Reduction in consumption, flooding of labels, affecting the industry

The nascent wine industry in Karnataka, which was hoping for good sales this season, has had a disappointing run, as sales have plunged by 10 per cent compared with the previous year.

The industry has registered a decline in sales for the first time in recent years. This in spite of wineries, including some big names in the industry, offering discounts to retailers to boost sales, industry insiders said.

General reduction in consumption along with flooding of wine labels and poor quality of wine are among the problems affecting the industry, sources said.

Sales

The wine industry reported sale of 1.13 lakh cases (comprising 12 bottles/9 litres) till December 25, 2012 against 1.25 lakh cases sold in 2011. (Sources said that another 2,000 to 2,500 cases could be sold by New Year’s Eve.)

The wine industry in Karnataka had been registering positive growth since 2007 when 31,000 cases was sold. While 40,300 cases were sold in 2008, the sales shot up to 64,480 cases and 96,720 cases in 2009 and 2010 respectively. These figures for pure grape wines include both Indian as well as imported wines, which constitute around 30 per cent of the total sales.

According to Robin Somaiah, chief executive officer of Surya Devine, general slump in the economy — a phenomenon reported across the country — is the main reason for the decline in the sales this season.

“This decline in sales is a cause for concern for wineries that are already facing various other challenges for survival,” he said.

“From about 70 labels of 14 local wineries last year, the numbers have increased to 110, causing immense confusion among consumers. Each winery has about 10 to 15 labels owned by different people. For example, Chenin Blanc coming from the same winery is bottled under different labels,” he said.

Hefty discounts

Mr. Somaiah said wineries had been extending hefty discounts such as offering two cases free for each case bought or one case free for one case bought to retailers. “Wineries have to empty their tanks before February when the fresh crushing season starts. Though wines bottles are getting dumped with retailers, they are not being sold,” he said.

While most wineries have been facing problems with quality issues, poor quality wines flooding the market have also affected the wineries — both new and established ones. “There is no certification agency to maintain standards,” said Mr. Somaiah, acknowledging the quality issues plaguing the industry. “In this scenario, customers prefer imported wines that have seen a rise in sales by 8 per cent during the period in spite of extra taxes.”

‘Too much competition’

Acknowledging the trend, managing director of Bijapur-based Nisarga Vineyard Mumba Raddi said there was too much competition in a small market. “The number of wineries in the State has increased from one about five years ago to 14 now. The market, however, is too small. There is an unhealthy competition now,” he said.

Dr. Raddi estimated that Karnataka’s wineries had the capacity to produce about 50 lakh litres of wine each year, but was able to sell only a fraction of it. “Sales have gone down due to a general slump in the market as well,” Dr. Raddi said.