A recent media report indicating that a Pune dealer had sold 148 Mercedes- Benz cars in the small town of Aurangabad in Maharashtra validates my long- time stand that the future of premium wines lies in tapping this latent market which has huge clusters of rich people waiting to be enticed to quality wines- but only after the brand smells Mercedes.
There are several statistics already published about our middle and rich classes where the incomes have been rising and the number of HNI (individuals having high net worth) is increasing in cities including Pune, Aurangabad, Jaipur, Kanpur, Ludhiana, Jullundur etc. The ingress of IT and several other industries and support services has changed the income patterns in the smaller cities. There is life beyond Mumbai, Delhi and Bangalore, which was also a sleepy town a few decades ago before the IT industry changed the fortune and lifestyle of hundreds of thousands of individuals.
As the example of Mercedes demonstrates, the orders were clocked because of the road show and power point presentation to the right people who were excited about the idea of something different and of value as a lifestyle product. Aurangabad is a city of two million people best known for its Ajanta-Ellora caves and cotton. Its population doubled during the past decade after Siemens built a factory for telecom equipment, and SABMiller constructed a brewery.
The problem with the wine market is that the one needs to create awareness of wine and its being a life style product. What to talk of brands, this knowledge is scarce. A person buys a Mercedes as much for its brand value as its availability and functionality. Thirty years ago, most of these current Mercedes buyers and many more, would have aspired to have the new ‘imported’ Maruti Suzuki that was introduced in the eighties. Mercedes could not be procured easily despite the availability of funds; one had to bend the laws.
Therefore, availability which has been unfortunately one of the big constraints till recently due to obsolete wine laws will be a major factor in these smaller towns. However, Indage had taken a lead and made inroads into these markets and Sula is now has taken over the job of penetrating even more. Imported wines are slower to tap this market since the cost of education and promotion is naturally higher per bottle due to lower volumes in the beginning. Coupled with the draconian excise laws requiring deterrent registration charges many people have been deterred against entering these markets for promotion.
Taking a cue from this latent demand FineWinesnMore FWM) has had a couple of impressive wine launches in Lucknow, the seat of government in Uttar Pradesh (UP), which has been hitherto neglected except perhaps by Jacobs Creek. Dharti Desai, the CEO of FWM says that she has registered 16 labels ranging from Rs.700- 2500 and is doing very well there.
One of our readers from Lucknow tasted an entry level Australian wine of a very popular brand and wanted to know where it was available in Delhi so she could pick up a few bottles on her next visit to Delhi. Can you imagine how much more she would drink if she found it in her shopping cart of her favourite department store and how many more people would taste that wine if she served at her party? ( I hope she would still stick to a maximum of two glasses a day, though)-In all fairness my advice to her was that she should try similar priced wines from Australia, Chile or South Africa, if she liked fruity wines- and definitely she should pick up from Gurgaon as they are unfairly high-priced in Delhi due to the prohibitive excise duty.
I get several queries from smaller towns for specific, high quality wines which the reader might have had an opportunity to taste in a fine dining restaurant in their home town. I am unable to help them as these wines are generally not available at the retail shops due to their high prices. But as the market matures, there would be enough people who would be able to afford not only the low priced soft and luscious Merlots from Chile, Australia, Italy or France but also the high priced Barolos which have a brand value as that of Mercedes Benz.
It is not only the wine companies which are missing out on these opportunities though. The news report in Bloomberg says that PVR- the leading film exhibition company with multiplexers based mainly in big cities has 70% presence primarily in Mumbai and Delhi. In the next four years, this ration will reverse, with 70% of the screens shifting to the smaller towns, known as Tier-2 and Tier 3 cities.
Tier 2 and Tier 3 cities in emerging markets like India, are where the proverbial pot of gold exists. This has important long term implications for wine producers, importers and even professional educators.
And in Aurangabad where half the population is under- 35, might be a prime example in the Indian market where wine could be promoted with a better long term returns .