The Hindu Business Line : Sula Vineyards launches low priced brand to beat recession

Bangalore, Dec. 5 Last week’s terrorist attacks have forced India’s largest maker of premium wines Sula Vineyards, to scale down its investment plans for the current fiscal, but the company has launched a low-priced brand to counter the recession in the industry.

“Star hotels like the Taj and the Oberoi were some of our key customers. Because of the terrorist attacks, we could see poor sales during December, which is the peak month for wine sales,” Sula Vineyards’ Chief Executive Officer, Mr Rajeev Samant, told Business Line. The company has also deferred its plans to set up a winery in Karnataka and instead, will have a bottling arrangement with a local company there till the market improves.

The wine maker has launched a low-priced brand, Samara, and expects to make up for poor sales of its other brands during the current fiscal. Priced at Rs 150 a bottle (750 ml), Samara, according to Mr Samant, is expected to sell about 12,000 cases (of nine litres each) during the current fiscal. The sub-Rs 250 category makes up for three quarters of the total wine market in India, which is about 1.5 million cases.

Mr Samant said the hospitality sector is one of the largest customers of its premium wines, but the recent crisis has forced the company to scale down projections as well as investment plans. Sula has now reduced capex by about 25 per cent. “But our cash flow is strong,” he said.

In Karnataka, where Sula Vineyards leads the market, it has entered into a manufacturing and bottling arrangement with a local company for its Samara brand. Though the company could have imported the wine brand from the neighbouring Maharashtra, steep duty of Rs 300 a litre levied by Karnataka has forced Sula to produce it in the State itself. Maharashtra has also imposed a fee of Rs 7 lakh a year on ‘out-of-State’ brands for all types of liquor brands.

Sula Vineyards had earlier said it was scaling down its harvest next year by one-third because of overcapacity in the industry and steep increase in duties by several States. Sula plans to reduce 2009 harvest plans to 4,000 tonnes from 6,000 tonnes. The industry growth in crushing will also come down to between 10 and 20 per cent from about 50 per cent during the previous years. The industry is expected to grow at about 20 per cent next fiscal from about 28-30 per cent during the current fiscal.

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