Man for Four Seasons Vijaya Mallya's UB Spirits wine subsidiary has devised an innovative plan to solve the anticipated wine grape shortage by deciding to offer the Maharashtra growers a stake in the company.
Four Seasons Wines Ltd., the wholly owned subsidiary will issue 500 equity shares at the preferred price of Rs. 10 each for every acre of grapes to all the contact farmers committing to supply exclusively to the winery for the next 15 years.
Sharing their strategy with delWine Abhay Kewadkar, Senior Vice President and the chief wine maker of Four Seasons Ltd. said,' About 1200 farmers from Baramati, Nashik, Narayangaon and Sangli areas have already responded enthusiastically to our proposal. We shall have a clear picture in a month's time after evaluating the total response.' Clarifying further he said,' the offer will be made only to those farmers who are growing or will grow quality wine grapes for us.'
'Will there be a cap on how much of equity will be offered?' Replying to the query from delWine, Abhay said that 51% of Four Seasons will always be held by UB Spirits ltd. The balance will be kept for the farmers and strategic partners. Alluding to the query regarding the cap, he said, 'There is no cap at the moment but we have not taken any final decision on this aspect as yet.'
The company claims to have tied up with farmers with long term contracts for 2000 acres and hopes to strengthen it further to 2,500 to 3000 acres in the next four years when the new winery in Baramati is expected to run at the full capacity of 1.5 million cases.
Four Seasons will also share its technical expertise with these farmers and help them in improving viticulture.
The UB Group belonging to the Maverick Mallya has recently entered the wine business through two companies. United Vintners Ltd imports and distributes wines from across the world while Four Seasons produces Indian wines under the Zinzi label and soon to be launched 'Four Seasons'.
There have been constant delays in the launch of the signature label and despite several announcements made by the company since last year about the launch 'next month', Four Seasons has failed to launch the Four Seasons.
'We want to launch wines bottled in our winery,' says Kewadkar by way of a limp explanation. 'Didn't they tie up with Renaissance last year for crushing grapes and bottling wines at Renaissance Winery ? 'We did crush grapes in their winery as also in a nearby winery in Baramati, known as Associated Wines. Indeed, we produced wines in three wineries. While we bottled Zinzi at Associated, we decided to bottle Four Seasons at our own winery in Baramati which got ready only two days ago. Wine from all three locations is already in our winery We are now ready to bottle and will definitely release wine next month.'
Armed with the wine in the tanks from the 2007 crush and the present year's harvest, Four Seasons hopes to sell 1.2 million bottles (100.000 cases) during 2007-08. This may seem a tall order to a rank outsider but it is not an impossibility with the resources and ambition of its protagonist, Vijay Mallya who has disproved his detractors on many previous occasions in the past.
Wine grapes are soon expected to hinder the run-away expansion of Indian wine industry. Financial Express in a recent article said- 'Wine experts like Subhash Arora fear that, "If the cultivation of the wine variety of grapes do not increase, there is a possibility that grapes of the table variety will be mixed with the original variety to make wines. This will result in the production of inferior quality wines."
Kewadkar had told the reporter, "The shortage of grapes will be more profoundly felt in the next three to five years. To tide over this problem we have tied up with farmers on a long-term basis and we are even offering them shares in our company as incentives." He added, "We are giving the farmers buy-back assurance. A lot of farmers are therefore keen to shift from the table variety to the wine variety of grapes as it has higher returns."
In the menwhile, other producers are watching the development. Says Ranjit Chougule, Managing Director of Chateau Indage, the biggest producer and pioneer in contract farming,' I am aware of this move. Until both supply and demand for grapes are equalized across India, not only in Maharashtra, you will see various such techniques being utilized by wineries and farmers alike to try and ensure optimum supply and prices. Only time can tell of their success or failure.'
Rukn Luthra, Asst. Vice President of Pernod Ricard, producers of Nine Hills wines in Nashik does not see too much supply-demand imbalance during the new 3-5 years.' In any case, we work very closely with our farmers and give a value add to them and do not foresee any problems. We will watch UB's move with interest though,' he adds.
Ranjit Dhuru, CEO of Chateau d'Ori does not feel the pinch as his vineyards mostly meet his grape requirements. Generally an open minded person because of his IT background he says, ' In principle it seems to be a good idea'.
The proposed offer is not without pitfalls. What happens when the shares have been issued and the farmers change their mind? What if the market conditions change and there is either a glut (remember Australia a couple of years ago when big corporations refused to pick up the grapes even at reduced prices?) or there is sudden acute shortage?
As Abhay says,' we shall cross the bridges when they come.
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