It inspired Omar Khayyam to pen his immortal Rubaiyat. Emperor Jehangir was reportedly willing to trade his empire in return for his daily fix of the stuff. And Indians are only now beginning to realise why. Urban India's drinking habits are evolving. Slowly! A significant minority has already had its first tryst with wine. And many of them enjoyed the experience. Result: a minor explosion in demand, the so-called first wave of demand for wine.

Ask Champagne Indage head honcho S.G. Chougule about the potential of the Indian wine market, and he says: "Sky is the limit." Champagne Indage is the country's largest wine producer and seller, and accounts for an overwhelming 70 per cent of domestic production. The numbers are still small-Rs 200 crore (6.35 lakh cases) per annum of domestic production and another Rs 100 crore (1.4 lakh cases) of imported wines-but they're growing at a more than healthy 30 per cent per year. The per capita consumption: 10 ml per year. If that sounds like a dose or two of cough syrup, sample this: the per capita consumption of wine in the US is 8 litres. In France and the UK, the comparable figures are 60 litres and 25 litres, respectively. "If good wines are not available, how will the market grow?" asks Abhay Kewadkar, Vice President, Grover Vineyards.

In this context, vintners are excited by Union Agriculture Minister Sharad Pawar's proposal that wine be sold as freely as soft drinks. If implemented, this will change the dynamics of the wine trade. Sula Vineyards Managing Director Rajeev Samant points out that wine is sold in supermarkets across the world. "And it is already sold in supermarkets in cities like Bangalore, Delhi and Chandigarh. Why should Mumbai, and the rest of the country, be exceptions?" he asks.

But that's just the distribution angle. What about upstream issues? Do the three largest domestic players-Indage, Sula and Grover Vineyards-have scalable operations?

Indage does, says Chougule. He predicts that the domestic wine industry will grow to Rs 500 crore by 2010. To cater to this growing demand, his company is expanding beyond its base in Maharashtra, which accounts for over 70 per cent of the country's wine production. "We will be setting up two wineries in Himachal Pradesh and one each in Andhra Pradesh, Tamil Nadu, Karnataka and West Bengal. While the one in West Bengal will be ready in the next six months, the winery in Himachal Pradesh will be ready next year," he informs. Those in Karnataka and Andhra Pradesh will be up in 2007, while the one in Tamil Nadu will start once the quality of wine is approved. The investment: Rs 40 crore. On completion of this phase of expansion, Indage's capacity will rise from six million litres a year now to 12 million litres a year, and take its group turnover from Rs 140 crore to Rs 300 crore. Sula Vineyards, which has about 300 acres of vineyards (of this, 200 acres are planted), is increasing its acreage to 600 acres. This will take Sula's output of wine grapes from 700 tonnes last year to 1,500 tonnes this year and increase sales from 70,000 cases to 1.4 lakh cases. Grover, meanwhile, will increase its acreage from 300 acres this year to 400 in 2006, allowing it to raise its production from 90,000 cases to 1.25 lakh cases. Chougule adds that 38 wineries have come up in India over the last five years.

Clearly, there's a large wine story panning out, with every player looking to grab a bigger piece of the action. But it's not a very easy industry to operate in-one requires high degrees of patience, perseverance and skill to survive. It also requires a fair amount of luck for a grape crop to produce a good yield; and the break-even period could stretch to 10 years. According to Kewadkar, Grover took about 8-10 years before it began earning money. During this phase, it had to recruit and retain high-cost skilled manpower to ensure a good quality crop. "You will need microbiologists and food processors. The barriers to entry can be huge," says Samant.

Sula's Vineyards' Samant: Wine should be sold freely

The other issue is the availability of wine grapes- as opposed to the more popular table grapes that people consume as a fruit-but the wine industry does not consider this an insurmountable problem. "Table grapes give the farmer Rs 10 per kg, while the wine grape gives him Rs 25-35 per kg," says Kewadkar, adding that long-term contracts between companies such as his and grape farmers "are a win-win situation for both since we get assured supplies for 10-15 years and the farmer factors out price and demand fluctuations from his equation."

Farmers and wine manufacturers typically enter into cultivation agreements for a certain number of years. Sula, for instance, owns the land and enters into cultivation agreements with farmers, who get about Rs 30 per kg of wine grapes. Farmer's investment: Rs 30,000. With yields varying from 4-6 tonnes per acre, a farmer cultivating one acre stands to earn a decent amount for his labours. Today, wine manufacturers are looking to create tripartite arrangements with banks and farmers. Here, the manufacturer stands guarantee for the money that the farmer borrows to meet his initial investment. This, obviously, works to the advantage of both the farmer as well as the wine manufacturer. All the three players own vineyards-Indage and Sula have land in Maharashtra, while Grover is based in Karnataka.

Indage's Chougule: Thinks demand will explode

That Indian vintners are coming of age is evident from the fact that their products are being accepted abroad. The three largest players together exported 1 lakh cases worth approximately Rs 15 crore last year to Europe, the us and Asia. Sula's Sauvignon Blanc sells in France at euro 13 (Rs 702) a bottle. Indage's Marquise de Pompadour, a sparkling wine, sells as Omar Khayyam in the export markets, while its better-known brand Riviera goes as Chhabri. These are sold in 44 countries, including the UK, Germany, France, Switzerland and the US. While Omar Khayyam is priced at about £14 (Rs 1,100), Chhabri costs £5 (Rs 395). Grover, too, is pretty optimistic about its export prospects. "We export 30 per cent of our production to countries like France, the US and the UK," says Kewadkar. Indage, in fact, has a dedicated vineyard to cater to the export market, despite its primary focus on the domestic one. "The export market is very competitive. Consequently, the domestic market is more profitable," adds Chougule.

Foreign players are also homing in on this growing market. Some of them import wine into India in bulk and bottle it here, while some others simply import and sell bottled wine. Says Sanjay Menon, Managing Director of wine importer Sansula: "The imported wine market accounts for about 1.4 lakh cases each year and is valued at Rs 100 crore." The company imports and distributes wines such as Michele Laroche and Nederberg, which cost upwards of Rs 750 a bottle and cater to the top end of the market. This segment is growing at 20 per cent per annum.

Grover Vineyards' Kewadkar: MNCs will grow the market

Beer major Foster's, which sells its eponymous brand of Australian beer in India, is also eyeing this market. Says Foster's India Managing Director Pradeep Gidwani: "There is a nascent opportunity in the Indian wine market; and the Foster's Group is evaluating the opportunities that exist here." The company owns such global best sellers as Wolf Blass, Lindermans and Beringer.

The imminent entry of foreign players doesn't worry Indian vintners. On the contrary, they welcome the development. "It is important for more players to come in. This will increase awareness and, in turn, expand the market," says Kewadkar.

Pushing consumption is a combination of dropping prices-a good bottle of Indian wine costs about Rs 400-500, about the same as a bottle of premium Indian whisky or vodka-higher disposable incomes and greater awareness about international lifestyles across the country. But Kewadkar says it will take at least another 3-5 years for wine to become a part of daily life outside of the metros and the bigger cities. But when that happens-and if Sharad Pawar can push his proposal through-there will be an explosion in demand.

Cheers to that.