indian market overview

8/14/2019 Indian Market Overview

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Strictly private and confidential


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Overview of Indian Wine Industry

November 2008


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Indian Market Section 1

Section 1Indian Market

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Area 3.29mm km 2, Kashmir region included

Population1.148 bn inhabitants (worlds second largest nation by inhabitants)349 inhabitants per km 2

Capital city Delhi

Government Parliamentary Democratic Republic

Administrativestructure Union of 28 states and 7 union territories (Andaman and Nicobar islands, Chandigarh, Dadra & Nagar Haveli,Daman & Diu, Delhi, Lakshadweep, Pondicherry)

GDP$2,966 bn (2007) by PPP$1,099 bn (2007) by exchange rate

Currency Indian Rupee (INR; Rs)

Languages Hindi, 17 other local languages, English

Religions Hindu (80%), Muslims (14%), Christians (2.4%), Sikh (2%), Buddhists (0.7%), Other (0.9%)

Time zone GMT + 5:30

Taxation 33.7% corporate tax, 12.5% VAT (for most commodities) and tax exemption for f irst 10 years inSpecial Economic Zones

Country riskMoodys: Baa2S&P: BBB-Fitch: BBB-

Source: CIA Factbook, EIU

India at a glance

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Ranking of GDP growth 2006 2020 (% p.a.)

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

India

Malaysia

China

Thailand

Turkey

Ireland

Indonesia

Korea

Mexico

Chile

U.S.

Brazil

Germany

Japan

Source: Deutsche Bank Research, Formel-G

India is leading the way in GDP growth

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GDP Growth (USD in millions) GDP in PPP

505591

695

812915

1,140

1,270 1,313

0

200

400

600

800

1,000

1,200

1,400

2002 2003 2004 2005 2006 2007 (a) 2008 (a) 2009 (a)

13,000

10,500

3,870

2,700

1,850

1,700

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

(1) U.S.

(2) China

(4) India

(5) Germany

(9) Russia

(10) Brazil

( a) Es tima te .Source: Economy.com, Global Insights Nov 08 Source: IMF WEO

Inflation Levels Forex reserves ($ billion)

13.10%

3.00%

5.10%

2.30%3.50%

5.80%

4.40%

8.20%

6.80%

4.70%

6.40%

2.50%

5.20%

5.00%

6.80%

4.80%

5.90%

2.50%

7.20%5.20%

5.50%6.50%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

CP I WP I

26 29 3238 42

5474

119140

177

276

0

50

100

150

200

250

300

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

Source: CMIE, Global Insight Nov 08 Source: Indiastat.com, RBI

Strong fundamentals exist

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FDI flow into India A.T. Kearney FDI confidence index 2007

6.0

15.7

16.9

15.3

17.5

14.5

8.1

4.5%

2.5%2.9%

3.1%

1.8%

2.1%

2.8%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2002 2003 2004 2005 2006 2007E 2008E

F o r e i g n

i n v e s t m e n

t ( $ b n )

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

F or ei gni nf l ow

% of GDP

Foreign investment Capital inflow

2.21

2.09

1.86

1.81

1.78

1.78

1.75

1.72

1.70

1.70

1.63

1.61

1.59

1.57

1.56

0.00 0.50 1.00 1.50 2.00 2.50

1 (1) China

2 (2) India

3 (3) U.S.

4 (4) UK

5 (10) Hong Kong

6 (7) Brazil

7 (18) Singapore

8 (22) United Arab Emirates

9 (6) Russia

10 (9) Germany

15 (15) Japan

18 (*) South Africa

20 (13) Turkey

23 (24) Central Asia

25 (12) Czech Republic

(0 low 3 high confidence)

( ) = 2006 rank.Source: UNCTAD, Morgan Stanley Research Source: A.T. Kearney

India has gained strong standing in the internationalinvestor community

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Population by age (millions of persons)Population of large urban

communities(millions of persons)

40% 34% 32% 30%

43% 45% 47% 47%

7% 9% 10% 11%5% 6% 6%5% 6% 5% 5%

6%

0%

20%

40%

60%

80%

100%

120%

1996 2001 2006E 2010E0 14 15 34 35 44 45 54 >55

700 1,000 1,110 1,200

3.9%

7.4%

4.6%

1.8%

CAGR435

380

330286

0

100

200

300

400

500

2000 2005 2010 2015

CAGR: 2.9%CAGR: 2.7%

CAGR: 2.9%

Indian middle class breakdown (2002) Indian middle class breakdown (2010E)

High, 1%Upper middle, 5%

Middle, 22%

Low, 72%

F2002 188 million households


Middle, 22%

Low, 72%

F2002 188 million households


Middle, 26%

Low, 66%

F2010E 222 million households


Middle, 26%

Low, 66%

F2010E 222 million households

Note: Definitions (at F2002 prices):Low Up to $1050.Midd le $1050 $4200 .Upper middle $4200 $10,500.High $10,500 & above.

Source: Morgan Stanley, Value Partners

Large working population and growing middle classcontributing to overall growth

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Current market statistics (as of Mar 2008) Savings and investments

Market capitalization ($bn) 1277Average daily volumes ($bn)

- Cash- Derivatives

Total domestic mutual fund assets ($bn) 125.5

FII ownership (% of market cap) 1.2%

Saving (F2007, % of GDP) 38.0%

Gross capital formation (F2007, % of GDP) 39.4%

Level of gross FDI (F2007, $bn) 22.1

FDI as % of GDP, (F2007) 2.6%

National income statistics Composition of GDP (F2007, %)Nominal GDP (F2007, $bn) 838

Population (F2007, millions) 1,122

Population growth (F1995 2007, % CAGR) 1.8%

Per capita GDP (F2007, $) 747

Nominal US$ GDP per capita growth(F1995 F2007, %)

12.5%

Agriculture and allied activities 18%Agriculture 17%Mining and quarrying 3%

Industry 21%Manufacturing 16%Electricity, gas and water supply 2%Construction 8%

Services 61%Trade, hotels, transport and communications 25%Financing, insurance , rea l est . and bus. services 14%Community, social & personal services 13%

Source: RBI Economic Survey 2007-2008

Facts and figures: economy and markets

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Market Value (20032007) Market Volume (20032007)

$14.3$16.1

$18.3$20.7

$23.5

13.7%

13.1%13.5%

12.6%

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2003 2004 2005 2006 2007

M a r k e t v a l u e ( $ b i l l i o n )

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

% gr ow

t h

Market Value ($ billion)% growth

CAGR: 13.2%

3.6 3.94.2 4.4

4.7

7.3%7.6%

6.6% 6.7%

0.0

1.0

2.0

3.0

4.0

5.0

2003 2004 2005 2006 2007 M a r k e t v o l u m e ( L i t e r s b i l l i o n )

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

% gr ow

t h

Market volume (Liters billion)% growth

CAGR: 7.0%

Market Segmentation (2007) Market Share (2007)

Spirits88.4%

Wine0.8%Beers, ciders

and FABS10.8%

Other 75.5%

SABMiller plc7.8%

Millenium Alcobev6.4%

UnitedBrew eries Limited

10.3%

Source: Datamonitor

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Distribution (2007)

Specialistretailers46.6%

On-trade41.5%

Other 2.8%

Supermarkets/hypermarkets

9.1%

Source: Datamonitor

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Domestic Key Player

Established in 1982

Located in Narayangaon, Pune

Key Brands: Marquise de pompadour, Ivy, Joie, Chantilli,Figueira, Riviera, Vino Sparkling, Vin Ballet, Hammer

Production capacity of 15 million liters

Total Revenue: $53.4mm (2007-08)

Investors: Arisaig Partners, Reliance Capital Private Equity

Established in 1997

Located on the outskirts of Nashik

Key Brands: Dindori Reserve Shiraz, Sula Red Zinfandel, SulaCabernet Shiraz , Satori Merlot, Madera Red, Sula SauvignonBlanc, Sula Chenin Blanc, Madera White, Viognier, Dia White

Sales: Over 2 mm bottles in 2007-08

Total Revenue: $2.3mmInvestors: Future Capital Holdings, GEM India Advisors

Established in 1988

Located in Nandi Hills, Bangalore

Key Brands: La Rserve, Sauvignon Blanc, Cabernet Shiraz,Shiraz Rose, Viognier and Clairette

Production capacity of 2.1 million liters

Total Revenue: $4.6mm

Investors: n/a

Source: Company websites

International Key Player

Established in 1743

Located in Epernay Marne, France

Key Brands: Brut Imprial, Brut Imprial Ros, MillsimeBlanc 1998 & 1999, Nectar Imperial

Total Revenue: $1,173.9mm (2007)

Source: Company websites

Indian Wine Market Competitive Landscape

Market Share (2006)

Others29%

SamantSoma18%

Grover Vineyards

9%

IndageChampagn

44%

Source: Euromonitor

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Industry Overview Trends

The Indian wine market only makes up 0.8% of the entire Indian alcoholsegmentThe Indian wine market has an estimated size of $265mm and 11mmliters in terms of volumeThe industry has been growing steadily by 32% (2002-2007) and isestimated to grow by an additional 32% over the next 5 years (2007-2012)The countrys 3 main wineries include Sula vineyards, Chateau Indagevineyards and Grover vineyards the three players together contribute ~90% of the marketFive-star hotels, pubs and bar-cum-restaurants are the primary wineselling outlets in the country as 63% of the sales are through thesechannels

The Indian wine industry is on an upswing as production andconsumption are expected to increase by ~32% over the next 5 yearsAs the industry grows, new players such as Seagram and United Spiritshave entered the market (2007). While a number of other players suchas Diageo are said to be keen on entering as wellWith a low set up cost for a wine plant between Rs.1015mm ($0.2$0.3mm) with a capacity of 100,000 liters, competition and the overallmarket are expected to increaseAs wine consumption is still in its infancy, manufacturers are providingwine at economical prices

wine in the Rs300-500 price range make up ~59% of wines soldHowever, ~80% of wine consumption is confined to major cities likeMumbai (39%), Delhi (23%), Bangalore and Goa. The non urban areasstill account for only 20% of the market

Market Value (20022007) Market Value (20072012)

$147

$197

$112

$82$62$49

23

35

6

8

0

50

100

150

200

250

2002 2003 2004 2005 2006 2007

M a r

k e t V a l u e

( $ m

i l l i o n s )

0

1

2

3

4

5

6

7

8

9M

ar k e t v ol um

e ( L i t er s mi l l i on )

Still light g rape w ine Sparkling wine

Fortified w ine & vermouth Market volume (Liters million)

CAGR: 32%

$197$265

$360

$479

$795

$624

811

15

20

26

33

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012

M a r

k e t V a l u e

( $ m

i l l i o n s )

0

5

10

15

20

25

30

35M

ar k e t v ol um


Still light g rape w ine Sparkling wine

Fortified w ine & vermouth Market volume (Liters million)

CAGR: 32%

Source: Euromonitor International estimates, Official statistics, Trade associations, Trade press, Company research, Trade reviews, Rabobank research dated February 2008, press

India Wine Market Overview

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Sales of Wine by Sub sector (2007) Forecast Sales of Wine by Sub sector (2012)

Sub Sector

TotalValue

($ mm)

TotalVolume

(Liters mm)Still light grape wine 154.7 7.2

Still Red Wine 72.9 3.6Still White Wine 81.8 3.6Still Rose Wine _

Sparkling wine 37.5 0.5Champagne 28.0 0.1

Other sparking wine 9.5 0.3Fortified wine & vermouth 4.5 0.5

Port / Oporto 4.5 0.5Sherry _ Vermouth _

Nongrape wine _ _ Total 196.7 8.2

Sub Sector Total Value

($ mm)

TotalVolume

(Liters mm)CAGR

(2007-2012)Still light grape wine 686.9 30.5 34.7

Still Red Wine 326.7 15.4 35.0Still White Wine 360.2 15.1 34.5Still Rose Wine 0.0 _ _

Sparkling wine 97.6 1.1 21.1

Champagne 73.9 0.3 21.4

Other sparking wine 23.7 0.8 20.0Fortified wine & vermouth 10.9 1.2 19.6

Port / Oporto 10.9 1.2 19.6Sherry _ _ _ Vermouth _ _ _

Nongrape wine _ _ _

Total 795.4 32.8 32.2

Regional Consumption Share of Price Segment

Maharashtra37%

Delhi25%

Karnataka12%

Goa10%

Other 16%

INR200 600

75%

INR < 20015%

INR600 800

6%

INR > 8004%

Source: Euromonitor International estimates, Official statistics, Trade associations, Trade press, Company research, Trade reviews

Wine Segmentation (2007)

Red45%

White25%

Fortified15%

Sparkling8%

Ros7%

Source: Industry Estimates

India Wine Market Overview (continued)

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India has a familiaritywith French wine asthey are the largest

importer of wine

Wine Imports by Country of Origin: Total Value (2006)

France44%

United ArabEmirates

2%

Germany3%

SouthAfrica

1%

UnitedKingdom

7%

USA5%

OtherCountries

7%

Argentina3%

Australia12%

Chile2%

Italy14%

Source: GTIS

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Market Value (20022007) Market Value (20072012)

$11 $15

$38

$29$24

$19

0.2 0.2

0.3 0.3

0.4

0.5

05

10152025303540

2002 2003 2004 2005 2006 2007 M a r

k e t V a l u e

( $ m

i l l i o n s )

0.0

0.1

0.2

0.3

0.4

0.5

0.6 M ar k e t v ol um


Other sparkling w ineChampagneMarket volume (Liters million)

CAGR: 27%

$57$68

$82$98

$47$38

0.50.6

0.70.8

1.01.1

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 M a r

k e t V a l u e

( $ m

i l l i o n s )

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Other sparkling w ineChampagneMarket volume (Liters million)

CAGR: 21%

Indian Sparkling Wine Market Overview

Price Segmentation (2007)

Rs 650 toRs749

7%

Over Rs75010%

UnderRs549

28%

Rs 550 toRs649

55%

Notes: Under Rs549 ($13.9)Rs550 to Rs649 ($13.9 - $16.4)Rs650 to Rs749 ($16.5 - $19.0)Over Rs750 ($19.0)

Source: Euromonitor International estimates, Official statistics, Tradeassociations, Trade press, Company research, Trade reviews

HNWI Population Growth(2005-2006)

21.2%20.5%

16.0% 15.5% 15.4%

14.1%13.3% 12.9% 12.6% 12.2%

0%

5%

10%

15%

20%

25%

Sin g ap o re In d ia In d on esia Ru ssia Un ited ArabEmirates

SouthKorea

SouthAfrica

I sr ael CzechRepublic

HongKong

H N W I p o p u l a t i o n g r o w t h ( % )

Notes: HNWI (High net worthindividuals)Growth rates and absolute HNWInumbers are rounded.

Source: Capgemini Lorenz curveanalysis, 2007

Overview Brand Share of Champagne (2003-2006)

Consumption of sparkling wine in India is quite low

in 2007, sparkling wine contributed less than 6% of the total volumeof wine sales

Approximately 50% of sales comes from affluent consumers in WestIndia centered in Pune , Mumbai and DelhiThere is little interest in high-priced sparkling wine beyond major citiesand developed states

% Totalvolume Brand Company 2003 2004 2005 2006

Moet &Chandon(LMVH MoetHennessyLouis Vuitton)

Moet HennessyIndia Ltd

54.7 55.7 56.0 56.0

Dom Perignon(LMVH MoetHennessyLouis Vuitton)

Moet HennessyIndia Ltd

43.8 41.5 41.5 42.0

Others 1.5 2.8 2.5 2.0

Total 100.0 100.0 100.0 100.0

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Source: Euromonitor International estimates, Official statistics, Trade associations, Trade press, Company research, Trade reviews

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