Opportunity in India trouble in EU via Ireland

Opportunity in India

Subhash Arora, writing in the Indian Wine Academy on October 28, covers imports of wine into India. India has a population of 1.25 billion (2013) and, like China, a growing middle class. According to the National Council of Applied Economic Research (NCAER) the middle class is estimated at 267 million this year, and expected to grow to about 550 million in the coming decade.

Unlike China, the market for imported wine is small. Arora has drawn a table of the largest importers. He puts total wine imports at about 400,000 nine-litre cases, with the 10 largest importers accounting for 295,100 of them.

Importer 2012-13 2013-14 2014-15 2015-16
1 Brindco 63,000 80,000 60,000 71,500
2 Pernod Ricard 35,000 50,000 65,000 65,000
3 Aspri 30,000 30,500 21,000 28,500
4 Moet Hennessy 34,000 38,000 30,000 25,000
5 Prestige 14,800 17,500 17,900 23,800
6 Berkmann India 14,200 16,000 16,000 23,800
7 Sula 12,200 15,000 16,700 22,000
8 Hema Connoisseur 12,200 15,200 12,900 18,500
9 Wine Park N/A 6000 7500 9000
10 Mohan Bros 8500 10,500 8000 8000

The Australian brands that the above importers represent are:

  • Brindco: Lindeman’s, Penfolds, Mount Pleasant, Henschke, Jim Barry, d’Arenberg, Oxford Landing, Yalumba
  • Pernod Ricard: Jacob’s Creek
  • Aspri: Yering Station, Bird in Hand
  • Moet Hennessy: None that TKR can identify
  • Prestige: De Bortoli
  • Berkmann India: Casella
  • Sula: Hardy’s
  • Hema Connoisseur: Westend, Australian Vintage
  • Wine Park: Rolf Binder
  • Mohan Bros: None that TKR can identify

Arora says Brindco took the top spot from Pernod Ricard due to a dispute that PR was involved in with the Food Safety and Standards Authority of India during which containers of wine were impounded. They were released after PR won its case in the High Court.

He also says getting information from some of the importers, including PR, was difficult, so he has had to use his own market intelligence. According to Arora, the smaller importers have increased their sales between 30 and 50 per cent in the past year. The total sales of the leading 10 importers have increased almost 16 per cent.

Arora: “Jacob’s Creek is still the biggest imported brand in India today – miles ahead of other brands. It has singlehandedly brought Australian wines to the No.1 position as imports, perhaps followed by France and Italy as the ‘brands’.

“The importers have nonetheless seen the light at the end of the tunnel and feel ‘pull’ from the consumer like never before. In order to consolidate their position or increase their share in the medium term, many importers have become aggressive and have been organising road shows and tastings for trade and consumers in order to increase the reach of their brands.”

Australian exports to India to the end of September 2016 were 1.3 million litres (144,500 nine-litre cases), which is a big chunk of the 400,000-case total for imported wine. Total value was $4.4 million and FOB price per litre was $3.47, above the average of all exports at $2.95 per litre, but below the bottle average of $5.47, and 90 per cent of exports to India were bottled wines.

Exports to India have risen steadily since 2013 but the big year was 2012, when more than 1.4 million litres went there.

The red-white split is 72-28, with shiraz and shiraz blends accounting for 61 per cent of exports. Chardonnay and chardonnay blends have a 25 per cent share.

The price points by volume are per litre:

  • $2.49 and under: 11 per cent
  • $2.50-$4.99: 81 per cent
  • $5-$7.49: 4 per cent
  • $7.50-$9.99: 2.2 per cent
  • $10 and over: 1.4 per cent

Taxation varies in India’s ‎29 states and 7 union territories, which makes trade difficult, but there is opportunity there.

US eyes on Ireland

The US Foreign Agricultural Service (FAS) released a report on October 20 dealing with the restrictive marketing measures that Ireland plans to introduce for all alcohol products, which could affect US wine exports to the EU.

It’s a familiar story for TKR readers. The Irish Government wants to reduce alcohol consumption and the health issues associated with it. The method chosen is the same as in Scotland: minimum unit pricing, plus labelling and advertising restrictions.

The requirements would apply only in Ireland. However, the FAS says: “If the bill is passed, it could set an unwanted precedent and trigger other EU member states to follow suit, potentially disrupting not only the EU’s single market, but also exports of US wine, beer, and distilled spirits to the EU.”

With this bill, the Government aims to reduce alcohol consumption in Ireland to 9.1 litres per person per year by 2020, down from 10.93 litres in 2015. Consumption is already on the decline but the Government thinks it can improve the decline via minimum unit pricing.

1-irish-drinking

In 2015 US exports of alcoholic beverages (wine, distilled spirits, and beer) to the EU were valued at US$1.5 billion. The report says:

“The EU’s Food Information to Consumers (FIC) regulation 1169/2011 exempts wine from the mandatory ingredient listing and nutrition labelling requirements. However, the FIC regulation required that by the end of 2014, the European Commission (EC) assessed the need (or not) to introduce mandatory nutrition labelling and ingredients listing for alcoholic beverages. To date, the EC has not published its assessment report, but it is expected to do so in early 2017.” 

Ireland is in the top five of alcohol-consuming member states of the EU, and according to the Minister for Health Promotion, Marcella Corcoran Kennedy, has the second-highest rate of binge drinking in the world.

The Commissioner for Health and Food Safety for the EU is Vytenis Andriukaitis. He fully supports the Irish measures and encourages other member states to follow the Irish example and use all tools available to them to tackle alcohol-related health issues.

In the argument from the other side, Spirits Europe, the EU’s wine industry federation (CEEV), and the Brewers of Europe say the Irish alcohol bill is disproportionate and undermines the EU’s single market principle as it would require labels specifically for the Irish market.

If the Americans are concerned so should we be.

The Winemakers’ Federation of Australia view:

“Wine should be enjoyed in moderation and … wine companies must encourage and promote responsible consumption. However, we strongly reject increasingly strident rhetoric from interest groups seeking to deny wine’s legitimate and accepted place in modern society.”

Binge drinking worth big bucks

A research team led by Professor Sally Casswell, a social scientist based at New Zealand’s Massey University, has arrived at the conclusion that binge drinking make money for the alcohol industry.

The International Alcohol Control study combines research on drinkers from five countries, including New Zealand. Professor Casswell says 59 per cent of all alcohol is consumed in binges of eight drinks or more for men, and six or more for women.

She concludes: “Most of the alcohol industry’s profits come from that heavy use.”

It is her opinion that the alcohol industry should not be involved in any government policies that involve alcohol policy decisions. She advocates that governments step up and restrict alcohol marketing, as well as implement better alcohol taxation and a minimum unit price.

The fear for wine is that governments will follow the tobacco plain packaging route, but as tobacco companies are working out, there are ways around any restrictive punishment imposed. The below is from an article in The Conversation (click to read full article):

“Today around 80 per cent of Australia’s leading brands’ variant names include a colour, compared to less than half before plain packaging. Tobacco companies are also using colours to mislead consumers that certain product ranges are ‘healthier’ options.

“A universal colour code has been promoted by the industry in which smokers interpret lighter colours (white, silver, gold, yellow and blue) as being less harmful, and darker colours (red and black) as more harmful. Before plain packaging colour hues were a pack design component, now the myth of healthier tobacco options is perpetuated by colour names. This is disturbing from a public health perspective as it represents industry efforts to lessen smokers’ health motivations for quitting.”

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