The Indian wine market is growing as millennials seek experience over intoxication

• Wine makes up for 1% of total alcohol sales in India, but is expected to grow at a CAGR of 10% for the next five years.
  
• Indians prefer wines made of 100% grapes, and the sales of those made of molasses and sugar are declining.
  
• Domestic wine makers are launching premium wines like Dindori, J'NOON, Signet, La Reserve, Syrah-Grenache & more.
  

Let's catch up over drinks – Well, this get-together catch phrase might be losing sheen as it seems the current generation — millennials and GenZs — are not as keen on drinking on dates. In fact, they drink for different reasons too, for experience rather than intoxication — all good news for wine and beer makers, says a report by Kotak Institutional Equities.

“We note that the share of low-alcohol beverages is expected to grow faster as consumers mature and social drinking increases as against intoxication,” said the report. That’s beer and wine.

India has been a spirits market constituting whisky, brandy, rum and more such. It constitutes half the share of alcohol (51%) consumed, and if value is to be counted, it contributes to 76%. Next comes beer which makes up for 46% of the volumes. Wine constitutes a miniscule percentage of the market.

India’s per capita wine consumption is less than 100 ml, translating into less than a percent of overall alcohol consumption as against the global average of about 13%. Wine consumption is higher in developed countries and is as high as 30% in select European countries — where meals are paired with wines.

Now, with changing preferences which should lead to a market expansion, Kotak expects the wine segment to grow at 10% compounded annual growth rate (CAGR) in volumes, over the next five years.

Breaking the barriers

Adding to the trend is the breaking of cultural taboos around drinking that’s bringing more women in as consumers — globally the biggest chunk of wine drinkers.

“The perception of wine as a healthier alternative and a more sophisticated beverage for socializing plays a significant role in promoting wine among women. This expanding segment of independent women will play a crucial role in driving the penetration of the wine category,” the report added.

The love for wine is also expected to spread across the country too. As of now, select urban centers like Mumbai, Bengaluru, Delhi NCR, Pune and Hyderabad – contribute over 70% of the sales. That’s yet another lever for growth.

In addition to more sales of wine in metros, the demand is expected to pick up in tier 1 and tier 2 cities too, Kotak expects.

The fine wine experience

Though India has few wine drinkers, most of them seem to be connoisseurs. Apart from the premium wines which are made of 100% grapes, there are also wines made out of molasses and sugar where the alcohol content is under 20%.

The 100% grape wine market will grow faster than the category — at 12.5%. “The fortified wine segment, at the lower end of the popular segment, is witnessing a decline due to inferior quality and shift in consumer preference to 100% grape wines,” says Kotak.

There are more reasons to believe that the higher-end wines will see more sales. Rise in prominence of on-trade channels and occasions and disposable income; rapid urbanization and rising influence of social media on millennials say Kotak.

More importantly, wine drinking is considered ‘aspirational’ and that’s where Indian consumers are heading.

Desi winemakers score better

In spite of aspiration and premiumisation, Indians are not necessarily going for imported products either.

“None of the major global wine or alcoholic beverage manufacturers, except for Pernod Ricard, achieved significant prominence within the Indian wine sector,” said Kotak.

On the other hand, Indian wine players are introducing new products to their premium portfolios. Sula launched The Source, Rasa and Dindori in the last five fiscal years. Fratelli, in collaboration with Boisset, introduced J'NOON as its premium brand.

Grover Zampa entered the premium wine category, with brands such as Signet and La Reserve in collaboration with Chateau D'Etroyes. It also introduced new blends such as Syrah-Grenache to elevate its presence in the premium segment.

The presence of more good quality wines made from local grapes grown in Maharashtra and Karnataka, propelled by wine tourism and more — are all expected to bode well for Indians who seem to be shifting to elite drinking.

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