In India, wine industry struggles to take root

updated 3:15 p.m. ET March 30, 2008

NASHIK, India - Bulls lumber down dusty roads, cow-dung patties bake in the sun, and women in bright saris pluck grapes from manicured fields, their bangles jangling with every toss.

Welcome to India's wine country.

This sleepy town in western India, long famous for its grapes, has become the subcontinent's Sonoma Valley, the heart of a $100 million industry that has seen annual growth of more than 25 percent annually since 2003.

A taste for wine is now a sign of sophistication among Indians who have grown wealthy as the economy has boomed, and scores of wineries have opened in recent years to quench their thirst.

"This is an industry whose time has come," said Rajeev Samant, the CEO and founder of Sula Vineyards, one of India's leading wine producers. "With more education and more affluence, it's very natural for a population to drink more wine."

The wine business is still relatively small, especially considering India's population of 1.1 billion. In 2006, Indian winemakers sold roughly 940,000 cases of wine domestically and 60,000 cases overseas, up from 530,000 domestic cases and 30,000 overseas in 2003, according to industry figures.

By comparison, American vintners shipped 217 million cases to domestic markets in 2007 and another 50 million cases overseas.

Indian winemakers face a significant challenge gaining a foothold in this country where alcohol is still largely frowned upon for religious and cultural reasons, and many of those who do drink — nearly all men — are just fine with their whiskey-and-sodas.

But winemakers of all sizes, from international spirits giants to mom-and-pop home brewers, see huge potential in India's booming market.

Most Indian bottles cost around $10, making them far more affordable than foreign wines, which can cost several times what they would in Europe or the U.S. due to heavy taxes and import duties. The wine importing business is also murky with gray-market bootleggers and improperly stored bottles, making locally produced wine an attractive option.

With sales accelerating, major global players have recently jumped into the grape-stomping barrel, including Seagram India Ltd., a subsidiary of spirits giant Pernod Richard Group; UB Group, brewer of Kingfisher beer and the world's second-largest alcohol manufacturer; and Diageo India Ltd., owned by the company behind Guinness stout, Johnnie Walker whiskey and Smirnoff vodka.

All three recently launched Indian-made wines, and while it's too soon to tell how they'll shake up the market, the investments indicate a new phase of competition.

To see how high wine has risen in the country's esteem, look to Bollywood, the loftiest peak of India's pop culture. Just 10 years ago, an actress would only drink on-screen to signal her character's loose morals. But several recent films have shown superstar actresses coquettishly drinking wine as an indication of their elegance, not their trashiness.

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