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With the largest population of young people in the world and 100 million of them reaching the legal drinking age over the next five years, India is an exciting proposition for Australian wine exporters at a time when there's not a lot to get excited about.
Key points:
- India imports more wine from Australia than any other country
- The current 150 per cent federal tariff on wine combined with state taxes makes Australian wine up to eight to ten times more expensive in India
- A free trade agreement between India and Australia is expected to be ratified by the end of 2022
"The potential is immense," said Australian Grape and Wine chief executive Tony Battaglene.
"With [an] enormous population, even though very few drink wine at the moment, we've got [the] enormous ability to get in on the ground floor."
Wine currently accounts for just 1 per cent of alcohol sales in India, with spirits and beer dominating the market.
But India's only qualified master of wine, Sonal Holland, said that was beginning to change.
"Wine is the new media symbol of sophistication, success, aspirational living, and celebration," she said.
The high-profile wine consultant has been recruited as South Australia's wine ambassador in India as part of the SA government's India Wine Expansion Program.
"Until recently, awareness of Australian wines in India was limited to being perceived as inexpensive, cheerful, youthful, easily accessible wines," Ms Holland said.
"Consumers are now becoming more and more aware of the kind of high quality and diversity that can come from some of the high-quality Australian wines."
Plenty of upside to existing trade with India
India imports more wine from Australia than any other country.
But it comes from just 24 producers.
The biggest player is well-known Barossa Valley company Jacobs Creek, which made the move into the Indian market 21 years ago.
"In the past year, we've actually grown at 118 per cent," said Helen Strachan from Pernod Ricard, the French wine and spirits company that owns Jacobs Creek.
"We don't have many other growing markets for Jacobs Creek, which is why India is really important for us."
The Australian wine industry needed growing export options after the collapse of the Chinese market due to trade disputes and soaring tariffs.
"It's left a hole of about a billion dollars," said Wine Australia general manager Rachel Triggs.
"Our export market peaked in October 2020 at just over $3 billion.
"The latest export results are just below $2 billion, so that is the void that China has left."
With its huge population and preference for red wine, many are hoping India can help fill that gap.
Filling a China-sized exports hole
Another producer who sees potential in India is Guy Adams from Brothers In Arms winery at Langhorne Creek, SA.
When the Chinese market collapsed, 70 per cent of its sales disappeared.
After attending a recent international wine trade fair in Mumbai with other South Australian producers, Mr Adams planned to start exporting to India next year and believed it would be a more stable market than China.
"I think it will be more of a classic market where it will be a slow growth, but that growth will be measured," he said.
While Mr Adams said India had a similar business mindset to Australia, there were also some significant and costly hurdles for producers taking the plunge.
There's a federal tariff of 150 per cent on imported wines.
Combined with state taxes, that can make Australian wine eight-to-10 times more expensive in India.
"If you go out to a really fancy restaurant, it's not unusual to be charged about $60 for a glass of Australian wine, whereas a cocktail might cost you $20," Ms Triggs said.
Trade deal benefits premium wines
A free trade agreement, which is expected to be ratified by the end of the year, will bring some relief with staged tariff reductions for bottles over $US5.
"Our future is in premium wines," Mr Battaglene said.
"We are a high-cost producer, so we need to grow our premium offering, and that's the area that's benefited from the tariff reductions under the free trade agreement."
Helen Strachan said it did not help Jacobs Creek.
"It's unfortunate the interim trade deal did lack ambition," she said.
"Ninety-eight per cent of the wines exported to India are beneath that $US5 mark, so only 2 per cent of current wine exports will benefit from the interim trade deal."
Need for 'very strategic' marketing
Then there were the complex and costly regulatory requirements the two countries were working on simplifying.
"So apart from the fact you've got different regulations at a state level, you've got different labelling requirements at a state level, you have different distribution arrangements at a state level," Ms Triggs said.
"You have some states that are dry.
"Promotion of alcohol is prohibited federally, so your promotional strategy has to be very, very strategic.
"So yeah, it's an extremely difficult market to crack."
While some producers have written off the Indian market as too difficult, the Australian industry says the time is right to give it another look.
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