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Levies sour business of imported wines

The hurdles strewn in the path of the imported wine marketers is finally beginning to hurt their growth.

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BANGALORE: The hurdles strewn in the path of the imported wine marketers is finally beginning to hurt their growth.

The recent hike in the excise duty from Rs 70 per bulk litre to Rs 370 per bulk litre and the cap on the mark-up that a hotel can earn on imported wines by the Karnataka government has pulled down demand in the state.

Dharti Desai of finewinesnmore, which markets imported wines, said she was expecting her sales in Karnataka to fall by 25% this year.

“Such discriminatory wine policies have started affecting us. In Karnataka, hotels are not picking up as many imported wine labels as before because of the cap on the margins that they can on it,” said Desai.

She expects Bangalore sales of 1,200 cases this year as against 1,600 cases in last year.

Like Desai, Vijay Mallya-owned United Spirit’s wine business has also seen a drop in retail sales with wine prices shooting up because of higher duties.

“We have not moved stocks in the last few months because there was clarity on the wine policy. Now with higher excise duty, our prices have shot up suddenly and that has brought down our sales in Mumbai and Bangalore,” said Sanjay Roy, head marketing and sales, United Spirits.

United Spirits, which was to launch its own wine brands by bottling imported wines, has put it in on hold because of the higher duty.

Wine consultant Alok Chandra criticised the protectionist wine policies of the Maharastra and Karnataka government. He said it served only a handful of wine players.

“In Karnataka, it is protecting only Grover Vineyards and Hampi Heritage Vineyards Pvt Ltd,” said Chandra.

In Maharashtra too, crippling levies on international wine brands have eroded the price competitiveness of imported wine traders.

Besides the import duty of 162%, foreign wines attract an exorbitant excise duty of 200% charged on the manufacturing cost of the wine, in Mumbai. This puts players in the imported wine market at a huge disadvantage against local wines.

An analyst with a foreign broking house said that the current duty structure on wine was dissuading many of the overseas wine firms from putting their brands in the Indian market.

“Only some time, every winemaker around world wanted to be in India because of the growth potential but such levies is scaring them off,” said the analyst.

Currently, the total wine market is estimated to be 1-1.5 million cases. Of this, imported wine market is close to 36% at 3.8 lakh cases.

“The proportion of foreign wines in the total wine market will drop drastically if it continues to be treated as milking cow by the government,” said the analyst.
p_sharma@dnaindia.net
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