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SULA Wines A CASE STUDY PRESENTATION ON Presented by: B-25 Manthan Chauhan

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Its a Presentation on a case study based on Sula Wines, How it works, what are the Wine making steps, what is contract farming and who was the founder behind this great success.

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Page 1: Sula Wines Presentation

SULA Wines

A CASE STUDY PRESENTATION ON

Presented by:

B-25 Manthan Chauhan

Page 2: Sula Wines Presentation

From Stanford to Nashik:Introductory Stage! Sola wines was the brain child of Rajeev Samant

who was born and brought up in Mumbai

After 12th he went to Stanford University in California where he completed his graduation in economics and then changed his track to do a masters in industrial engineering

In 1990 Rajeev joined ORACLE within a year he was promoted as a finance manager at company HQ

In 1992 he Quit his job at ORACLE to venture out on his own

The Samant family owned 30 acres patch on the banks of the Godavari river and Rajeev wanted to do something on that land

Page 3: Sula Wines Presentation

Contd … In 1993 he started growing Alphonso mangoes on that patch but that venture did not take

off as desired

As Nasik was largest grape growing region Rajeev decided to grow table grapes and thought of venturing into wine grapes

Wine making was still in infancy in India and very little wine was being imported into India

As Rajeev was not technically equipped to handle the cultivation of grapes and making wine from it

He went back to California and located Kerry Damskey one of the renowned wine maker and convinced kerry to join him

Page 4: Sula Wines Presentation

Wine and Grapes: Introductory Stage ! The Vineyard should ideally be located in

a place with fertile soil, climate with good variation between night and day temperatures, dry weather and controlled rainfall

The first harvest is never used for making wine and crop is pruned away for the first few years to enhance the quality of entire crop

Once matured grapes are ready to harvest, though it can be done through machines but premium winemakers go for manual harvesting

Page 5: Sula Wines Presentation

Steps involved in wine makingPrimary fermentation where sugar and yeast are added at specific temperatures

The fermented mesh is pressed to separate the skin and pulp from juice

Heat and cold stabilizaion processes aimed at getting rid of sediments

Further wine is stored in oak barrels for secondary process of sedimentation

Page 6: Sula Wines Presentation

The Start

Rajeev and Kerry decided on two white wine Varieties,the Sauvignon Blanc whichIs a classic from Bordeaux region of France and Chenin Blanc which is a classic fromLoire Valley also in France

He started with Interesting Decision of Contract Farming

There was a problem with the climate as weather was dusty and dry in summer With a monsoon between June and September,, so it was decided that grapes Would be grown in winter and harvested by hand at night in March and arrangement Were made to use water from nearby Lake

Sula’s first wine was released in 2000 and was widely acclaimed as India’s finest White wines

Page 7: Sula Wines Presentation

Early Challenges The government had not allowed any new wineries to come up in Maharashtra For 15 years and it took Mr. Rajeev two years and a file about two feet thick to Persuade the government to let him set up the winery

Production is subjected to:- Indian standards Specification for wines(IS 7058), Prevention of food Adulteration Act 1954 and stock and sales licenses are needed For warehousing or distributing

No banker was willing to lend for such a risky Venture but after a lot of persuation A bank agreed only after securitizing the loan by mortgaging almost everything

From typical customer reaction-why should I pay so much for an indian wine?

Patiently, Rajeev was able to change the mindset and his Indian customer takes Pride in consuming a quality Indian Product

Page 8: Sula Wines Presentation

Sula had positioned itself as an Indigenous wine made to international standards With international techniques and know how.

A number of consumables are procured overseas and also adopted to the sub-tropical Indian conditions.

The wines, Rajeev chose to produce were well chosen for India, White wines are a Natural match for India’s spicy cuisine

Sula celebrated the harvest season of 2005 by opening a 1st wine tasting room in India in its Nashik winery atop a hill giving 180 degree views

The winery and vineyards are open to public for educational tours also there ‘Beyond’, a 23 room resort with a beautiful view of Gangapur Lake

Sula had invested a lot in designing and then promoting its logo .Its distinctive solar Logo was designed by Jaideep Mehrotra and well recognized by consumers

Brand Building

Page 9: Sula Wines Presentation

Success: Development Stage !Sula has rapidly established itself as India’s Leading Premium wine brand.

Sula wines has helped spark a wine revolution in India that has seen consumption grow at over 25% annually .

In November 2002, Wine Spectetor, which is acclaimed as the world’s leading wine magazine, did a full length feature on sula wines.

In 2003, Sula Produced India’s 1st Zinfandel Rose wine(variety of red grape) .

In 2005, Sula released Dindori Reserve Shiraz, as well as India’s 1st dessert wine, the Late Harvest Chenin Balnc.

• The company doubled its grape production from 700 tones to 1300 tones.

• In the very same year Sula reached the magical annual sales figure of 1 million bottle

Page 10: Sula Wines Presentation

By 2006, it was a time for the 3rd winery to start operations, which was having a huge capacity of million litters.

Company is having several awards in its portfolio of success.

• from the Brands of it, 2 brands Cabernet Shiraz got 2nd and Dindori Reserve shiraz got 5th positions on the list of the greatest quality wines in the wine Asia report 2007.

By 2008, the four wineries of sula have a combined capacity of over 5 million liters.

• Company has expanded its area from 30 acres to about 1200 acres.

With all these success efforts, sula vineyards is now India’s number 1 premium wine company, with sales going over 2 million bottles in 2007-08 and over all 2nd largest producer of wines in India.

Contd …

Page 11: Sula Wines Presentation

Contract Farming: Implementation Stage !Rajeev’s vision of spreading prosperity has been realized , as contract farming model has been a great success for prosperity of farmers even.

Typically contract is for 5 years.

It starts with the selection of varietals

Each farm has its own characteristics relating to its proximity to water, soil quality, etc which makes it suitable of certain kind of grape

After that the right planting material has to be used, which was usually identified and procured by Sula.

Sula also trains their farmers for harvesting methods, storage, plant care and other important aspects.

Sula was also providing credit to their farmers for procurement of inputs like probotics,equipment, fertilizers etc…

Prices offer to farmers are also competitive to the market rates.

Page 12: Sula Wines Presentation

For the different category of wine company has given different contracts to respective farmers.

Company took over the ND wines with the 10years of contract which allowed him to use its facilities to make sula wines.

In 2006, sula bought Jaulke-based company Pimpen co-op India Ltd, for 5.51 crore.

Contd …

Page 13: Sula Wines Presentation

Growth Stage ! Wine making is a capital intensive business and even Sula’s phenomenal sales have not

been enough to fund their growth.

Demand has continued to grow and to satisfy this demand Rajeev had borrowed heavily to start his venture and the idea of borrowing more was making him feel uncomfortable

GEM India Advisors picked up a 30% stake in Sula for Rs. 15 crore.

Then Rajeev went in look for other investors, Indivision picked up a 20% stake in Sula wines for Rs.50 crore.

Page 14: Sula Wines Presentation

• GIA is also divesting a part of its holding to Indivison, after which GIA will keep a 20%

stake in Sula.

• Sula has appreciated five times in valuation over last two years, so this turned out to be

a great investment for GIA.

• Sula is likely to go for an IPO in near future.• Rajeev decided to go with Indivision, since the group’s retail chain Big Bazaar offered “

excellent Synergies for distribution ”.

• Earlier only a few states like Karnataka,Goa and Chandigarh had allowed sales of wine in supermarket, but now other states like Maharashtra and Haryana have also followed suit. Delhi is very likely to open up soon.

Contd …

Page 15: Sula Wines Presentation

Its main competitors were Chateau Indage and Grover, both of which were primarily based in Maharashtra, close to Sula’s operations

There are about 45 wineries in India, the major competitive threat looming over wine makers is that posed by the entry of large liquor companies like UB, Seagrams and Diageo Seagrams released range of wines with ‘9 HILLS’ label Diageo is going to launch its products very soon UB’s Vijay Mallya tied up with Union Minister, Sharad Pawar family to launch their range

of wines

Sula wines launched ‘value’ wines priced at Rs. 240 to Rs. 400

Competition

Page 16: Sula Wines Presentation

By 2015 the wine production may increase to 40 lakh cases

To promote wine drinking as a habit Sula procures and presents an impressive array of international wines for the Indian customer by importing them from Australia, Italy ,New zealand, Chile and France

Sula’s indigenous production has been accepted abroad ,it is available in many leading wine consuming nations of the world including Italy, France and Italy

Contd …

Page 17: Sula Wines Presentation

Questions & Answers

Page 18: Sula Wines Presentation

Question 1Q. What are the advantages and disadvantages of growing through Contract Model ?Ans. Advantages

1) Contract farming provides farmers with production inputs (such as seeds and fertilizers), quality control, and advice on new production methods

2) For investors and contractors, contract farming overcomes land constraints, quality is controlled by the investor and crop risks are shared with the farmers

3) Reduced transaction costs for (i) Coordination due to agreed arrangements for regular and stable supplies (ii) Procurement owing to scale economies, higher productivity

Page 19: Sula Wines Presentation

Disadvantages

1) The term of contract is much longer typically the contract period is for over 5 years

2) Farmers make a long-term investment, for example by building a special drainage system, over a short term contract early termination of the contract by the contractor will translate into a loss

3) If the crop is lost, the risk falls on the farmer and often no compensation is provided

4) Investments in training and know-how, farmer discontent and disputes, are risks to be supported by the contractor

Page 20: Sula Wines Presentation

Question 2Q. What are the elements of Sula’s branding strategy ? Will it help them in the emerging

competitive scenario in the Indian Wine Industry ?Ans. Sula has positioned itself as an indigenous wine made to international techniques and

know how

Consumables like – Barrels from France, corks from Portugal, yeast from Australia and foil from Spain

Its distinctive solar logo is now quite well recognized by consumers throughout the country

Page 21: Sula Wines Presentation

White wines were produced which were a natural match for India’s spicy cuisine

In 2008, Sola introduced ‘value’ wines priced at Rs. 250 to Rs. 400 and these wines were doing well

Clever branding of Sula through wine tourism, Sula Fest and its wine bar, Vinoteca

It has also set up a wine import division due to the onslaught of foreign wines

Contd …

Page 22: Sula Wines Presentation

Thank you !