GLOBAL LEADERSHIP CENTRE INTERNATIONAL BUSINESS(Batch 2011-13) ANALYSIS OF SUPPLY CHAIN OF INDIAN AND EUROPEAN WINE MARKET Rajat Chaturvedi (33) Rohan Vaidya (62) Ritesh Naik (41) Akash Jain (49) Prateek Garg (47) Poonam (17) Swati Kumari (13) Faculty Guide: Ankush Guha 1 EXECUTIVE SUMMARY The prospects of growth for wine in India are quite high. About 600 million Indian’s are currently below the legal drinking age and 100 million will come of that age over the next 3 to 4 years. So, the consumption of alcoholic beverages such as wine is expected to increase. In spite of India’s high import tariffs on wine, this country was one of the world’s fastest growing wine markets. However, states like Maharashtra, Karnataka and Himachal Pradesh have taken steps to encourage wine industry and given preferential treatments by liberalizing their excise regime and reducing excise duties. Eighty percent consumption of wine in India is confined to major cities such as Mumbai (39%), Delhi (23%), Bangalore (9%) and the Goa (9%). The Supply chain of the wine industry in India is fairly linear. Winemakers are the key to the supply chain and they record good profits. The key to success in the wine business is branding so, a substantial chunk of dollars are spent in selling and distribution. It is also critical to note that, promotion of alcoholic beverages is prohibited in India. So, winemakers use strategies such as surrogate marketing and creating economies of scale. We analyzed the current situation of Indian wine industry trends, supply chain models, also we simultaneously reviewed European wine industry, the difference between Indian and European logistics, recommended how can Indian wine industry compete with counterparts.. One of the most important challenge in organized retail in India is faced by poor supply chain and logistics management. The infrastructure in India in terms of road, rail, and air links are not sufficient. The wineries location must be taken into account while thinking about the wine supply chain. Wine is made of grapes and grapes can be grown in certain locations. Some of the most important factors that determine a wines location are soil, climate irrigation and geography. Various models are used in Europe for Wine logistics. According to one model Winemakers or wine co-ops grow grapes and are responsible for vinification and blending (and sometimes for bottling). Otherwise bottling, labeling and packaging operations are carried out by Logistics service providers. To devise a system in which vineyards are customer-driven and to carve out a crucial role for themselves, wine co-ops will have to merge so that they can develop the technical and human resources that are required to fulfill a partner’s role. their European 2 Deregulation has led to the growth of wide transport networks. Deregulation of shipments, optimal route Routing and plan scheduling, and the development of national services. The membership of eastern European countries in the European Union has resulted in a shift in the balance among local, regional and long-distance transports. Outsourcing of logistics activities is widespread in Europe and is gaining popularity. Many companies hire specialized logistics service providers to do the job. This trend has resulted in industrial companies outsourcing parts of the standard logistics services like shipping, transhipping and storage. Added to this development are increasing numbers of high-quality logistics services and contract logistics. 3 TABLE OF CONTENTS CONTENTS INTRODUCTION RESEARCH METHODOLOGY INDIA’S OVERVIEW ROLE OF SUPPLY CHAIN IN ORGANIZED RETAIL INFRASTRUCTURE AND PORT OF ENTRY IN INDIA CHALLENGES IN INDIA LOGISTICS IN SUPPLY-CHAIN OF WINE INDUSTRY FACTORS INFLUENCING WINE SUPPLY CHAIN SWOT ANALYSIS OF INDIAN WINE INDUSTRY EUROPEAN WINE INDUSTRY LOGISTICS MODELS IN EUROPE COLD STORAGE IN EUROPE EUROPEAN INFRASTRUCTURE & PORTS OF ENTRY RECOMMENDATIONS PAGE NO 1 2 3 4 5 6 7 11 20 22 24 30 32 36 4 . Organization. at the same time there are a number of opportunities. and the area under cultivation to be about 80. WHY WINE? India in the last decade has become the second largest producer of fruits and vegetables in the world next only to china. But. in some industries completion is shifting from competition between the organizations to competition between the supply-chain of that particular organization. consumed in the U. In global world targeting local market is not enough for long term company survival. especially with higher spending power that brings about a shift in 5 . Today. ERP system are probably the most important enabler for current changes and trend in supply chain management. Of the total grapes produced in the country only around 1. irrespective of variety. It has about 53 per cent of arable land (land available for cultivation of crops as compared to measly average of about 11 per cent for the rest of the world). Information technologies like Internet.000 ml. The annual grape production in the country is currently estimated to be 1.000 hectares. at a lower price. increased product variety and lower profit margin due to competition and commoditization of product and services.INTRODUCTION Consumer are constantly demanding better product.8 million metric tons. of wine. India currently produces about 190 million tons of fruits and vegetables. along with better overall services and customer support. In taking a “supply chainwide” into their business strategies some organization are focusing on maximizing the profit of the supply chain as a whole as a way to maximize their own profit.5% is processed into wine. Approximately 85% of the total production. is struggling with shorter product life cycle. would be consumed fresh.S. Good supply chain management is becoming for resource optimization. Barcode system. as compared to 9. Per capita consumption in India is only 9 ml. on the other hand. overall experience enhancement and to achieve competitive strategic advantage in order to obtain sustainable growth rate.A. Belgium is known in the world for its RED WINE and France is known for its CHAMPAGNE. Europe is the biggest market of wine manufacturing in the world. what is the future for industry. their supply chain models.consumption pattern. OPPORTUNITIES. THREAT) Analysis. RESEARCH METHODOLOGY The methodology we are using to analyze industries of India and Europe and develop a comparative study between them is SWOT (STRENGTH. 6 . in which areas its required to improve itself and what are the barriers for the industry. After collecting the data of both the areas we will make a comparative study between them looking at the SWOT analysis of both India and Europe and their after recommendation will be made to Indian industries as in what they can do in order to wider their market share. The Indian wine market is growing rapidly at 25-30% per annum for the last five years. their problem areas and opportunities at the same time analyze European wine industries. the success factors behind them. The wine industry is in its budding stage in the country and so far has not been able to establish any structure for the integrated development of the wine industry on its own. also rapid urbanization and growth in the retail sector are expected to sustain the domestic demand for wine. WEEKNESS. With the help of SWOT we can analyze each and every aspects of that industry like what is their present situation. their supply chain models and then recommend them how they can reduce cost and make their global presence by exploiting the resources available and implementing new technologies. GOALS FOR PROJECT The goals for the project is to study and analyze the market trend and the current situation of Indian wine industry. So considering in mind both the factors we choose to study wine industries of both the countries. companies in the Indian Made Foreign Liquor (IMFL) space like Diageo. and the rest of India accounting for the remaining 20% of the market. While major producers own lands and thus grow their own grapes. Wines made in India are priced between Rs 450-700 and imported ones could cost upwards of Rs 2500. domestic wine consumption too has correspondingly increased. wineries offer technical help and agricultural expertise to farmers. As more and more Indians travel overseas for business and pleasure. Wine distribution is largely dictated by the sales and excise policy of each state. The states are not only allowed autonomy in formulating policy for the sale of wine and alcohol. THE PLAYERS Champagne Indage has been the pioneer in making French style wine in India. followed then by Delhi with 23%. 7 . Here. All of the 28 states and seven union territories operate as individual power centers that formulate their policy independently. they also have fiscal powers to impose additional excise duties. "Wine is now always there at places where it hadn't been even offered before. Many major players often use imported vines for growing the perfect fruit. Bangalore and Goa 9% respectively. like parties and weddings.INDIA’S OVERVIEW CURRENT SITUATION IN INDIA Drinking wine as a lifestyle choice is catching up very fast. Grover Vineyards and Sula Vineyards too have made smart strides in a short time span. United Breweries and Seagram’s too have ventured into making wine. contract farming for wine grapes is extensively practised. adopt new lifestyle patterns and yearn for the good things in life. Mumbai is the leading wine city in terms of volume consumption with 39% of total wine consumed. City dwellers still remain the major guzzlers. Recently. prices notwithstanding. Industry experts predict India to emerge as one of the largest wine producers in the world by 2058. rail. With the expansion of retail. 8 . In India. vehicles transferring products back and forth. One of the most important challenge in organized retail in India is faced by poor supply chain and logistics management. or the quickness in responding to ever changing tastes of the customer. customer satisfaction is paramount. and air links are not sufficient. service. The infrastructure in India in terms of road. It is the supply chain that ensures to the customer in all the various offerings that a company decide for its customers. In the organized retail market in India the role of supply chain is very important for the Indian customer demands at affordable prices a variety of product mix.ROLE OF SUPPLY CHAIN IN INDIAN ORGANIZED RETAIL. where competition is intense and stakes are high. with demand for endto-end logistics solutions far outstripping supply. In retail. Efficient logistics management not only prevents needless movement of goods. Logistics and Supply Chain enables an organized retailer to move or store products more effectively. With the end consumer becoming more demanding and time conscious. as they combine the best systems and expertise to manage a ready flow of goods and services. The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain. be it cost. the margins in the retail sector can be improved by 3% 5% by just improving the supply chain and logistics management. but also frees up storage space for more productive use. Therefore. which can be provided by professionals. the logistics market for organized retail is pegged at $50 million and is growing at 16%. supply chain will take on an increasingly important role. Retail analysts say on-time order replenishments will become even more critical once the WalMart/ Bharti combine begins operations .the American retailer works almost entirely on crossdocking and is likely to demand higher service levels. The importance can be understood by the fact that the logistics management cost component in India is as high as 7% -10% against the global average of 4% 5% of the total retail price. Therefore warehousing plays a major role as an aspect of supply chain operations. including potential levies for delays in shipment. the need for just-in-time services is increasing. New Mangalore. Mumbai. UPS is investing in new UPS Stores in New Delhi. Indian exporters import these products for their own use rather than for resale. Jawaharlal Nehru Port Trust.S. In both cases. Foreign firms are now allowed to establish joint ventures with local manufacturers. While India's rail network exceeds 63.REFRIGERATION AND AIR CONDITIONING EQUIPMENT IN INDIA The Government of India (GOI) considered air conditioning and refrigeration products as luxury items about 10 years ago and assigned high duty rates to the products. Imports of air conditioners and refrigerators continue in small quantities. Sri Lanka ports are serving India now for large container ships. much of this network is questionable as to reliability for modern transportation needs. SERVICE PROVIDERS FOR TRANSPORT LOGISTICS The three major international carriers have made large investments in India and play a vital role. Vishakhapatram. the import of refrigerators was restricted. 9 . Plans are for building new facilities in New Mangalore and Krishnaptnam. rails. PORTS OF ENTRY India's major ports are Haldia. India's roads consist of 2. Indian industry looks forward to technology collaborations with other countries including the U. Mumbai. ROAD SYSTEM AND TRANSPORTATION India's infrastructure of roads. the best two-thirds are broad-gauge and old. Pune and Bangalore. ports and airports is the most vulnerable part of its supplychain presence.000 kilometers. Until recently.4 million kilometers of paved roads and more than a million kilometers of unpaved roadway. Information transfer across the cold chain supply is crucial for ensuring the viability of the very process including logistics. Himachal Pradesh. 10 . With almost 30 per cent of the total fruit and vegetables produced in India perishing due to lack of post-harvest handling facilities in the country. Rajasthan. West Bengal. the supply chain is determined by excise policies in individual states. All supply to institutions and retailers is totally controlled by the prevalent excise policies in the individual states. Andhra Pradesh. Chandigarh. are some of the incentives provided. which amounts to almost $10-15 billion. the economic justification for investments in this sector exists. Delhi. reduction in peak import duties on equipment imported for storage facilities and taxes on them. which is equivalent to US$ 475 million. and Uttarakhand Tamil Nadu. overcoming exceptions.CHALLENGES IN INDIA In the case of liquor and wine companies. and the current cold storage infrastructure and capacity are grossly inadequate. The Indian cold chains market is largely untapped and lined by several players in the unorganized sector which clues for immense investment and development opportunities. Supply to retailers is not allowed in Tamil Nadu. The distribution systems are different in various states like Maharashtra.375 million. and addressing painpoints across the supply chain. Grants to establish new storage facilities to the tune of 25 per cent of capital expenditure. Karnataka. The flow of information is essential for correcting processes. Transport permits to supply wines and liquor are valid for a limited time period only COLD CHAINS IN INDIA The cold chain industry is still at a nascent stage in India with few players operating in the space. Information from sensor-equipped RFID planted in the goods transported (bins or units included) during the entire cold-chain process needs to be assimilated real-time. Goa. Improvement and development of the cold chain infrastructure is crucial for the Indian economy. 21. The total cold chain market in India is worth Rs. LOGISTICS IN SUPPLY-CHAIN OF WINE INDUSTRY In every sector supply chain is main concern. The wine supply chain has always been complex and fragmented and with more distant suppliers and ever-more demanding customers. It is determined that the wine supply chain could be broken down into the following key areas: Grape Grower Wine Producer Bulk Distributor Transit Cellar Filler / Packer Finished Goods Distributor Retail 11 . as it is the thing which decides the whole price and the distribution of the product. In today’s business scenario where distribution is complex and fragmented and it’s really difficult for the manufactures to source its products effectively. this brings challenges to the manufacturers to implement effective supply chain system. 12 . Good supply chain also results in quality of vine. and type of product and from where it’s coming. but also from the distinctive qualities of soil. topography. Vinery should get grapes at prescribed time so that it not affects the manufacturing cost. As the idle machine also increased the cost. dispatch. Which also results in reduces costs. it’s very important that grapes should reach to the producer at the right time. Supply chain here should be specific in nature as it should inform about the supplier. He also have to maintain its inventory as he is a bulk distributor. It is essential that the grower keep records for each plot or block under his control. processing. as he has to supply product to its different location. It’s save grapes from rotten. as well as record keeping of appropriate information about what is received and what is dispatched. This includes details about the location. he has to maintain its inventory as a lot. WINE PRODUCER After growing.GRAPE GROWER This is the initial stage of the vine producing. So there is a chance of wastage if there is not a proper supply. It should be more specific to the product initials. As we also cannot keep grapes for the long time as they are perishable in nature so it’s necessary to have a better supply chain from the field to the vinery/vine producer. 13 . Disciplined record keeping is a key success factor. The supply chain should consist all information like this. As many as 4000 varieties of Vitis Vinefera have been developed and are used in the production of wines. As it delivers raw material for procuring at time to time. BULK DISTRIBUTOR The bulk distributor is responsible for receipt. and climate. Diversity and quality of wine results not only from the type of grape used. storage. he should maintain its records separately. batch/lot. sampling and analysis of bulk wine. Bulk distributor is one who should have proper supply chain basics. type and manufacturer. DISTRIBUTOR The finished goods come to the distributor for retailers. storage. storage. 14 . FILLERS/PACKER Fillers are the filling unit in vinery. He also has to maintain proper supply to its retailers according to date and time. He also has to keep all the information about the sourced product. filling. processing. The transit cellar can be part of the filler/packer company (geographically separate or not) or can be outsourced. Here also they keep records of the different lot and batch and supply accordingly to its different distributors. and from there it’s directly sells to its end customers. sampling. The finished goods distributor may also re-pack and re-label the products as per specific customer requirements. It is responsible for the receipt. Retails send the pallets and cartoons from the distributor to the retail stores. The finished goods distributor receives pallets and cartons from the filler/packer. sampling and analysis of bulk wine. as well as record keeping of appropriate information about what is received and what is dispatched. which are recorded. RETAIL Here the retailers received the pallets and cartoons from the distributors and sells it to its end customer. and dispatch of finished goods. What differentiates the bulk distributor from the transit cellar is that the former has a commercial role (he sends invoices) whereas the latter has only a role of transit with no commercial and no invoicing goal. From this point finished goods direct source to its distribution area which are located in different areas. dispatch.TRANSIT CELLAR The transit cellar is responsible for the receipt. Distributor sends it to the retailers in different locations. These trade items and logistic units are identified with lot numbers. They separate vines from their transit cellar and distribution part. He is also responsible for the inventory and re-labeling for the product. sales fell in the year 2009-2010 for the first time since 2001. Wine exporters blame the slump on the 26/11 Mumbai terror attacks two years ago that led to a dip in tourism in India. Required know-hows and machinery are available locally. 25 litres in the US. At a per capita level.FACTORS INFLUENCING WINE SUPPLY. this country was one of the world’s fastest growing wine markets. Until the year 2008-2009. the wine consumption in India was only about 13.000. the consumption was about 9 millilitres annually. growth was about 25% to 30% every year. In the same year. Control over selling. the Wine Industry of India is at its introduction stage of its life cycle and a small winery can be started in India with an investment of about Rs 2200. with over 50% of its 15 . However. 20 litres in Australia and 40 millilitres in China. It is critical to note that. distribution. The size of the Indian wine market is small when compared to global consumption and annual per capita consumption of 70 litres in France and Italy. Despite the recent setback. Yes. The prospects of growth for wine in India are quite high. In some states an imported wine may cost almost 4 to 5 times of its price.5 million 9-litre cases at a value of Rs 4100 million.000 in a country where the wine industry is growing at a rate of 25% to 30%.6 billion cases. So. About 600 million Indian’s are currently below the legal drinking age and 100 million will come of that age over the next 3 to 4 years. For the year 2008-2009. the level of tax burden for both local winemakers and importers of wine is high. the world wine consumption was 2. In spite of India’s high import tariffs on wine. consumption of wine in India is projected to increase to 2 million cases by 2011 and 4 million cases by 2015.3 million liters or 1. the consumption of alcoholic beverages such as wine is expected to increase. Each of India’s 28 states and 7 union territories has its own rules and regulations for sale of alcohol.CHAIN Imagine starting a winery for just Rs 2200. and pricing of wine belongs to state governments. Wine makers are the key to the supply chain and they record good profits. Eighty per cent consumption of wine in India is confined to major cities such as Mumbai (39%). However. Delhi (23%). Bangalore (9%) and the Goa (9%). A wine bottle that leaves France at three euros is sold in India at approximately 15 euros.revenue shared between various levels of government. The Supply chain of the wine industry in India is fairly linear. Karnataka and Himachal Pradesh have taken steps to encourage wine industry and given preferential treatments by liberalizing their excise regime and reducing excise duties. It is also critical to note 16 . The key to success in the wine business is branding so. states like Maharashtra. a substantial chunk of amounts are spent in selling and distribution. it is that it is almost impossible to talk about “the” wine supply chain. production processes and commercial processes. winemakers use strategies such as surrogate marketing and creating economies of scale. GRAPE PROCUREMENT Wine still remains mainly an agricultural product Even though many new technologies have been introduce in the twentieth century (and some before) that enables wineries to better control the wine production process and develop better am more stable wines from lower quality supplies. From a supply chain perspective. Success in the wine business in India is conceivable if you do the hard yards of government regulations and have the right marketing mix. Producing and selling a bottle of wine that will sell for a retail price of Rs 10. Product breath seems to have an important impact on the grape procurement process. So. as they also involve different products. promotion of alcoholic beverages is prohibited in India. the quality of grapes still plays a major role in the final quality of the product. overall capital requirements.000 a bottle is different than doing the same for the bottle of wine that will sell at Rs 100. different markets and different logistics. The relationship between wineries and grape growers has never been an easy one. PRODUCT BREADTH If one conclusion needs to be drawn from this thesis. we also have to make a difference between producing for the packaged (i.that. bottled) or bulk markets. Grape grower” that by nature are 'forced to make long term investments in their vineyards and whose production depends highly on natural factors as climate. target market.e. seem to be very sensitive about their relation with wineries. History is full with cases on forward integration from the side of 17 .000. It is not difficult to understand why grape growers are most important strategic suppliers for wineries. transportation. This happens not only because wineries are not only dealing with a premium product but also because less technology and chemicals are being used throughout the production process and therefore the quality of grapes has a deeper Influence on the quality of wine produced. Obviously. Large wineries rely mostly or "third-Party providers to manage capacity. although capacity management issues remain crucial. the more they rely on self owned vineyards. only small "boutique wineries” that sell wines in upper price level described above seem to rely solely on their own production of grapes. wineries need to better control the grape growing process. for premium products. like Robert Mondovi. or inside the winery? As one can then imagine. establishing long-term contracts as well as performing one-time transactions They buy grapes. must (already crushed grapes). to blend 18 . These companies usually purchase grapes from a variety of providers. or generic ( wine from wine brokers that brokers might even import from other countries. how can the grape grower possibly predict how much of its production he will be able to sell to the Winery? Were a given lot of grapes mistreated during harvesting. production of large volume of table wine is more related to typical transaction cost relationship. Having said this. On the other side. As it plays a more strategic role in overall wine production process. and the quality of grapes does not play such a strategic role. the fact that the final decision relies on such subjective matters can easily generate a situation in which having an outside supplier is more complicated than producing the grapes in self-owned wine yards. Wineries that produce premium wines. supplying capital and training when necessary. it is safe to say that the more premium their product. and agreeing on a certain level of quality. The more premium the wine. Profits are the major issues for these organizations.grape growers creating co-operative wineries and backward consolidation from the side of wineries buying land from grape growers. A typical example of how complicated the relationship between wineries and grape growers is can be described as follows: the grape growers grows and harvests the grapes but It is the winery who gets to decide which grapes are Suited for production. A question then arises: who will pay for the unused grapes'? Furthermore. have been successful in developing long term relations with grape growers . the more carefully It will select the grapes. A look at the balance sheets of public held wineries. or how wine is sold: 19 . As we will see. The fact that grapes are harvested during a short and specific period of time during the year also adds to this problem. and vineyard ownership. This means that a substantial amount of capital needs to be used to buy land for planting wines. While wines can take up to 14 years to reach its peak. a financially intensive business. CAPITAL REQUIREMENT Wine production is in essence. France suggests inventories/sales ratio of an average of 230 days. this process certainty affects working inventories. producers wines tend to own their wine yards. all these issues will obviously have an important impact on logistics relationships. vineries seem to have found different methods to overcome these problems COMMERCIAL PROCESSES Perhaps one of the most important aspects of product breath is the effect it has on the commercial and marketing processes of the wineries. and it years to replant the wine yards to accommodate the change in the market trends. other wines can reach the markets as soon as 6 months after the crush. as wineries need to produce during this period of time the wine they will be selling throughout the year. production or to label it under a different brand . Even though wineries do not need to hold the wine until it reaches its peak. In addition. wine needs ageing and this means inventory and working capital. in the US. Depending of the type and quality of wine. Wines take up to 4 years of intensive care and human labor to produce substantial yields of grape juice to produce wine and they yield economically accepted volumes of juice for approximately for 25-30 years. Many new technologies have enabled wineries to raise the Quality of their wines while avoiding long ageing periods. we can see that the financial risks of these are not to be let unseen. Furthermore. With such financial pressure on them. The two main reasons for this are the naturally ageing process of the wine. but for premium wines the process remains essentiality the same and this step is hard to avoid. If we consider the fact that they are prone to disease.them with their own. the amount of juice that can be used from grapes to produce wine differs between with the quality and type of wine with a general rule that more premium the wine the larger the volume of grapes that needs to be used to produce the same quantity of wine. the wineries need to work closely with other players in the chain in order to design the best fit for the market they are trying to reach. The following characteristic illustrates how some of these factors influence the supply chain: 1. wineries are competing in a global market against a huge amount of different brand labels. In any case and any kind of product. As economies of scale and target markets enable wineries to pursue different strategies. It must deliver value over time to sustain its price and limited production”. others try to work closely with wholesalers in order to find the best way to push the product through the chain. the better wine must be.000 cases of premium wine a year need to get their label to be known to a select group of premium buyers around the world.“Price is closely related to image. WINERY LOCATION The wineries location must be taken into account while thinking about the wine supply chain. lower prices are associated with lower quality. Wine is made of grapes and grapes can be grown in certain locations. 20 . On the other hand. grapes grow between 30 and 40 degrees in northern and southern hemisphere. As a thumb rule.000 cases of table wine need a way to push their products through the chain (or get them to be pulled. Many people evaluate wines based on price: the higher the price. climate irrigation and geography. Small wineries that typically produce between 5000 or 10. Some wineries pursue strategies to generate the brand awareness in order to be able to pull the product through the distribution chain. each of them with different characteristics. Some of the most important factors that determine a wines location are soil.000. Conversely. A prestigious brand is incompatible with low prices and mass distribution. wineries that produce 1. in an ideal situation) as fast and profitable as possible. the central government has empowered states to generate revenue and control sales. distribution. but does not affect the quality of grapes. 4. Frost affects the quantity of grapes that ripe. LEGAL ISSUES Level of regulations is high Level of regulations is steady Given the traditionally closed nature of the Indian import market. Nagaland and Manipur are states that enforce total prohibition of wine. Wines are dormant below 10 degrees and ripening occurs only above 17 degrees. There does not seem to be a maximum amount of water they can take as they can recover from floods fast. and pricing of wine belongs to state governments under Section 47 of the Directive Principles of the Indian Constitution. Mizoram. Sates like Haryana. The following apply to regulation in states: a) Differing methods of alcohol control in specific states Gujarat.S. 3. Wines typically need 500mm to 750 mm of rainfall in a year depending upon the average temperatures. Wine functions are diminished above 24 degrees and may completely shut down above 32 degrees. Each of India’s 28 states and 7 union territories has its own rules and regulations for alcohol control. the existing market for imported spirits. India is a federal nation.. 5. its high import duties. and like the U. States 21 . exporting wine to India can be a regulatory adventure. The following key regulations apply to the wine industry in India: 1) State authority Control over selling. Lakshadweep. the multitude of state taxes and complex state licensing and approval process. Tamil Nadu and Andhra Pradesh briefly instated prohibition. The ideal soil therefore has good drainage with access to retain water at some depth if irrigation is not an option.2. creating a strong umbrella brand for various products is important. which has now become the order of the day in India.like Uttar Pradesh and Tamil Nadu control imports by refusing to issue an excise Transport Permit. Brand registration fee and Brand Fee & apply for. So. ‘surrogate advertising’ or ‘brand extension’. The applicant immediately on the approval of L-1 License has to deposit License Fee. States like Kerala do not allow retail sales of imported wine. Approval of Label. For example. Registration of Brands. L-3 (HotelRoom Service: 1). the Kingfisher brand is now promoted through the airlines and its various sporting activities. The industry calls this. 2) Marketing Regulations In India. b) Possession of Wine Every state has its own law dealing with the amount of wine a family can store in their homes without acquiring an excise license. L-4 (Restaurant: 251). L-5 (Hotel-Bar: 47) and L-19 (Club: 54) etc. The Licensees required for wine are L-2 (Retail Vend: 309). and Fixation of exdistillery price. Approval of Bonded Warehouse. The states of Punjab and Himachal Pradesh are more liberal in their rules and procedures but maintain high excise duties. Kingfisher’s alcoholic beverages cannot be advertised however. The Transport Permit is the distribution authorization form that allows goods to be released from warehouse and delivered to designated customers like hotels or authorized retail outlets. c) Wholesale and Distribution License Each state has its own licensing system. There are several licenses for wine import. there are restrictions on promotion of alcoholic beverages like wine and beer. Import permits are issued to the L-1 licensees on demand which is duly recommended by the inspector posted at Bonded Ware House. Permit Branch issues Import permits for import of liquor and Transport Permits for transportation of liquor from Bonded Warehouse to off and on site licensed consumption. No state allows maintaining a wine cellar with more than 100 standard bottles of wine without a license. transport and warehousing of wine. 22 . are subject to the labelling provisions of the Standards and Weight and Measures (Packaged Commodities) Rule of 1997. the Directorate General of Foreign Trade (DGFT) in India announced that Hotels (3 Star and above) and other service providers in the tourism sector could receive a dutyfree import entitlement equivalent to 5% of their average foreign exchange earnings for beverages and spirits including wine. The wine can be released from the bonded warehouse for distribution only after the importer/distributor meets all the mandatory requirements of the state where they plan to market and/or sell the product. 23 . 4) Storage regulations Imported wine must be stored at a government approved custom bonded warehouse. In case of wine it should be in milliliters and liters. The labelling declaration on the wine bottle must include: Name and address of the importer Generic and common name of the packaged commodity Net quantity in terms of standard units of weights and measures. 5) Labelling Regulations Imported wine. often referred to as bottled in origin (BIO).3) Exemption of federal customs duties for specific entities In the year 2003. old). Supermarkets are emerging to support wine distribution infrastructure. WEAKNESS Wine remains an elite taste. Poor awareness of wine and infrastructure. Domestic market with increasing disposable income. OPPORTUNITIES 100 million persons will be legally allowed to drink alcohol (25 yrs.INDIAN WINE MARKET ANALYSIS STRENGTH Indian wine consumption has grown 30% annually over past 5 years Good climate for grapes harvesting Urbanization Wine is becoming more acceptable to women and youth Youth are craving an alternative to hard liquors and developing a more refined taste. old) in the next 5 years. Growth in wine segment at 25-30% from past 5 years 24 . Growing tourism industry. Lack of cold supply chain so it’s difficult to store Less than 50 percent of the population is legally old enough to drink (25 yrs. Indians still prefer whisky. 25 . Advertising for alcoholic beverages is banned.THREATS The Indian constitution discourages alcohol consumption. Domestic wine production is coddled by state governments. 000 hectares have been taken out of production.5 percent from the previous marketing year.EUROPEAN WINE INDUSTRY The European Union (EU) is the world‘s largest wine producer. Sharp production decreases in Germany. consumer. and importer. down 3. Thus far. Bulgaria. Italy. and Hungary. Other important EU producers include Germany. The United States remains the leading export market (24. and Hungary and small decreases in France. Italy. EU wine imports slightly declined in MY 2009/2010 but are expected to increase in current marketing year. and Slovenia. Romania. Romania. and Spain were only partly offset by significantly higher production in Portugal. EU vine-growing area has been declining for the past few years due to shrinking margins and the implementation of the new Common Market Organization grubbing-up scheme (see the Policy section for details). cut surpluses. The European Union (EU) is the world leader in wine production. Wine is also an important sector in Austria.6 percent of the total in volume and 30. and Spain represent about 80 percent of total production. Within the EU. EU-27 wine exports partially recovered in MY 2009/2010 and are expected to further increase in MY 2010/2011 thanks to growing demand both from developed countries (United States. and compensate producers by offering them alternatives. 175. The following table shows production trends in the leading EU wine producing countries during recent years. Portugal. Canada. with almost half of the world‘s total vine-growing area and 60 percent of production wine volume. 26 . Japan) and BRIC economies (such as Russia and China). France.7 percent in value) for the EU-27. Total EU-27 MY 2010/11 wine production is still preliminarily estimated at 156 Mhl. Greece. exporter. The grubbing-up scheme involves voluntary withdrawal from vine growing by decreasing subsidies over three years to reduce production of uncompetitive wines. with additional reductions expected in 2011 – the third and final year of the scheme. Domestic EU wine consumption continues to decline due to the continued general economic crisis and is forecast to stagnate in MY 2010/2011. which further dampened alcohol consumption. In addition. especially aimed at youth. Another important factor is the anti-alcohol drinking campaigns. changing tastes) affect overall demand. health concerns and concerns about drinking and driving have pushed local authorities to implement more stringent legislations. despite a slight economic recovery.CONSUMPTION Domestic EU wine consumption continues to decline. 27 . which has made advertising wine virtually impossible. especially in southern European countries. substitution of other beverages. Per capita wine consumption has been falling for decades. conducted in some countries. where changing consumption habits (increased outdoor drinking. primarily France and Italy. LOGISTICS MODELS USED IN EUROPE FOR WINE INDUSTRY: MODEL 1: BRANDED WINE 28 . Every time a service provider receives an order from a distributor it will either send a further order on to the supplier or winemaker or else draw from its own stocks. If vineyards are to be efficiently managed from the downstream side. Otherwise bottling. To devise a system in which vineyards are customer-driven and to carve out a crucial role for themselves. blending specifications. Information on orders circulates from one link in the chain to the next. wine co-ops will have to be able to determine their own grape specifications and pricing schedules. Wine merchants transmit operational information (sales forecasts. This model is characterized by the strong value-added that derives from communications. and packaging) to service providers and winemakers. 29 . Wine merchants sometimes determine grape-growing specifications in the branded wine supply chain. although not always. With branded wines it is possible to produce large volumes of wine of consistent quality. “Bordeaux’s brand name is its ace in the hole against New World wines”. In time. they are the ones to decide which wines to market. starting downstream and moving backwards. This means that the wine merchant is the strong link in this particular supply chain. Wine merchants work closely with consumers and are therefore very aware of market trends. a company’s main strength is its brand name. This piloting will be mainly achieved through partnerships and alliances. labeling. bottling. In most wine merchants’ opinion. wine co-ops will have to merge so that they can develop the technical and human resources that are required to fulfill a partner’s role. wine merchants will seek to take over production activities and drive this function from the downstream side. This takes power away from winemakers and leads to lesser product diversity. one that uses a standardized type of information. labeling and packaging operations are carried out by Logistics service providers. Ginestet’s Managing Director says for example.Winemakers or wine co-ops grow grapes and are responsible for vinification and blending (and sometimes for bottling). Winemakers no longer control the composition of their wines. As a result. One criterion of success is the ability to work within a highly integrated chain. vinification and blending. much as wine merchants do in the branded wine supply chain (c. All flows are piloted on the basis of forecasts that are updated daily in such a way as to reflect actual consumption. due to the retail sector’s greater ability to exchange information in real-time.MODEL 2: STORE BRANDS In this supply chain. They source directly from winemakers and become the chain’s key link. Major retailers are very involved in this kind of strategy. Labeling and packaging operations are carried out by the logistics service providers.. winemakers are in charge of grape-growing. Bottling. This and the lean management of flows are what explain the chain’s flexibility. The risk with this particular supply chain structure is that it is piloted by actors who are not wine sector specialists. Store brands have risen sharply over the past decade and account for about 30% of all sales of wine in major retail outlets. replacing wine merchants. The major retailers are the ones steering the information flows. Major retailers play a role in product design and communications. model 1). This reinforces major retailers’ power over winemakers and causes an imbalance in their relationship.f. Products of this nature can be expected to undergo a number 30 . This is a configuration where the wine merchant level has been eliminated. In the store brand supply chain however there is a higher degree of commercial integration. (French) nationwide communications are organized by Trade Associations and funded by membership fees. In the export markets. with its highly dispersed supply structure. In this chain it is difficult for the winemaker to get demand-related information. There are three types of collective communications: 1. promotion is undertaken by Trade Association task forces and by ONIVINS. who have been increasingly positioning themselves in the market’s top-of-the-range segment. However. albeit with occasional help from logistics service providers. which accounts for 95% of Grand Cru flows throughout this chain. It remains to be seen whether collective campaigns have an efficient impact on consumers’ purchasing acts. one in which logistics performance is taken very seriously. Communications lying somewhere between brand advertising and generic publicity Looking to the future. runs the risk of losing market share to the major retailers. Communications highlighting all French wines 2. is no easy task. In terms of product promotion. Collective communications account for 48% of advertising expenditures. Winemakers are the key actors in this logistics chain. the wine merchant level.of changes in the years to come. Specific communications focusing on the country’s main winegrowing regions 3. 31 . promoting this category of wine. Today store brand wines amount to something like 100 million bottles of red and white Bordeaux wines per annum. The fourth schema is characterized by winemaker’s involvement in all of the chain’s value-added activities. This schema characterizes the Grand’s Crus logistics chain by depicting the traditional breakdown of value-added in the Bordeaux wine region. Lean workflows predominate in this model. and value-added operations are distributed unevenly. wine merchants no longer act as logistics partners in this model. 32 . this being their true profession. This precludes any strong marketing action promoting the wines. who are the main actors in this chain. An awareness of logistics is something new to winemakers whose core business is wine production. Winemakers focus their efforts on vinification. are in close touch with the end user. Furthermore. and therefore captures all of the value-added. They increasingly turn to outside service providers for other operations. the winemaker is practically the only actor in the logistics chain. given the multitude of activities they undertake. The model’s drawback is that winemakers must possess a great deal of logistics maturity. In this model.MODEL 3: WINES MARKETTED DIRECTLY BY THE WINE MAKER This model enables a great deal of agility to changing market demand in as much as winemakers. the world’s vineyards produced 36 billion bottles of wine. and local transport. While the hold of the airplane is fine. wines can also be damaged when exposed to temperatures below freezing.42% reached below 0°C. In the USA. wine can be “cooked. Very few efforts have been made to assure that the world’s fine wine is delivered in the best conditions possible to the final consumer. the percent of wine cases exceeding 30 degrees Celsius during shipment was 10.7% of wines were exposed to temperatures over 25°C. on both domestic and international shipments. The cold chain assures that proper temperatures are maintained at every step of the journey and each participant in the distribution chain has a responsibility to uphold. Such services are provided for pharmaceuticals and temperature control may be provided for portions of the wine’s journey (e. constant environment. or 6 billion bottles were exported from the world’s wine producing countries. 17. While less frequent.” another reefer container and reefer truck. UK. Changes in the Structure of the Wine Market The evolution of a global wine market is relatively recent. One innovation was “Mise en bouteille au château. 18% of the wine. Air shipments are not necessarily better. Cases shipped to Hong Kong recently via airfreight reached 35° Celsius. and 3. there have been few changes in the way wine is shipped to market.The temperature of fine wine sent from France to the US. 35% of the wine was drunk locally and quickly. Wine needs a cool.12% of wine cases reached temperatures below 5 degrees Celsius as per eProvenance 2007 to 2011 measurements. few air shipment channels are organized to maintain a cold chain during offloading. the reefer container covers only a portion of the wine’s journey from producer to consumer. More than 29. FedEx and UPS are not fully organized to provide temperature-controlled chains for wine. yet is too often shipped around the world with less care than cartons of lettuce.” According to eProvenance temperature measurements from 2007 to 2011. However.COLD STORAGE IN EUROPE Fine wine does not take kindly to overheating or freezing. transport and storage conditions can ruin wine before it ever reaches the consumer. 33 . Over the last 200 years. wine traveled mostly from Bordeaux and Burgundy to the UK and Europe. and Japan is typically stable during the ocean voyage but wide temperature fluctuations appeared both before and after. China.6 percent. using the “cold chain” practices common in the food and pharmaceutical industry. whereas they are used for only 5% of shipments from Bordeaux to China. In 2009. or 17 billion bottles were stored and transported within domestic markets. representing $23 billion dollars of wine. (Source: Australian Wine & Brandy Corporation) What is happening to these wines in transit? When exposed to temperatures above 30⁰ Celsius for too long. Despite the great care winemakers devote to every step in the vineyards and winery. customs. The topic of temperature conditions has always been elusive – the dark secret that everyone knew was lurking but no one wanted to discuss or address. the hold of the airplane). (Source JF Hillebrand) More importantly. resulting in tartaric precipitations and even frozen bottles that can break.g. the use of reefer containers varies widely: Approximately 50% of shipments from Bordeaux to Japan use reefers. Historically. 47% of the wine. and no one has responsibility for the entire process. and the development of national services. Exposure to temperatures exceeding 30°C for duration of 18 hours or more can significantly damage the wine’s color. The number of long-distance transports has grown considerably. fearing economic consequences. Many players in this distribution system work on thin margins. Who is responsible for this situation? The wine industry involves a complex. While there is no systematic measuring or monitoring system in place across the distribution channel.2 billion in wine experiences improper temperature conditions during transport and storage. decreasing the wine’s ability to age over time. Some industry participants have stated they would rather not have the storage and shipping information. and is discernible only by tasting or chemical testing. 34 . Damage often remains undiscovered until years later. Deregulation of shipments. corks pushing) can be discerned. and simply do not re-purchase it. and often a “cooked wine” is not differentiated from a “corked wine. A decrease in free sulfur dioxide also occurs. The membership of eastern European countries in the European Union has resulted in a shift in the balance among local. the largest growth in transport volume has been achieved by freight transports on roads and rails. multi-step distribution chain. demonstrated that wine can be damaged by excessive heat before any signs of visible deterioration (leakage. and tend to avoid the “extra” expense of climate control. optimal route Routing and plan scheduling.” Consumers view it as bad wine. As much as $2. closely followed by sea freight. In recent years. aromas and taste. the sturdiness of the glass wine bottle disguises the fragility of the organic contents. Independent research carried out by ETS Laboratories in St Helena in 2008 (financed by eProvenance). The damage is not obvious. but the industry cannot manage what it does not measure. regional and long-distance transports.What problems result from these temperature fluctuations? Unfortunately. EUROPEAN INFRASTRUCTURE Deregulation has led to the growth of wide transport networks. negatively affecting the value of the brand. ultimately we are all responsible for what happens to fine wine on its journey to the consumer. clarity. followed by Great Britain. 9 river hubs are set up in the “Paris area”. Hamburg Italy: Naples. Schenker.Logistics requirements and service areas Outsourcing of logistics activities is widespread in Europe and is gaining popularity. Italy and Spain. Maersk. Genoa. Major Ports of entry Belgium: Antwerp France: Le Havre. Leading port in Europe for the import-export of wine and spirits with a traffic more than 620 million bottles. Trieste Netherlands: Rotterdam LE Havre is the major port in the world-wide transit of wine in Europe. Cherbourg Germany: Bremen. 35 . Palermo. This trend has resulted in industrial companies outsourcing parts of the standard logistics services like shipping. the first consumption area in Europe. The largest logistics service providers in Europe include DHL. TNT and Kühne & Nagel and Kerry. Marseilles. Added to this development are increasing numbers of high-quality logistics services and contract logistics. closest to the main French wine producers (Champagne and Burgundy). Many companies hire specialized logistics service providers to do the job. transhipping and storage. Logistics centres in Europe The largest logistics markets in Europe are Germany and France. wine consultancy services. Energy efficient air conditioning-systems and insulation products Irrigation and waste water management Vineyard and winery equipment Winery design Oenology services: wine making. plantings and irrigation. Though India has a lot to learn about wine making from its European counterparts. where there is lots of scope for improvement in Indian wine industry. Technologies to improve health of grapevine root stocks and grape yield. wine education Another area which needs to be improved is of cold supply chain. its capability in the following technical areas have been rapidly increasing: Viticulture services: vineyard establishment. Also there is need of investing in current supply chain infrastructure of the country 36 . canopy management. This is possible only by close co-ordination of govt. quality assurance and traceability systems.RECOMMENDATIONS Technology plays a key role in the development of new grape varieties. and private companies. input management. com/ http://en.chillibreeze.org/america/ http://articles.indiatimes.com/2012-04-03/drinks-corner/31029641_1_wine-society-sulavineyards-wine-industry http://www.wikipedia.com/articles_various/Wine-industry.timesofindia.REFRENCES http://www.org/wiki/European_Union_wine_regulations http://winebloggersconference.asp 37 .europeanwineresource.