Friday, June 08, 2012

The imaginary Indian wine boom

Hold the front page! Indian wine taxes finally due to fall! Stand by for a China-style Indian wine boom!

Except that it isn't going to happen. Or at least not yet anyway. First there's the inconvenient little truth that every time a wine tax goes down in India, another one is levied to prevent wine from becoming affordable. But second, there's the rather larger fundamental fact that there is an anti-alcohol lobby in India that makes its counterparts in other countries look like pygmies.

This is the only nation that includes a call for total prohibition in its constitution. And lest anyone imagine that this is a long-forgotten joke by the original authors of that document, at the end of 2006, two members of India’s Supreme Court - Justices SB Sinha and PK Balasubramanyan – wrote, in a ruling on a case involving the payment of Bombay distillery fees, that  "Article 47 of the constitution clearly casts a duty on the state at least to reduce the consumption of liquor in the state, gradually leading to prohibition itself,

“It appears”, they continued, “to be right to point out that the time has come for the states and the union government to seriously think of taking steps to achieve the goal set by Article 47 of the constitution.". There is little likelihood of total prohibition being introduced, but nor is there much chance of anyone repealing the “Dry Day” legislation that effectively stops any kind of wine retailing on up to a dozen or more days per year. In Delhi, alcohol is still banned for anyone under 25, while the 1.3m inhabitants of Wardha District in Maharashtra have to wait a further five years until they are 30 before they can have a drink.

SB Sinha and PK Balasubramanyan were principally talking about spirits, of which many Indians, including supposedly teetotal Muslims are very fond. Very, very few people in India have actually been infected by the wine bug. Wealthy Indians who readily pay outrageous sums for luxury Cognacs or whiskies balk at splashing out on the top Bordeaux that fill the cellars of their British, American and Chinese counterparts and middle class Indians generally prefer whisky. India has an infant wine industry, but most of it is unprofitable and in the hands of people with little understanding of the business. It is revealing that the majority of the domestic production is centered on the table-grape growing region of Nasik, close to Mumbai, and within the control of the Maharashtra regional government which has offered large incentives to anyone wanting to invest in winemaking. There is very little proper retail infrastructure (most wine that is sold outside restaurants and hotels is still traded from non-air-conditioned shopfronts) and little real progress in sommelier training. London auction rooms rarely see Indian hands waving in competition with Brits, Americans and Chinese when top wines come under the hammer.

After several visits and after chairing three International Wine Challenges in India, and despite many absurd conversations with people who imagined that the subcontinent really does have a chance of competing with China to become a giant wine market in near future, I have been pretty clear where I stood.

I received further confirmation, as chair of the London International Wine Fair Conference in the excellent presentation by Spiros Malandrakis of Euromonitor on the BRICs. Despite its huge population and thriving economy, India, Malandrakis explained, is contributing negligeably to the growth in wine consumption in the developing world.

Just over a week after hearing those figures I was at Vinexpo Hong Kong talking to members of the Union des Grands Crus de Bordeaux who travelled there via the subcontinent. They had, they said, held reasonably successful tastings, but there was no real buzz. Other chateau representatives who had opted to travel via Brazil were far more energised by what they had seen.

But, say the optimists, If the taxes were to fall, surely that buzz would emerge, as it has elsewhere. After all, the British love fine wine and the historic links between the two countries and the use of English by educated Indians must count for something. Mustn't it? But if high excise and import duties certainly don't help, they are not necessarily an insuperable barrier. A passion for wine - or even just an eagerness to show off with a few great bottles  is rather like love. It will find a way. Brazil actually also faces obscenely high taxes on wine, but the market is booming. Until now, that boom has been in local and Portuguese (through old colonial connections) wines and bottles from neighbours like Chile and Argentina which belong to the same tariff-free zone. Now, there seem to be growing opportunities for other countries.

I'm sure that India will develop a wine market eventually and I know that people like Simon McMurtry of Direct Wines who has just invested in the Wine Society of India will be doing his best to accelerate the trend, but my money is on it taking at least five to ten years, by which time China will almost have certainly taken an insuperable lead.