Mumbai: Diageo India Pvt. Ltd, the Indian subsidiary of the world’s largest drinks company Diageo, is close to finalizing an arrangement with Reliance Fresh, the retail chain of the Mukesh Ambani-led Reliance group, to set up wine boutiques at the latter’s retail supermarkets nationwide, said a person with knowledge of the development.
According to this person, Diageo’s boutiques will be set up initially in Mumbai and Pune and then extended to three other cities—Delhi, Bangalore and Chandigarh—later. Reliance Fresh, with 226 stories in 10 states, is one of the largest food and grocery chains in India.
The Diageo initiative follows its plan to tap the fast-growing wine market in India by launching global and local brands. Diageo recently launched three of its international wine brands, B&G, Blossom Hill and Piat d’Or, in India through duty-free channels. The company has also signed third-party manufacturing agreements with two local companies—Renaissance Winery Pvt. Ltd and Mountain View Wineries Pvt. Ltd in Nashik in Maharashtra—for the Indian brands.
Asif Adil, managing director of Diageo India, said he could not comment on the development as the company’s wine retail plan through supermarkets is yet to be finalized.
Manu Kapoor, a spokesperson for Reliance Fresh, said the company would decide on starting wine boutiques within its stores nationwide when it receives clarity on excise rules for retailing wines through hyper and supermarkets.
Across India, such laws vary. For example, Maharashtra has already permitted supermarkets and provisional stores to have licences to sell wine, according to Shailendra S. Pai, managing director of Vallonie Vineyards Pvt. Ltd, an Indian wine maker.
Large retailers in cities such as Mumbai and Pune have already started retailing wine. “This trend will be grown further with multinational companies tying up with large retail chains,” Pai added. No other state has allowed wine sales in retail; even states such as Punjab, Goa and Delhi plan to liberalize aws.
Diageo’s entry expands the Indian wine market with two other global drinks players, UB Group and Pernod Ricard, also planning to enter the nascent market.
The wine market, so far dominated by four small to medium local players, has not seen too many global brands because India historically represented too small a market.
Heavy import duties also contributed to global companies’ lukewarm response. The recent decision to cut import duty on liquor, is likely to help companies import bottled-abroad wines. Currently, importing foreign liquor attracts 150% duty in India.
Growth in both urban and rural incomes, changing drinking habits among the large youth population and a recent move by various state governments to liberalize regulations are luring these global giants.
Demand for wine is growing at an estimated 25-30% a year, nearly three times as fast as beer, whisky and rum. Leading players in the domestic wine market are Sula Wines Ltd, Champaigne Indage Ltd and Grover Wines Ltd.
Seagram India (P) Ltd, a Pernod Ricard Group company, currently the world’s third-largest wine and spirits conglomerate, plans an aggressive growth in the Indian wine market. Domestic liquor major United Spirits Ltd, the spirits company of the world’s second-largest drinks company, the UB Group, wants to diversify into wines by setting up a new winery in Nashik. Seagram was the first multinational firm to jump into the Indian market by launching its Nine Hill’s brands last year.
Industry analysts expect the entry of the UB Group—which holds more than 50% market share in the Indian beer and spirits mart—to be smooth as the company has the largest marketing network in the Indian drinks space. Currently, India produces about eight million bottles of wine every year. About 20% of locally produced wine is exported, and the market, estimated to be 6.5 million bottles a year, includes some imported brands.
Kapil Grower, director of Grover Vineyards, says a liberal retail trade will boost growth in the sector. “Though the entry of multinational drinks companies into this market will create tough competition, it will ultimately help grow the market so that there will emerge a systematic industry culture and quality standards,” he said. “This is a welcome trend.”