Bangalore: Sales of foreign wines are likely to be hit this fiscal year with lower demand from hotels after the Mumbai terror attack, and excise duty revisions in Maharashtra and Karnataka.
“...because of government action (due to excise duty revision), we’ve had to do without business for five months, and now because of terrorist action we will lose another five months,” said Sanjay Menon, who heads the Mumbai-based importer Sonarys Co-Brands Pvt. Ltd. “Forget growth, it’s a matter of keeping the company going.”
Sales of wines and spirits typically peak between October and February. Wine importers see the bulk of their business coming from hotels that buy at duty-free rates.
Already, the attacks in Mumbai are impacting tourism with several countries advising their citizens against travelling to India. “This year, it (sales) has just mellowed down. We are waiting and watching if at least (the) tourist and travel sentiment comes back to the country,” said Arun Kumar, director of Aspri Spirits Pvt. Ltd, a Mumbai-based company.
Last week, an official in the tourism ministry in New Delhi said on condition of anonymity that while a big drop was expected in December, there were no fresh or committed bookings for January.
In July, the Maharashtra government brought in a special duty of 200% on foreign wine, spirits and beer in place of an additional duty the customs department charged at the point of entry.
Importers say the transition took time because the rules were not clear. “Effectively, you could not sell. By the time the whole matter got clarified, it was October,” said Menon.
A similar process is currently under way in Karnataka, where the state government, in a bid to encourage local wine production, hiked duty on wines made outside its territory to Rs300 a bulk litre from Rs10 a bulk litre in October.
The duty revision requires companies to register their wine labels anew with the state-run wholesaler, Karnataka State Beverages Corp. Ltd, before they can sell. The price increase is likely to hit consumption in state capital Bangalore.
“Last year the total (sale of) imported (wine) was at about 1,600 cases a month and this year we are expecting anywhere between 1,100 and 1,300 (cases a month),” Dharti Desai, chief executive officer of Finewinesnmore, a Mumbai-based importer, had said in an interview last month. “It’s a tug-of-war between Maharashtra and Karnataka.”
Sales of imported wines in India were estimated by wine importers to be some 250,000 cases in the year ended March, which is less that 20% of India’s wine sales of 1.3 million cases a year, according to industry estimates.
The bulk of imported wine is consumed in cities such as Mumbai, New Delhi and Bangalore. A case of wine contains 9 litres in 12 bottles.
In September, a report by the Associated Chambers of Commerce and Industry of India said domestic consumption would grow at a rate of 25% a year for the next four years.
“We (industry) will be lucky if we retain last year’s volumes,” said Sonarys’ Menon, whose company sold about 24,000 cases of imported wine in the year ended March.