The reawakening of Sula in India
When a business goes public through an initial public offering (IPO), they release a document known as the Draft Red Herring Prospectus or DRHP for short. Usually, it’s a huge book with about 500 pages. It also covers a wide range of topics, including the company’s finances, risk considerations, and industry trends.
Only 1% of the $30 billion alcoholic beverage market is devoted to wine. Or, to put it another way, only 40 ml of wine is consumed per year per person.
For comparison, the average amount of wine consumed annually worldwide is 5.45 litres. Even Chinese people don’t drink much wine down to 1.56 litres annually. Therefore, winemakers are hopeful that we will at least reach that amount. We probably won’t get there anytime soon, though. Whiskey and other hard spirits are quite popular in the nation and makeup about 70% of all alcoholic beverages consumed.
Let’s talk wine!
Companies like Sula Vineyards and Grover Zampa have leapt into the scene. They sought to alter India’s drinking practices. 1% of a customer’s spending power may not seem like much progress over two decades, but anything is better than nothing, right? Considering that all wine in 2000 was imported. The wine was only consumed in five-star hotels. 95% of the consumption happened there.
The figures today are significantly different.
Wine is grown domestically to an extent of 84%. Additionally, just 25% of the wine is consumed in posh hotels and eateries. Most people choose to open a bottle, relax on their couch, and sip their beverage while watching a movie with friends. The world has evolved.
Yes, a portion of it is due to the 150% duty placed on imports of foreign wines. A bottle of French or Italian wine costs a fortune to purchase and consume. However, these winemakers’ efforts have also contributed to the changing habits. Just take a look at Sula; it is among the top 10 wineries in the world for social media activity. Wine is becoming trendy and stylish.
What separates India?
India is distinct from the rest of the world, where 65% of wine drinkers are older than 45. Very distinctive. Over 50% of Indian wine drinkers are millennials, according to industry research firm Wine Intelligence’s 2018 findings. In other words, if you’re 37 or younger (remember, it’s 2018!)
Sula was now wise. They were aware that India’s market dynamics were distinct. They recognised that millennials value adventures. So in 2005, they opened a Wine Tasting Room. In 2008, they established the Sula Fest, a music event. People liked to travel, they knew. They started wine tourism in 2008 as a result. And more than 350,000 individuals visit their vineyards annually. What about the occupancy rates? 70% better than the majority of Indian hotels.
In India, the alcohol market is challenging to handle. The industry is governed by numerous laws. Additionally, it differs from state to state. So it would have been difficult to start growing all those grapes unless you have a state that acknowledges that wine isn’t always a social evil.
And Maharashtra provided that push in 2001. The state examined its alcohol laws and decided to handle wine differently. After all, grapes are the source of it. If you think about it, it is rather “agricultural” in nature. Wine so received excise tax and sales tax rebates. But it wasn’t just that; with regulation changes, vineyards now had for the first time access to bank-funded working capital.
It was crucial because growing grapes, ageing them, and bottling them all require time. Entrepreneurs required short-term funding to maintain their companies. And it was a big help.
Status Quo
As a result of a new wine policy that is bringing about significant improvements, Maharashtra is once again setting the standard. Now, if you’ve travelled to the US or Europe, you may have observed that most supermarkets offer complimentary wine. You can get it without stopping by a liquor store. This implies that you can be persuaded to buy booze together with your groceries. mostly because it is nearby. According to Maharashtra’s new regulation, wine sales would be permitted in supermarkets and grocery stores larger than 1000 square feet. Wine sales might increase by 20% as a result of this alone. At least that is what it appears that industry professionals believe.
Conclusion
Sula will rely on other states acting similarly.
That does not imply, however, that Sula is without flaws. The company is making an offer for sale because its sales growth hasn’t been great (OFS). In other words, current investors are cashing out on their investment and the IPO funds won’t be used to expand the company.
So while the Indian wine sector may experience a revival, this does not mean that Sula would unquestionably experience a phenomenal rise. For that, all we can do is wait and see.
