,000 hectolitres. However, the sector is growing very rapidly, at around 20% per year, and production is expected to double by 2010. Investment in wineries in 2005 for the state of Maharashtra amounted to €22 million, or around €2 million per winery. Between 10 and 12 new wineries have been created each year since 2001-2002.

Several project developers met during the mission expressed their desire to establish partnerships with French operators in the wine sector in order to create and provide technical support for new production units. It is also worth noting the existence of joint venture-type associations focused on the local bottling of imported bulk wines, which seem to offer interesting prospects. Indian wineries' production is primarily geared towards the domestic market, but exports are important for producers as a "marker" of reputation, especially when the purchasing countries are France or the United States. At present, Grover (near Bangalore, advised by oenologist Michel Rolland) is the largest exporter (25% of its production), followed by Sula (10% of its production) and Indage.

The state of Maharashtra:

Currently at the forefront of wine production. Of the 38 wineries in India, 36 are located in Maharashtra (capital Mumbai), which produces 85% of Indian wine. The largest wineries in the state are Indage (30,000 hl) and Sula (5,000 hl), while most of the newer wineries have an individual capacity of around 2,000 to 3,000 hl. Production is evenly split between reds and whites. Sparkling wine production is starting up (1,500 hl) but is developing rapidly in the few wineries that produce it. There is also a small production of rosé and sweet wines.

There are three main production areas in the state:

Nashik (currently the most dynamic and renowned),

Pune-Narayangaon (where Indage is located),

Sangli-Solapur (the easternmost).

All the wineries have their own vineyards but purchase some of their grapes (more than 50% for some) under contract. Contract farming agreements are multi-year (up to 10 years) and include a minimum price clause. Wineries tend to develop their own vineyards and should be less dependent on external supplies in the coming years. Investors in the sector almost always call on foreign consultants to help them choose and implement production tools. The most influential countries at present are France, Italy, the United States and Australia. Being advised by a foreign expert from a major wine-producing country seems to be a strong selling point for Indian wineries. Most of the bottles from these wineries bear the signature of a foreign winemaker. These investors are partly landowners who already have an agricultural production business (most often table grapes) or come from sectors other than agriculture (finance, industry, etc.), attracted by the prospects of rapid growth and good financial returns. Most have diversified economic activities and are therefore not solely dependent on wine production. As the sector is very attractive, there are many candidates for setting up vineyards and wineries, and they generally begin their journey by seeking out technically qualified foreign partners to guide them in making their investments. Financial partnerships are also popular, often taking the form of joint ventures. Some Champagne houses have been financial partners in Indian wineries since their inception.

The government, wishing to attract new investors, has launched a programme to develop areas called "Wine Parks" intended to accommodate vineyards and wineries. These areas are equipped with infrastructure and an environment that facilitates the start-up of new production units.

Origin of the supplies used to develop production:

The equipment in recent cellars comes from two main sources: Indian manufacturers (stainless steel vats, destemmers, pumps, cooling units, etc.) and imported materials. There are a few French-made machines, but the main current supplier of cellar equipment is Italy. The new cellars are equipped with state-of-the-art equipment and are perfectly designed, offering excellent production conditions (hygiene, space, etc.). The use of barrels is expected to grow rapidly, offering some opportunities for French cooperages.

In terms of vineyards, expansion is mainly achieved through grafting in situ onto a single rootstock (Dog Ridge), using grafts distributed by a few wineries. The main grape varieties currently planted are Cabernet Sauvignon, Syrah and Zinfandel (with a little Pinot Noir and Merlot) for reds, and Sauvignon Blanc, Chenin and Ugni Blanc (and to a lesser extent Chardonnay, Viognier and Riesling) for whites. It is worth noting the use of Thompson Seedless (table grape) for the production of sparkling wines (and probably some white wines).

The quality results are quite mixed. They are very respectable in well-equipped wineries with qualified technical supervision (Sula, Sankalp, Indage, Grover, etc.), acceptable but nothing more for the majority, and with major flaws in a few cases (oxidation in white wines in particular).

While 10 or 15 years ago, international experts doubted the possibility of producing quality wines under Indian conditions, the progress made in recent years has proven the opposite and revealed real quality potential, despite the very specific local growing conditions (tropical viticulture without winter dormancy).

A developing market but still difficult for foreign wines to access:

The wine market in India is still in its infancy and modest in size, but is expected to grow rapidly, although this is difficult to predict with any certainty. The current import volume is around 12,000 hl, of which 15% is sparkling wine (mainly Champagne). France supplies 43% of these imports. Imported wines are heavily taxed (over 250%), with less punitive taxation when they are imported in bulk. The overall domestic market is currently around 65,000 hl (nearly 9 million bottles), mainly in large cities (Mumbai, Delhi) and among the wealthiest segment of the population, representing 20 to 30 million potential consumers. The average retail price of a bottle is €6.50 (three times the average daily wage in India). Prices are higher for foreign wines, which are difficult to find for less than €20. Figures of 25 to 30% annual growth for this market in the coming years are regularly cited.

Wine marketing conditions – a limiting factor:

Although progress has been made in recent years, internal marketing conditions remain fairly restrictive and continue to be a major obstacle to the development of the Indian wine market and production. The constraints are technical and regulatory in nature. In addition to the very heavy taxation on imported wines mentioned above, tax and regulatory policies are not uniform across states, which means that local producers are required to use specific labelling that is only valid in the state where the wine is sold. Given that India has 29 states and 6 territories, this is a real headache for companies in the sector. Points of sale are limited to upmarket hotels and restaurants and small shops specialising in alcoholic beverages. The latter, numbering around 40,000, do not have the equipment to store and display wines in good conditions and their opening hours are very restricted. Advertising for alcoholic beverages is prohibited, so wine cannot currently benefit from promotional campaigns. It is important to note that alcoholism, which is widespread in India, remains a major concern for local authorities.