The Rise of Indian Wine

Local farmers supplying grapes to Sham Chougule, owner of India's Chateau Indage Estate Vineyards, call him the wine king—and with good reason. The 72-year-old entrepreneur owns a whopping 70 percent of the small but rapidly growing Indian wine market. Over the past three years, the stock price of Chougule's publicly traded company has doubled, giving Indage a market capitalization of $170 million. Now he's going global, with a purchase of Australia's seventh-largest winery. He plans to spend $27 million to modernize his company and acquire an extra 2, 000 acres of vineyards in India. He's also looking to purchase wineries in South Africa, Chile, Argentina, France and Spain. Wine is going to be the next big thing in India, he says. "I don't want to think small anymore."

Neither do his customers. As globalization has stoked India's economic boom, its growing middle class has gotten accustomed to the pleasures and conveniences of the West, including well-made wines. While wine is still a fledgling industry in India, with about $100 million in retail sales last year, it is growing by about 35 percent annually, as Western-educated expatriates return home with new tastes. Some 50 new producers have sprung up in the last few years, turning out about 1.3 million cases of wine a year. Industry experts say that number could go much higher, especially if the country lowers tariffs on wine and cuts some of the red tape binding the industry.

Wine is hardly new to India; 16th- century Mogul rulers were known to enjoy chalices of red Shiraz wine imported from Iran. But ever since the hard-drinking days of the British Raj, the alcohol of choice has been whisky. There are some 200 million Indians who regularly drink whisky, compared with about 700,000 regular wine drinkers. But there's a strong sense that the cultural pendulum is starting to swing, as the growth of wine sales dramatically outpace that of spirits.

Upper-middle-class professionals, IT workers and returning expatriates are increasingly mingling at the wine bars springing up in major cities. "Wine is more cool, hip and healthy than hard liquor," says stock analyst Ajay Singh, 28, as he sips a glass of red at Mumbai's popular Indigo Restaurant. Likewise, women—who account for about 20 percent of Indian alcohol consumption—are opting for wine when socializing publicly. "It's considered more acceptable, elegant and in vogue for women to sip wine rather than stand there with a whisky, or a rum and Coke," says Shagun Mehra, a European-trained wine consultant who organizes wine tastings for Indian corporations, as well as global banks like Standard Chartered.

Perhaps the biggest indicator that wine has arrived: Bollywood is drinking it. Over the last two months, a couple of major Indian film releases have featured stars drinking wine, in one case a Sauvignon blanc from India's own Sula Vineyards. Experts say the influence of those Bollywood scenes on the mass market could be huge.

That's what Sula's energetic CEO, Rajeev Samant, hopes. Last year his company's sales were up 45 percent to $10 million, with higher-quality wines ($6 and up) growing fastest. Like Chougule, Samant is planning a major expansion next year, which is likely to be financed by U.S. venture capitalists.

Western companies are already making their own investments into India's wine industry—Seagram's last year launched a brand called Nine Hills that will be produced in Nashik. The investment is in part a response to India's 260 percent tariffs on imported wines. Those rates have led India into a WTO trade row with the European Union over barriers in the wine market. But while New Delhi may think it's doing local growers a good turn with such protectionism, growers themselves are in favor of dramatically lowering tariff barriers and letting in more foreign producers, which they believe would drastically expand the market. Just as Indian consumers' enthusiasm for a new taste is growing, so is the industry's confidence about its ability to compete on the world stage. Both shifts are toastworthy.