Champagne Indage – Let’s Celebrate !!

Champagne Indage Ltd (CIL) is India’s leading wine producing company with a 75% market share in the wine segment and also Asia’s largest producer of wines. CIL has been instrumental, to a large extent, in developing Indian wine industry. It produces white, red, sparkling and rosy wines of many varieties. Apart from domestic market, the company exports wine to USA, Japan, UK, Switzerland, Germany and other European countries. CIL has a total wine production capacity of 6.5 million litres across five countries. It is also making two more wineries in India, one each at Baramati and Nasik. CIL has a portfolio of brands like Riviera, Chantilli, IVY, Figueire, Vin Ballet, VINO, etc.

Subsidiaries:

Seabuckthorn Indage Ltd (Fruit juice business) - 52.63%

The juice business of Seabuckthorn Indage is growing at 400%. In the home market CIL has introduced 10 juice varieties under the brand name Leh Berry in 200-ml and 1-litre tetra packs. CIL plans to introduce line extension products like jams, jellies, marmalade, and pickles for the Seabuckthorn fruit. This is likely to expand the product range and reduce dependency on its wine business.

For more visit : http://www.lehberry.com/home2.html - http://www.lehberry.com/home2.html

Thachi Wines (Australian Wine business)

The acquisition of Thachi Wines (TW), Australia, has given Champagne Indage a global footprint. TW has contractual arrangements for vineyards and a winery in Australia, and processes 2.7m litres of wine a year. At present, TW markets its products in Australia, China and Europe under the brand name Broken Earth. Most of this wine is sold unbranded. The acquisition would provide a ready-made market for CIL to hawk its own brands in these countries through TW’s distribution channels

Indage UK (Distribution arm)

To market its product in the UK and Europe.

CMP: Rs.671

Market Cap: Rs.852 crs

EPS for FY07: Rs.15.4

EPS Growth : over 100%

ROE for FY07: 15.8

Opportunities:

- Indian demand is tiny compared to the $117-billion global wine market, but has been growing at 20 percent annually in the last seven years, according to a report by Rabo India, a unit of Dutch financial giant Rabobank. The Indian wine market stands at Rs.450 crore in value terms.

- CIL will sell its products in the supermarkets of Maharashtra, Karnataka, Chandigarh, Goa and Haryana. CIL plans to open more than 1,000 outlets and sell more than 4.5 mn litres in the current fiscal. Retail expansion which would be a mix of franchise and company-owned outlets and would be branded as 'IVY Wine Bars'.

- CIL aims for a total capacity of 14 mn litres by October 2008.

- Economy brand, Vino brings in about 12% of revenue. CIL expects beer drinkers to migrate to Vino due to the latter’s attractive price of Rs 99 a bottle.

Risks:

Q1 is the weakest quarter due to seasonality of business. United Spirits, Sula Wines, Seagram, Grover Wines and Diageo are the competitors in this space.

Prominent Investors:

Sonata Investments            820000    6.75%

Shivanand Mankekar         221420     1.82%

Interesting Links:

http://inhome.rediff.com/money/2007/mar/19wine.htm - http://inhome.rediff.com/money/2007/mar/19wine.htm

http://indianwine.com/cs/blogs/about_wine/archive/2006/10/17/1115.aspx - http://indianwine.com/cs/blogs/about_wine/archive/2006/10/17/1115.aspx

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you re right smart cat indian food..like chicken tikkas, reshami kebabs , etc go very well with wine....and i can see more n more people ordering wine and even champagne these days in TGIF or Other good pubs here....

No idea about the management quality, but I think it is a father-son duo running the show.

On Pune-Nasik highway, Champagne Indage & other wine making companies have vineyards & they promote Wine Tourism. As per media reports weekends are pretty crowded there. I don't have a first hand experience though.

Market for wine in India is very small and it is good news that it is growing and I am sure Dr.Mallya is clever to understand that also. He has formed a joint venture with mr. Sharad Pawars brothers winery in Baramati.

The wine market is expected to grow to 8.3 million litres by 2010. Per capita consumption of wine remains extremely low in India; however, there is growing consumer interest in wine with a number of wine clubs opening in Delhi, Chandigarh, Hyderabad and Bangalore.

Nearly 80 per cent of wine sales are accounted for by the major cities, especially New Delhi, Mumbai, Chennai, Kolkata, Pune and Bangalore.

West India accounts for over 41 per cent of total volume sales of wine in India, followed by North India, which accounts for 29 per cent of volume sales.

Nearly 90 per cent of wine sales are for still (that is, red and white) wines. Sparkling and ros� wines, in contrast, target select segments of particularly affluent consumers.

In most states the sale of wine remains restricted to licensed off-and on-trade outlets, which means a limited number of outlets selling wine.

Around 63 per cent of the volume sales of wine are through off-trade channel in five-star hotels, pubs and bar-restaurants.

KIT by Technopak Advisors

Excerpt from SSKI Report on Wine Industry & Champagne Indage

Note : This is an old report of November 2006. Since then the stock has appreciated from levels of Rs. 390 to present level of  around Rs.700

The wine god Bacchus is smiling upon India. Wine, a poor cousin of “hard” drinkshere, is slowly but surely finding its feet. The industry grew at 25%+ per annum overthe last three years to Rs2.6bn currently. Interestingly, growth rates will be strongergoing forward; with young, loaded Indians aspiring to “arrive” in the society as alsofavorable regulations encouraging viticulture, the industry is estimated to record astrong 60% CAGR over FY06-10 and 24% over FY10-15, to Rs20bn and Rs60bnrespectively. The credit for seeding India with a wine culture goes to ChampagneIndage (CIL), the market leader with a 70% share and the only listed play in the space.We believe CIL is at the vantage point to reap the rewards of its perseverance, and isset to witness exponential growth (90% EPS CAGR over FY06-09E).

Potential unlimited – an Rs20bn market estimated by FY10: At per capita

consumption of 0.07 litres per annum, the Indian wine market offers an exponentialgrowth opportunity for producers. The industry is estimated to log in 60% CAGR forthe industry over FY06-10 and 24% CAGR over FY10-15, to Rs20bn and Rs60bnrespectively.

In India, the total number of wineries stands at 38, of which 36 are in Maharashtra.The state accounts for over 85% of India’s wine production. In terms ofconsumption pattern, around 80% of wine consumption in India is confined to thecities

India has 75,000 acres of vineyards, of which less than 10% (only 7,000 acres) areused for growing wine-grade grapes.

“TROPICAL WINES” FROM INDIA: A LONG-TERM OPPORTUNITY

Besides a huge latent domestic market, there is a window of opportunity for

domestic wine producers to create a unique niche or “position” for Indian wines inthe international market. Given India’s tropical climate, the sunshine factor impartsa unique flavour to the grape grown and wines produced here vis-à-vis those by theworld’s two principal wine producing blocks – the “Old World” and the “NewWorld”. Other than India, only Brazil – which has recently started wine production– boasts of a tropical climate. This offers an opportunity to the domestic producersto create a separate niche or “position” for Indian wines in the international market– that of “Tropical Wines”. However, given that the domestic market is big enoughto absorb even the ramped up supplies in the coming period, we see this as a longtermstory for the domestic industry with a perspective of 5-7 years.

CHAMPAGNE INDAGE: PROXY FOR THE INDIAN WINE INDUSTRY

With 70% of the market under its belt, Champagne Indage is the largest and onlylisted player in the Indian wine industry. The company is vertically integrated with~5,600 acres of vineyards under cultivation – both owned by the group and oncontract farming basis. Its robust portfolio of 35 brands (28 of which are owned)straddles the entire price spectrum in the market place – from Rs99/ bottle toRs600+/ bottle

After Champagne Indage, Sula Vineyards is the second largest player in the Indianwine industry with a 20% market share. Set up in 1998 at Nashik in Maharshtra,this new entrant into the industry has notched up an impressive performance in ashort span to garner this market share. The company has three wineries with a totalcapacity of nearly 2m litres per annum and access to vineyards with an expanse ofabout 400 acres. Besides selling its own products, Sula also imports and distributeswines from leading worldwide players in the domestic market.

Grover Vineyards is another well-known player in India with ~7% market share.

The company owns over 200 acres for growing wine grade grapes near Bangaloreand uses 35 varieties of French wine grade grapes in its production process. GroverVineyards too is a private company with 14% stake held by Veuve ClicquotPonsardin, a leading champagne house of France.

McDowell & Co has acquiredBouvet Ladubay, a winery in France. Before setting up a local winery in France, thecompany would initially ship the wine in bulk and bottle it in India till a strong franchise has been created for its brands.

CIL makes 35 varieties of wine with the help of 100 varieties of grapes. The brands spanacross price points catering to every economic strata. The company has a virtual monopolyin sparkling wine, with brands such as Marquise De Pompadour, Joie, Ivy Brut, Milleniumfor the elite wine lovers. Among still wine range Riviera is the largest selling brand. With India's younger generation getting attracted to wine consumption, CIL has introduced anaffordable range to convert beer drinkers such as Vino priced at Rs99 per bottle and Sin

- a wine cooler economically priced at Rs30 per 330ml bottle. Other brands under JVinclude Cranswick Indage (Australia), Wente Indage (California), Zulu (South Africa) andRhine Pride (Germany).

SSKI Recommendation

We expect CIL to register sales CAGR of 75%+ over FY06-09 on the back of

capacity expansion and strong demand growth. With margins in the 28%+ region,RoCE of 19.5% and RoE of 18%+, the stock compares favourably with peers in thealcoholic beverages industry – both domestic and international. The stock trades at12.8x FY07E EV/ EBIDTA vis-à-vis 14.0-17.5x for the peer group. With estimatedCAGR of 90%+ over FY06-09 in earnings, we initiate coverage on the stock with anOutperformer rating and a 12-month price target of Rs500.

Though I am a teetotaller, I have seen in most of the five star hotels of Mumbai "Riveria" brand of Red wine and white wine is served. Seeing the popularity of the Brand and support given by the Govt, the stock seems to have potential. The debt:equity is 4:1, which is a slight disturbing. The company have allotted warrants recently to Mr Shivanad Manekkar at 325.00 recently.

Wine makers look to cash in on retail boom

Source : ET

In Today's Mint,

Thanks for all those posts Devesh. Understanding the industry dynamics is more important then looking at the PE/EPS etc.

Champagne Indage is seeking to expand its operation in overseas market through acquisitions and contract manufacturing. The company is opting for contractual bottling agreement with local players for entering the UK and the US wine markets. " In the US, we are going to sign the contractual agreement for the bottling of over half a million cases and in UK for 6.5 lakh cases.," Ranjit Chougule said. The company is going to sign the agreement with wines manufacturer and is also entering into agreement with US based retailer Costco to sell its brand all across the US market. Speaking about the company's plan in US, Mr.Chougule said, "US is the biggest wine market in the world and entry would provide an oppurtunity to establish firmly in global arena." (ET)

A small South African winery is using conversational marketing to go global

Source: http://money.cnn.com/2007/08/07/technology/wine_marketing.biz2/index.htm?postversion=2007080807 - CNN Money

Here's the Maharashtra government's novel idea to promote grape cultivation in the state — exclusive wine bars.
It has issued a notification incorporating major changes in the Bombay Prohibition Act that lays down rules for sale and consumption of all alcoholic beverages. Currently, liquor licences are given only to hotels and restaurants where food is served. But as per the amended rules, wine bars will not have to fulfil any such condition.

"The amendment will permit setting up of wine bars," a home department spokesperson told ET. The caveat, however, is that these bars can sell wine made only in Maharashtra from grapes grown in the state. "The amendment is aimed at helping local grape cultivators and wineries," said the official.

Such wine bars will not have the permission to serve any liquor except wine. Under the new policy, any shop can get a licence to open a wine bar for an annual fee of Rs 5,500. But the fee for this in Mumbai will be much higher — Rs 37,500 — but will be cheaper in the suburbs and other adjoining areas, including Thane and Navi Mumbai. The rules also stipulate that the bars need to have a minimum carpet area of 160 sq ft and should not face the road.

A fledgling wine industry has been lobbying hard for such an arrangement, but the state government was unsure of the political fallout. In the past, the government had to abort its plan after it was criticised for encouraging "wine culture". On the other hand, the state government went ahead to announce various sops, including excise holiday till 2011 for wine makers. It also unveiled a grape processing industrial policy with incentives like sales tax concessions, simplified processes and procedures, fixed licence fees for 10 years and creation of a wine institute and a grape board for quality control, certification and export promotion.

The state, incidentally, has two of the country's biggest grape-producing districts, Nasik and Sangli. Nearly 20,000 hectares of vineyards in these two districts alone grow more than one lakh tonne of grapes every year. Though the state has half a dozen wineries, the production of its wine-quality grapes is at around 5% of the total produce with most farmers growing the table variety. Some concerted efforts, of late, have seen a gradual increase in the production of wine-quality grapes. "The recent changes will help the nascent wine industry grow faster," the official said.

I have increased my exposure to CIL. Now my avg.price comes down to Rs.623. My target price is Rs.1050 (conservative 35 EPS*30 PE)

Check out the Review of IVY Wine bars and photos

http://www.citipals.com/l_13721_ivy-worli-mumbai_bg:1_sl:15019#bizimages - http://www.citipals.com/l_13721_ivy-worli-mumbai_bg:1_sl:15019#bizimages

''India's wine market is currently equivalent to around 200 people, sharing one bottle but it is likely to grow at projected CAGR of 22 per cent over the next three years in view of rising consumption of wine patterns not only among youngsters but equally so in aged group,'' Chamber President Venugopal N Dhoot said.

The cost for opening and setting up a wine plant in the country with capacity of around a lakh litres comes only to somewhere between the Rs 1-1.5 crore mark. As a result many entrepreneurs, Indian and foreign, are jumping on the Indian wine bandwagon.

Interesting piece of article http://business.scotsman.com/agriculture.cfm?id=1355392007 - http://business.scotsman.com/agriculture.cfm?id=1355392007

Thanks for the heads-up. I was wondering why women were chasing me today (for a change).

This was stated by M.S. Dhanota, president and COO of Seabuckthorn Indage Ltd, after the launch of Mountain Spring — the natural mineral water made by the company. "The total bottled water industry in the country is worth Rs 1000 crore, of which 10 per cent is the mineral water industry. By the end of this year, we hope to capture a 5 per cent share in the market," he said.

Leh Berry Minerals , has also signed agreements to set up offices in the UK and Dubai. "We will also be expanding our manufacturing facilities in Bhutan, Nepal and Sri Lanka," he said.

The company has set up a manufacturing facility at Paonta Sahib in Himachal Pradesh with an investment of Rs 3.50 crore and has a capacity of 1 lakh litres of mineral water per day.

Dhanota also said they were planning to have 14,000 outlets for selling mineral water this year. As part of their distribution network expansion, the company has tied up for co branding with Café Coffee Day, which has given them access to 1,200 outlets across the country.

Vineyard produces a 'commodity'. Indage makes 'brands'. Possibly because of that?

hi devesh , any idea when the next round of trip is being organised ...being in mumbai if i miss this it wd be a crime ...

The Indian alcoholic beverages market is gradually opening up as quantitative restrictions are being lifted, import duties are being lowered and domestic regulations are being simplified. These developments are attracting the attention of foreign players, who are faced with a slowdown in developed markets. According to some recent reports, by 2005, the total supply of liquor in the world will be close to 282 million hl. But consumption will be only about 198 million hl. In such a scenario, India would be an attractive market for foreign players.

An estimated 10 million people consume alcohol in India, out of a population of about 1.2 billion. The liquor industry in India is highly government regulated in terms of constraints on manufacturing, storage as well as distribution. The industry faces threat of prohibition in several states, high taxes, restrictions on advertising, restrictions on inter-state movement, etc. However, the deep-rooted social conditioning against alcohol consumption is gradually starting to change. Consumer attitudes are relaxing as people are exposed to the Western lifestyle through the media and overseas travel. The per capital consumption of liquor in India averages 0.2 litres per annum. It has remained constant throughout the 1990s, while the consumption of beer has risen steadily since 1988 to about 0.8 litres per person per annum.

Alcohol is a broad term that covers three categories: spirits, beer and wine. Spirits include whisky, rum, vodka, brandy and gin. India imports around 3 million liters of spirit and 7500 cases of wine from Europe. French wines are still the largest imported, but wines from Australia and California are making strong inroads.

The wine market is growing at 25-30 per cent a year, nearly three times as fast as beer, whisky or rum, which together makes up 45 per cent of the total. Exports currently make up about 10-15 per cent of total output. The perception of wines as being up-market and sophisticated is helping in bringing about this change. One sign of the changes happening is the emergence of Wine Clubs in a number of cities. The per capita consumption in India is only 0.07 liter/person/year.

Up to 80% of wine is consumed in the major Indian cities. The consumption pattern is, Mumbai (39%), Delhi (23%), Bangalore (9%) and the foreign tourist dominated state of Goa (9%), where as Rest of India has only 20% consumption. Not only has the number of imported wines increased exponentially, the Indian producers, too, have introduced a number of new labels and wine styles. Approximately 38 wineries are presently operating in the country with a total production of 6.2 million liters annually.

Maharashtra is leading among the states with 36 wineries and 5.4 million liter production. Apart from this, 72,000 wine cases are imported mainly by ITDC, Sansula, Brindco, E & J Gallo and other private companies.

Wine Production In India:

India has about 123,000 acres of vineyards, but only one per cent of this acreage is used for wine. Only three wine companies are currently producing wines in India namely:

• Chateau Indage Limited, Pune
• Grover Vineyards Limited, Bangalore
• Sula Wineyards, Nasik.

The overall production of these units is approximately 150,000 cases (Each case is of 12 bottles). In addition, they also import about 20,000 cases of wines in bulk and bottle them in their plants. About 100,000 cases of inferior quality wine is produced by small local winemakers which is called 'pot wine'.

Domestic Consumption Of Wines:

The overall consumption of wines in India is about 400,000 cases a year of which 85 per cent are table wines and the remaining are the expensive varieties. Out of the 400,000 cases, about 50,000 cases are imported from various sources. The trend in consumption of wines is steadily increasing. Today, the consumption per head is roughly 0.0030 litre per annum. The day it becomes one litre, the market will become over a billion litres or over 111 million cases. Eighty percent of wine consumption in the country is confined in major cities such as Mumbai (39%), Delhi (23%), Bangalore (9%) and Goa (9%). There is growing awareness about the wine as a product in the domestic market.

Both the Indian wine market and the indigenous wine industry are in their nascent stages, but growing by leaps and bounds. Fifteen years ago there was no locally made wine that was drinkable. Now there are three significant wine makers, all family-owned businesses, the Chougules, the Grovers and the Samants. There is also great interest in wine makers from France, Italy, Australia, South Africa, America, and Chile to enter the Indian market.

Opportunities For Imported Wines in India:

• Booming Economy: Sensex touched 11,000 pts. Increase of 3,500 pts. during last 2 years.
• Italian Cuisine No. 3 in popularity.
• Wine consumption growing at 30% every year. 2006-07 expected at 40% growth.
• More people shifting from Spirits to Wines. Spirits growth only by 10%.
• Ladies & youth: big factors.
• Current market: 74 million people.
• Expected to grow to 100 million people in next 5 yrs
• India's wine market at 5 million euros, makes up less than 1 % of India's 1.3 billion euros alcobev market
• Duty Free Licenses to Hotels & restaurants
• Up market bars, eateries & Retail Shops; in past stocked few brands have started keeping up to 200 wines on the list
• Wine consumption in India will grow 10-fold in 10 years
• Wine growth 3 times faster than spirits & Beers
• India consumes about 8 million bottles of wine every year. Of these, 1.2 million are imported.
• With 8 million bottles sold a year, its annual consumption is .008 bottles a head against a world average of 5 bottles.
• As for importing, India currently brings in 1,25,000 wine cases a year -accounting for a mere 4.5 milliliters of per capita consumption of the billion-plus population.

The Government of Maharashtra has nominated Maharashtra Industrial Development Corporation (MIDC) as a nodal agency for establishment of grape wine parks in the state and would coordinate efforts of various organizations from central and state agencies and the stake holders such as farmers, processors, service providers etc. Under this policy two wine parks have been established by MIDC, one Godawari Wine Park at Vinchur, Nashik District and Krishna Wine Park at Palus, Sangli district. In addition a Grape Processing and Research Institute (GPRI) at Palus under the Bharati Vidyapeeth Deemed University has also been established.

SUPPLY CHAIN

For imported wine segment the distribution involves importers, distributors & retailers. The enclosed distribution chain will put more light on the levels and cost implications at various stages:

Movement of stocks and process involved:

Step 1: Winery
Step 2: Customs bonded warehouse
Step 2: Distributors / Wholesalers
Step 3: Retailers/Hotels/Restaurants

Poor storage and transport facilities inspite of tropical climate are the main problems of wine marketing in the country. Other constraints are the lack of promotional activities for wine consumption in the country and unfavorable rules for domestic marketing of wines except in few states. These and other factors contributed to India’s low wine consumption. Certain promotional strategies, such as easing of tariff barriers for the wines, developing awareness on health benefits of wine and to supply good quality wines in reasonable prices in the domestic market are emphasized.

Conclusion:

Impediments remain for international winemakers, not least the high import duties of up to 260% currently levied on wine. Companies seeking to enter the Indian wine market should equally be aware of the regional nature of Indian wine consumption. Major cities like Mumbai, Delhi and Bangalore should be the primary targets, as they account for almost 80% of the country's total wine consumption. The soaring popularity of imported brands which, sell at much higher prices than domestic varieties, offer international companies great opportunities for strong value growth.

Taxation on Imported Wine in India:

Courtesy: Indo-Italian Chamber of Commerce and Industry

Indiabiznews, October 8, 2007

http://economictimes.indiatimes.com/Latest_News/Grape_wine_industry_in_Nasik_on_rise_Sula_CEO/articleshow/2474308.cms - Grape wine industry in Nasik on rise: Sula CEO

Champagne Indage eyes winery in S Africa