indian wine industry overview
TRANSCRIPT
Strictly private and confidential
Overview of Indian wine industry
Strictly private and confidential
November 2008
Section
1 Indian Wine Industry 1
2 Taittinger SA 6
Contents
Section 2
Section 1
Indian Wine Industry
1
Indian Wine Industry Section 2
Indian Wine Industry
Alcohol market segmentation
Spirits88%
Wine1%
Beers, Cidersand F&B's
11%
Source: Euromonitor
Wine, though small in market
size as compared to other
categories in the alcoholic
beverage industry, has
attracted a great deal of the
country’s attention in recent
years. A CAGR of around
30% over the last ten years,
wine has attracted high
participation from local
entrepreneurs, foreign liquor
companies and private equity
firms. This has caused
increased local interest in the
various growth drivers,
industry structure and
strategic decisions shaping
the Indian wine industry
Industry overview Sales of Wine by Sub – sector (2007)
The Alcohol drinks market is segmented into beers, ciders & FABs, spirits and wines. The wine Industry is further divided into Still light grape wine, Sparkling wine, Fortified wine & vermouth and Non-grape wine
The Indian alcoholic drinks market is currently valued at $23.5bn in 2007 with a growth of 13.2% from 2003, wine representing 0.8% of this total
The Indian wine market currently stands at 8.2mm liters in terms of volume, with a CAGR of 30.4% from 2002 and is expected to grow to 32.8mm liters by 2012. This represents a growth of 32.1% since 2007
The number of wineries in India has grown from 30 in 2004 to around 62 in 2008 with the state of Maharashtra accounting for almost 97% of total wine production with 58 wineries out of the total 62
The country’s 3 main wineries include Sula vineyards, Chateau Indage vineyards and Grover vineyards
The three players together contribute around 90% of the market with Indage Group holding 44%, the majority share in the Indian wine market
The domestic brands are more affordable in comparison to the new world wines from Australia and Chile
The key brands in the market include Chantilli, Riviera, Vino, Vin Ballet, Ivy and Sula
Sub Sector Total Value ($ mm)Total Volume
(Liters mm)
Still light grape wine 128.7 7.2
Still Red Wine 60.7 3.6
Still White Wine 68.0 3.6
Still Rose Wine _ _
Sparkling wine 31.2 0.5
Champagne 23.3 0.1
Other sparking wine 7.9 0.3
Fortified wine & vermouth 3.7 0.5
Port / Oporto 3.7 0.5
Sherry _ _
Vermouth _ _
Non–grape wine _ _
Total 163.6 8.2
Wine Sales 2002 – 2007 Recent Trends
$41$51
$68
$93
$123
$164
0
45
90
135
180
2002 2003 2004 2005 2006 2007
Sal
es v
alue
($
in m
illio
ns)
Increasing awareness and availability of domestic brands has enabled wine sales to grow at double-digit rates. Wine is perceived to be more sophisticated and healthier than spirits
Affordable wine introduced in small packages and increased distribution of wine was the main reasons for the higher growth rates in 2007
Still light grape wine recorded the highest growth in terms of value and volume from $95.4mm and 5.4mm liters in 2006 to $128.7mm and 7.2mm liters in 2007 respectively. This represents almost 34.9% growth in value and 33.4% in volume
India’s wine imports in 2006 amounted to $9.9mm as against $1.16mm of exports. This is positively impacted by the ruling of the WTO in favor of an appeal made by the US and EU against the high customs duties imposed by India on wines and spirits
Wine consumption in India is still in its infancy with manufacturers are focusing on providing wine at economical prices. Within Still Red wine, Rs300-500 ($6-$11) is the most popular price band, in which almost 59% of the wines sold in India are priced
In India, the cost for setting up a wine plant is quite low, between Rs10–15mm ($0.2–$0.3mm). As a result many entrepreneurs, Indian and foreign, are entering the market
Wine drinking is becoming more acceptable in restaurants. The on-trade channels have played the most important role in the increasing awareness and sales of wine in India
Source: Euromonitor, press
Competitive Landscape
Key players wineindustry market shares
Others29%
SamantSoma18%
GroverVineyards
9%
IndageChampagne
44%
Source: Euromonitor
Indian wine companies need
to focus on the quality of the
wine to compete in the current
market scenario.
Further strategies for Indian
wine companies would be
based on combining of
alternative distribution
channels, brand building,
bottling of imported bulk wine
and strategic alliances for
selling imported wines.
Foreign wine companies
targeting the Indian wine
market, strategic alliances for
import and distribution could
be the suitable mode of entry
2
Indian Wine Industry Section 2
Key Players Brand Shares of Still Light Grape Wine (2003-2006)
Established in 1982
Located in Narayangaon, Pune
32 labels spread in 2500 hectors
Production capacity : 15 million liters
Market share: 44%
Key Brands: Marquise de pompadour, Ivy, Joie,
Chantilli, Figueira, Riviera, Vino Sparkling, Vin
Ballet, Hammer
Established in 1997
Located on the outskirts of Nashik
Sales: Over 2 mm bottles in 2007-08
Market share: 18%
Key Brands: Dindori Reserve Shiraz, Sula Red
Zinfandel, Sula Cabernet Shiraz , Satori Merlot,
Madera Red, Sula Sauvignon Blanc, Sula
Chenin Blanc, Madera White, Viognier, Dia
White, Sula Blush Zinfandel
Established in 1988
Located in Nandi Hills, Bangalore
Wine Production: 10 lakh cases
Over 200 acres under plantation
Market share: 9%
Key Brands: La Réserve, Sauvignon Blanc,
Cabernet Shiraz, Shiraz Rose, Viognier and
Clairette
% TotalVolume Brand Company 2003 2004 2005 2006
Sula Vineyards Samant Soma Wines Ltd 10.9 13.7 13.9 15.7
Chantilli Champagne Indage Ltd 4.9 6.4 10.4 11.8
Riviera Champagne Indage Ltd 9.5 12.3 13.3 11.5
Grover Vineyards Grover Vineyards Ltd 12.4 11.4 10.5 10.4
Vino Champagne Indage Ltd – – 4.9 6.5
Vin Ballet Champagne Indage Ltd 4.0 5.1 5.9 5.8
Ivy Champagne Indage Ltd 1.6 2.1 2.0 1.8
Others 56.6 48.9 39.1 36.6
Total 100.0 100.0 100.0 100.0
Brand Share of Champagne (2003-2006)
% Totalvolume Brand Company 2003 2004 2005 2006
Moet & Chandon
(LMVH Moet
Hennessy Louis
Vuitton)
Moet Hennessy
India Ltd
54.7 55.7 56.0 56.0
Dom Perignon
(LMVH Moet
Hennessy Louis
Vuitton)
Moet Hennessy
India Ltd
43.8 41.5 41.5 42.0
Others 1.5 2.8 2.5 2.0
Total 100.0 100.0 100.0 100.0
Source: Euromonitor, press
3
Indian Wine Industry Section 2
SWOT ANALYSIS
4
Indian Wine Industry Section 2
STRENGTHS WEAKNESSES
Favorable demographic conditions coupled with rapid urbanization and improved customer attitude and lifestyle is increasing wine consumption
The government in India is protective towards the wine industry, as it is labour intensive, adds a lot of value to the primary agricultural product, and is an attractive source for taxes and duties
In India, the cost for setting up a wine plant is quiet low, between Rs.10–15mm ($0.2–$0.3mm) with a capacity of 100,000 liters
Organized retailing of wine has now been introduced in the state of Maharashtra. Wines can now be sold in supermarkets and grocery stores with a license
Good Climate for growing wine grapes
Five-star hotels, pubs and bar-cum-restaurants are the primary wine selling outlets in the country as 63% of the sales are through these channels. The government has allowed hotels to purchase imported goods duty free, up to a limit of 5 to10% of their foreign exchange earnings
Production of wine in India is characterized by small holdings which is a major constraint in economies of scale for processing
In wine distribution, logistics is the most difficult challenge in India, especially for temperature for storing sensitive products like wine
Around 80% of wine consumption is confined to major cities like Mumbai (39%), Delhi (23%), Bangalore and Goa. The non urban areas still account for only 20% of the market
Quality wines are priced relatively high
Land ceiling regulation imposed by the government restricts the companies to purchase agricultural land more than 10 hectares, limits wine companies in expansion
Packaging costs account for another 35% of the production cost which are approx. 40% higher than international benchmarks
OPPORTUNITIES THREATS
India’s economy grew by an average of 6.6% annually between 2000 and 2006 and is expected to grow by 6% to 7% over the next 10 years. There is a large potential consumer segment that could take to wine drinking
There is an emergence of lounge bars and gourmet restaurants coupled with the new concept of wine bars
Wine tourism and wine tasting is becoming popular in the state of Maharashtra, which contributes 97% of total wine production in India
Organized retailing of wine has now been introduced in the state of Maharashtra Wines can now be sold in supermarkets and grocery stores with a license
Indian government through its policies, encouraging the growth of wine industry Key policies include, – License to set up wine bars and permission of wine sale in beer bars– Licensing procedure for setting up wine units simplified– 100% exemption from excise duty for 10 years for the state of
Maharashtra– Foreign direct investment (FDI) with no approval from government /
RBI– Provision of infrastructure facilities such as wine parks and wine
institutes
Global warming is expected to cause problems for coastal wine grape growers, and is expected to make any sort of viticulture impossible
The wine industry is low capital intensive which has made easier for the new players to enter the market. This is expected to increase competition between the domestic and foreign players
Wine substitutes like beer and spirits are expected to negatively impact the wine market due to better availability and affordability
The wine industry in India has always faced the threat of prohibition to drinking alcohol. Despite the increase in awareness, many states still face the prohibition imposed by the government
The unit prices of wine are expected to increase in future due to increase in input prices of raw materials and increasing overheads like transportation and storage costs
5
Indian Wine Industry Section 2
Forecast Sales of Wine (2007-2012) Forecast Sales of Wine by Sub-sector (2012)
$164$220
$299
$398
$519
$662
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012
Sal
es V
alue
($
in m
illio
ns)
Still light grape wine Sparkling wine
Fortified wine and vermouth Non grape wine
CAGR: 32.2%
$164$220
$299
$398
$519
$662
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012
Sal
es V
alue
($
in m
illio
ns)
Still light grape wine Sparkling wine
Fortified wine and vermouth Non grape wine
CAGR: 32.2%
Sub Sector
Total Value($ mm)
Total Volume
(Liters mm)CAGR
(2007-2012)Still light grape wine 571.6 30.5 34.7
Still Red Wine 271.9 15.4 35.0
Still White Wine 299.7 15.1 34.5
Still Rose Wine _ _ _
Sparkling wine 81.2 1.1 21.1
Champagne 61.5 0.3 21.4
Other sparking wine 19.7 0.8 20.0
Fortified wine & vermouth 9.1 1.2 19.6
Port / Oporto 9.1 1.2 19.6
Sherry _ _ _
Vermouth _ _ _
Non–grape wine _ _ _
Total 661.9 32.8 32.2
Commentary
Wine consumption in India is expected to triple within the next three years. Lifestyles in urban areas and some semi-urban pockets are developing. By 2011, Asia will account for 4.8% of world wine consumption.
The Indian wine market is expected to reach $661.9mm in value and 32.8mm liters in terms of volume by 2012, posting a growth of 32.2% and 32.1% respectively over 2007
The sales of wine through on-trade channels are expected to be marginally faster than off-trade sales. On-trade volume sales are expected to be driven by the establishment of exclusive wine shops while off-trade sales will be driven by non-specialist stores like supermarkets
Organic wine is unlikely to take a significant place in the market, given the total absence of organic wine till 2007. Moreover, no major domestic vineyards are involved in organic farming and the high prices of organic wine further discourages its demand
With the entry of new players such as Seagram and United Spirits in 2007, and a number of other players such as Diageo said to be keen to enter the market, competition is expected to intensify
Indian companies like Champagne Indage and United Spirits through acquisition of foreign companies are trying to set up production facilities in countries like Australia, Argentina, France, Italy and South Africa, where domestic consumption is strong
Support measures from the government in policy and infrastructure provision will be an incentive for more investments particularly from liquor players who have established distribution networks
Currently the wine market is expanding with new entrants and increasing awareness among consumers. The highly concentrated industry dynamics are set to change with the entry of several spirits majors and foreign entities. More fragmentation is expected in the industry with several competitive groupings comprising many players entering the market
The positioning of Indian wine as a high-quality product is a critical factor in making wine more popular in India. However, mass marketing could lead to a situation where the brand image of Indian wines is lowered to just an alcohol substitute, whereas imported wines served in elite restaurants and homes have a higher value perception
Source: Euromonitor, Rabobank research dated February 2008, press
Outlook
The Indian wine industry is
currently on an upswing.
Production and consumption
are expected to increase by
25% to 30% over the next 5
years. Being in the early stages
of market growth, the industry
enjoys protection from the state
as it stands low in cost
competitiveness when
compared with the global
benchmarks
The industry is expected to
evolve further with intensifying
competition, and more
investments in wineries,
bottling facilities, their
distribution, promotions and
advertising. Such investments
will result in the expansion
phase in the lifecycle of the
industry, leaving the emerging
phase
6
Section 2
Section 2
Taittinger SA
7
Taittinger SA Section 2
Company overview Key management and board members
Headquarters: Reims, France
Founded: 1734
Description: Founded by Jacques Fourneaux, the company produces and distributes champagne and wines in Europe and the US
The company was acquired by Starwood Capital Group, a real estate investment company, for $3.2bn on January 3, 2006. Thereafter, on June 1, 2006, French bank Credit Agricole du Nord Est bought the Taittinger champagne house and associated vineyards for $849.6mm
Taittinger group operates through 290 subsidiaries involved in hotels and restaurants, light industry and luxury and real estate activities. Hotels & Restaurants accounted for 71% of 2004 revenues; Luxury Goods 16%; Champagne & Wines 12% and Finance & Real Estate 1%. The company specializes in Bordeaux wines and its champagne is distributed in around 120 countries across the world
Taittinger’s key brands include Vins De Bordeaux, Vins Du Monde, Niepoort Port, Defender Scotch Whisky, Glengoyne, Calvados, Brandies and Vodka Krakus & Kalinka
Name Position Experience/Affiliation
Pierre Taittinger Director General
Executive
Domaine Carneros,
Samazeuilh
Gérald Frère Director Groupe Bruxelles lambert
SA, Chrome Corporation
Gerard Mestrallet Director Paris EUROPLACE, Suez
SA, Compagnie de Suez
Investors:
Caisse Régionale de Crédit Agricole du Nord Est
Competitors Financial Information ($mn)
Company Country Sales (mm) Assets (mm)
Moet & Chandon France $1,777 $2,316
Boizel Chanoine France 492 1,265
Veuve Clicquot France 446 902
Vranken-Pommery France 393 1,419
Yantai Changyu China 359 445
Laurent-Perrier France 353 960
Champagne Vranken France 300 628
Schlumberger AG Austria 285 174
Maison Burtin France 221 565
2003 2004 LTM (June 2005)
Revenue $1,020.2 $1,108.4 $1,123.5
Growth% 8.6% 10.2%
EBITDA 216.1 230.1 178.4
Margin% 21.2% 20.8% 15.9%
EBIT 110.0 124.0 77.2
Margin% 10.8% 11.2% 6.9%
Net Income 31.6 51.4 36.4
Margin% 3.1% 4.6% 3.2%
EPS $9.10 $14.81 $10.48
Source: Company website, Capital IQ, press
Taittinger SA
8