The Nashik hangover

The Nashik hangover

Inspired by a few success stories,several farmers in grape country Nashik turned to wine making without a second thought. A tough decade later,more than half the ventures are burdened with debt. But the wine makers are not giving up,insisting they will eventually emerge successful

Nearly 10 years ago,almost every farmer in Nashik was drunk on the idea of making wine. The inspiration was the success of Sula Vineyards in their backyard,now the top player in the country. The push was the Maharashtra Grape Processing Policy,2001,which played a major role in attracting many to this market. But it was the hitch that most farmers were not aware of.

Back then,not many realised that wine making is very hard work. Farmers jumped on to the bandwagon without understanding the intricacies of the business. This led to sub-standard products and poor marketing. As a result,of the 72 wineries in the state,40 are today facing financial problems,with an accumulated debt of R200 crore.

Most of the wine makers are small players who are either bulk suppliers or making wines in the volume segment,vying desperately for a place among the top brands like Sula Vineyards,Four Seasons by the UB Group,Grover Zampa Vineyards and Pernod Ricard.

One of these is Sahayadri Valley Wines located in Dindori,the hub of winemaking in Nashik. Waiting to make it big,the winery has some 80,000 litres in stock since 2009. Rajesh Borse,the owner,invests heavily in keeping the wine in mint condition. Electricity bills are huge,but the winery is hopeful of getting good buyers soon.


The story of Deshmukh Vineyards is somewhat better. Suresh Deshmukh is a first-generation wine entrepreneur who started with a 1.25-lakh capacity winery in 2005 and a year later expanded it by another 1 lakh litre. He sells wines in the R420-700 per bottle price range and all his wine labels are prefixed with a D (for Deshmukh) to signify his brand. “I did feel the pinch in 2008-09 along with the others,but I learnt on the job. Wine making is an expensive business. It takes R40-50 lakh a year just to keep the winery going. Electricity bills come up to R60,000 per month and tanks have to remain chilled,” he explains. Deshmukh now has a marketing team in place and says he markets his wine aggressively in Maharashtra.

Unlike others who took the plunge without bothering to learn the business,Deshmukh first visited vineyards in Germany and France to get a feel of wine making. Vying with the big brands is a tall order,but his wines are slowly finding a niche. “I started with a 35-acre vineyard for table grapes in 2001. The same year,20 of us went to Italy and visited wineries in Bordeaux and Italy. I added 50 acres for grape wine cultivation and started my winery with 1.25-lakh litre capacity,” he says. This season,his winery has produced about 70,000 litres (8,000 cases) of wine and has about 1.50 lakh litres in stock.

Deshmukh says after Sula,there is really no player in the second or third spot and it is this position that his winery is gunning for. “The going has been tough all these years,with the total taxes coming up to 30%. Maintenance (keeping the tanks chilled) alone comes to several hundred thousands every month. But the worst is over and the winery is now reaching break-even point. In the next couple of years,we should begin to make profits,” Deshmukh says. There are plans to add sparkling wines to the portfolio and the company has applied for a licence for grape spirit as well. “We are taking things slowly,one step at a time,and should soon get there,” feels Deshmukh.

Located barely a km away from the Sula Vineyards,York Winery has a feel similar to Sula. The expanse of winery with a tasting room overlooks the Gangapur Lake and has a restaurant with a small theatre-type entertainment area. A small resort is in the offing soon. York appears to emulate Sula as a role model,but owner Ravi Gurnani is quick to point out that his winery has established its own brand. And,it was not easy. “Establishing a brand takes time. It has been a tough journey. If given a second chance,probably I would have done things differently,like get a better feel of the market before jumping in. I would say we are still some way from succeeding,but our wines are recognised for quality,” he says.

Gurnani and his brother-in-law were quick in identifying the need for reasonably-priced export-quality wine,as well as setting up a spot for a quick modern getaway catering to the upwardly mobile middle class. The family bought nine acres in 2004,on which table grapes were growing. They decided to start growing wine grapes and construct a winery on the land. The wine bar and the tasting room came up in 2009 and business has been slowly picking up since. Apart from their own wines,York is also a contract manufacturer and has been making wine for the Good Earth Winery and Mandala Valley wines from Bangalore. The firm also started bottling for Turning Point label and is using the facility for the Chandon sparkling wine for Moet and Chandon. The winery has a capacity of 4 lakh litres,produces about 1.5 lakh litres (barring Chandon) and makes about six varieties. In 2012,the winery made about 15,000-17,000 cases. They export under a very smart Mantra label and have sparkling wine next on the agenda. Domestically,their wine is available in Bangalore and Maharashtra right now,but there are plans to increase presence in Goa and Delhi.

Seeing the rush of wine tourists in the region,the winery is also cashing in on wine tourism and plans to have accommodation for tourists on its premises. On a weekend,York receives around 250 visitors,with an average of 400 tourists every week. The winery is still a couple of years away from profits,but Gurnani says he does not regret the decision to enter this business.

He adds,“The sector has been doing alright,but not as well as everyone expected. There has been oversupply and not much demand and that is the reality today. The cheaper wine segment is growing fast,but the margins are wafer-thin. Wines in this category are commodotised since the buyers in this category are not very brand-conscious.” Gurnani says establishing a brand takes time and there are limited areas of opportunity for promotions. He agrees that there were many who got into the business without understanding how it works. This resulted in many sub-standard wines and the negative feedback did not help. “There are several wineries that supply in bulk or are dormant today,” he says. But he insists that many have learnt their lessons and the serious players will prevail. “This happens with any industry and it has happened with our industry as well,” he sums up.

On the threshold of success

The sentiment is echoed by Jagdish Holkar,chairman,Indian Grape Processing Board (IGPB),who concedes that around 40-odd wineries in the state are in trouble,but quickly adds that all of them are technically viable and in running condition. He says IGPB and All India Wine Producers’ Association (AIWPA) have appealed to the Maharashtra government to come to the aid of wine makers. The accumulated losses of the wineries amount to R200 crore and these units can become viable if they are permitted to restructure their loans,he feels.

Neeraj Agarwal,vice-president,Sula Vineyards,says although small players have had to approach banks for funds to keep their wineries running,banks are yet to understand the needs of the industry. “From making wines to selling them in the market is an 18-month cycle and,therefore,an industry-relevant credit facility is required. This has been explained to the Reserve Bank of India and Planning Commission. Now,the AIWPA is talking to the state government as well,” he says.

Wine maker Deshmukh adds that there is no uniform taxation when it comes to wine and every state has a different tax policy,which needs to be regulated. “Wine consumption in India is around 10 ml per capita in contrast to 5 litres per capita in Italy and France. Even if we manage to double the existing Indian consumption,there is a huge market waiting to be tapped,” he reasons.

However,it’s not just the smaller players who are struggling. Even some big names are not doing well. The oldest in India,Chowgule’s Indage,is today debt-laden and broke. Their wine business,proposed wine bars and wine-inspired hospitality business have all floundered.

Four Seasons Winery,part of Vijay Mallya’s UB Group’s United Spirits,started with the Sharad Pawar family and 2,000 grape growers as stakeholders,has not met its ambitious targets. In July 2006,the company had said they would make five million bottles or four lakh cases in five years. But the company has crossed sales of only a lakh cases of premium and semi-premium wine this year.

However,Holkar is optimistic. “The first decade of the Indian wine industry went in learning how to make wine. Indian wineries are now on the threshold of another era where the focus will be on quality. Indian wineries will soon begin to adopt quality norms defined by the International Organisation for Vine and Wine (OIV) so that Indian wine is acceptable in international markets,” he says. India has become the 45th member of the OIV,a move that is expected to boost its wine exports.

Agarwal also paints a very positive picture for the industry. “The market is going to grow. It is a matter of time. This is a transitional phase and education about wine should go a long way in creating a market,” he says. Stressing on wine tourism,he says Nashik has an ideal climate for grapes. The terrain and water availability is good here and wine tourism is a big opportunity. Sula alone has some two lakh visitors a year and has established resorts and restaurants to cater to this market.

Manoj Jagtap,coordinator,AIWPA,who also supplies wine accessories for wineries,agrees that wine tourism is the next big thing for Nashik. There are 200 wine tourists visiting Nashik every day and the number is bound to grow with interest in wine growing,he says. Jagtap says he has been advising new entrants to first establish their brands before venturing into setting up physical infrastructure. “There are big players coming into the market and the industry is already getting back on its feet,” he maintains.

Construction is already well underway near Nashik for Moët Hennessy’s first winery in India. The company has already produced its maiden 2012 vintage at a separate facility and a launch is scheduled for October this year in Mumbai. Locals say Hindustan Construction Company (HCC),which set up Lavasa (the country’s first planned hill city) in Pune,has also ventured into wine making at Charosa village in Dindori. However,the company is yet to announce this officially.


Agarwal of Sula says there are several other overseas players watching the Indian market with interest and they could soon come here. “The Indian wine market has a good potential,and there is a sizeable amount of import as well. This gap provides an opportunity that can be filled with good-quality wines produced domestically,” he says. An opportunity clearly waiting to be tapped.