Analysis of the Wine Industry
It was founded in 1975. Its the largest NC in the wine and spirits industry and the first to enter the domestic wine business. It is a worldwide conglomerate. Period Richard owns the distilled beverage division of the former corporation Seagram, along with many other holdings. In 2005, the company acquired a British-based competitor, Allied Doomed Pl. In 2008, Period Richard announced its acquisition of Swedish-based V&S Group, which produces Absolute Vodka. It has 6 subsidiaries and owns a wide variety of beverage brands worldwide. For e. G. Chives Regal (blended Scotch whisky) ,
Havana Club (rum) , Jameson Irish Whiskey, The Glen Live (single malt Highland Scotch whisky), Malibu coconut-flavored rum etc. Indian Tryst with Wines The major wine producing regions of India are Kashmir, Punjab, Maharajah’s, Andorra Pradesh, Tamil Undue, Karakas and Ago. India has presented tremendous opportunities and challenges for international wine exporters, as the country represents a vast and largely untapped market. In addition to the present market dynamics in India, wine consumption is rising ATA rate of 20-25% per year. There are approximately 65 wineries in India.
Out of these the major 5 players are: Domestic Production values are estimated in the year 2008 and 2010 ( AL cases ) Chateau Ending Usual 300000 420000 Grover Vineyards 100000 1 50000 Ventura 25000 Vintage Brands ( Reveille ) 10000 20000 Demand for imported wine is increasing at similar levels and there is a definite market opportunity in India for a successful launch of a recognized brand like Jacobs Creek which already is the number 1 imported wine brand in India. Period Richard is in a strong position to take advantage of opportunities in this emerging market. The
Indian wine market has shown impressive annual growth rates of 20-25% for the last 6 years, and those rates are expected to continue and potentially increase in the coming years. This report details the development of a wine culture in India as an important factor in setting the foundation for long term growth. The following report gives a detailed PESTLE (POLITICAL, ECONOMIC, SOCIAL, introducing Jacobs Creek on nationwide basis in India PESTLE Analysis of India A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organization is operating.
Specifically a PESTLE analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organization. A PESTLE analysis is often used as a generic ‘orientation’ tool, finding out where an organization or product is in the context of what is happening outside that will at some point affect what is happening inside an organization. The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea.
The launch of Jacob Creek could be a breakthrough in the wine industry as so far international wines are specifically imported in India. Political There are many government controlled regulations which only favor wines manufactured in India. These factors have to be considered before launching Jacobs Creek. Indian’s federal, state and local policies have been controlling the Indian market, a factor that both encourages the growth of the Indian wine market and domestic industry while at the same time increasing the difficulty of foreign brands and their ability to penetrate into the marketplace.
But there are risks and rewards inherent with this emerging market. The import duty on bulk wine was zero from 2001 till 2003/04. In the year 2004/05 the duty for wine imported in bulk was raised to the same level as that of imported bottled wine. Simultaneously, the state excise duty on bulk wine which was RSI per liter was raised to Rests per liter, and later to 200% of CIFS value. Hence the concept of bulk wine being imported then bottled in India is no longer feasible.
The Central Government levies import duty, in addition to which each State Government further impose their own taxes on imported wine. The taxes levied vary from state to state. They are complex and keep changing on a fairly regular basis. Because of the complex tax structure and permit regulations it is very hard for a distributor in one state to sell the product to buyers in another state. Each state has different levels of taxation as well as varying labeling requirements, Types of labels, fees for registering labels, etc which need to be adhered to.
Wine exporting countries, through their High Commissions and Embassies in India, been making representations to the Indian Government with the purport of local producers to streamline the taxation structure and labeling requirements. This has been a slow process and scant progress has been made. Under the WTFO agreement and pressure from the US and EX. countries, the Government of India announced the reduction in basic duty from 150% to 100% Effective 3 July 2007. However the states increased the excise duty, which not only had an impact the pricing level in retail sales but also made it extremely tough for imported Wine to enter the market.
Maharajah’s, (state) the largest producer and consumer of wine, has been increasing axes on imported wine in order to protect the local industry. However when Jacobs ( GO ) since it has been supporting wines manufactured domestically. The following benefits will be granted 1. Direct subsidies for winery development, initial payment, 25-33% of the start-up costs for capital investments of wineries (too cap of SIS$ 160,000). 2. Capacity building initiatives and technical trainings on viticulture, oenology and winery development 3. Research Assistance and rootstock trials, variety selection, and pest/disease management research 4.
Laboratory development assistance for wine analysis Economic The major issues with new launches are the cost Pricing This is the most important aspect to be considered when Jacobs Creek will be locally manufactured. Although India is a steadily growing market, it is extremely price sensitive. The retail price for wines goes as high as 500% of the CIFS value for bottled wine. **Taxes and duties subject to change without notice** It is still higher in most 4 and 5 star hotels and market restaurants due to the higher margins they are able to obtain.
In Indian hotels and restaurants imported wine is sold upwards of Errors (A$60) per bottle, with premium wines sold at higher prices. Up to 70% of imported wines are sold through retail outlets at Errors (A$35) upwards per bottle. There is also a one off label registration fee that has to be paid in each State the wine is to be sold. The fee is calculated on the maximum retail price and varies from state to state. Recently, some states (Maharajah’s, Ago, Harlan, Karakas, Delhi) have allowed the sale of wine in supermarkets; an area where Jacobs Creek could be sold to targeted audience.
For example in Ago the label registration fee for a bottle of wine that retails for between Errors-5000 is currently Errs,OHO. Small restaurants and take away Joints do not sell wines. In 2 and 3 star hotels and restaurants, domestic wines are sold at Errors (A$30). To enter the race, Jacob Creek has to be priced competitively. Source Denominator, 2009 Social The Developing Market – Consumers According to the Exam Bank Survey it is conservatively estimated that 10 million Indians (around 1% of the population) could be termed as potential consumers of imported wines.
They would come from the upper/middle class socio-economic groups. The profile of wine drinkers has changed in the past five years. With Indian’s detailed expanding economy these consumers tend to have rising levels of disposable income, greater exposure to foreign foods through travel and a willingness to try new products. The most affluent consumer segments in India, clustered in seven cities, account for over 80% of Indian’s most affluent households (USDA, 2008). These cities are Iambi, Delhi, Achaean, Kola, Hydrated, Mohammedan and Bangor, and are 2009).
Other factors bode well for the development of a wine market in India such as high levels of education, a young population in which 50 percent of people are under the age of 25 and fluency in English. A growing awareness of health issues is also prompting some consumers to switch to wine from beverages with higher alcohol content. In urban areas, serving wine at dinner events is becoming increasingly common and consuming wine can be considered a sign of status. This is due to the fact that many Indians have traveled overseas and have been exposed to a variety of wines.
They have started regarding wine as a beverage with health benefits rather than as an alcoholic beverage. Women, too, are increasingly choosing wine as a beverage of choice as it has a certain sophistication attached to it. Wine is also being used more special promotions, product launches etc. The market is growing at a healthy 30% per annum. This works in the favor of Jacobs Creek since people are aware of the brand and the fact that it will be sold at a cheaper price, makes it more attractive.
Though India does not have a culture of wine drinking and many Indians do not consume alcoholic beverages for religious reasons, this concept is changing over the years. Access to reasonably priced Jacobs Creek will be considered by some to be the key to speeding the development of manufacturing international wines in India. Environmental The heat and humidity of Indian’s wine region dictates many of the viticulture choices that are made in the vineyards. Vines are often trained on bamboo and wire in a pergola to increase canopy cover and to get the grapes off the ground are more prone to fungal diseases.
The canopy protects the grapes against sunburn and rows are spaced wide to help with aeration between the vines. Irrigation is essential in many of Indian’s wine regions and since the sass, drip irrigation has been widely used. The tropical conditions often promote high yields which requires frequent running throughout the year. While a large portion of the Indian subcontinent is not ideal for viticulture, the large diversity of climate and geology does cover some areas with suitable terror for winemaking to thrive. Grape cultivation is one of the most remunerative farming enterprises in India.
