Will India's second-largest winery succeed at premiumisation

At Grover Zampa's cellar in Nandi Hills, near Bangalore, winemaker Karishma Grover takes this writer through a tasting session.

There is Zampa Soiree Brut, a sparkling wine that is fruity, "almost a bit of green apple". La Reserve Blanc is "younger, fresher, easy to drink", the sort you want to drink in a bar. Vijay Amritraj Reserve Collection White, on the other hand, is for sit-down dinners and "feels like a more expensive wine" (it is).

Vijay Amritraj Red has the lingering of dark fruits and "the finish is long, oaky, very intense". Finally, there is a red wine Grover serves - just a bit - straight from the barrel. That is Insignia 2015, which will be ready next year. It is India's most expensive wine at Rs 5,000 a bottle. Insignia 2014, with a super limited production of 300 bottles, was launched recently after "24 months of oak contact". 

Grover Zampa is India's oldest and second-largest winery with annual production of 2,00,000 cases in 2015/16 (one case has 12 bottles). That is way below what Sula Vineyards, India's largest winemaker, produces - wine consultant Alok Chandra estimates its production at 850,000 cases and says it is "larger than the next five companies put together".

Nevertheless, Grover Zampa is trying to create a niche for itself as India's most premium winery. The launch of Insignia culminates a series of moves the company has orchestrated over the last few years to move up the chain. In 2012, Grover Vineyards merged with Nashik-based Vallee de Vin to form Grover Zampa. Among other wines, the merger led to the addition of Zampa Soiree Brut (Rs 1,200) and red wine Chene (Rs 1,850). Then, during the Wimbledon fortnight of July 2014, former tennis star Vijay Amritraj launched his own label with the company at St James' Court in London. The wines are priced around Rs 1,450 in India. They are available in nine countries, including the US, France, Singapore, Japan, and Sri Lanka. These price points are far above what Indians were earlier prepared to pay for domestic wine.

Sonal Holland, India's only Master of Wine, the highest academic achievement in wine, wrote a consumer research paper. "People will spend anywhere between Rs 600 and Rs 750 for a bottle of wine for consumption at home. For entertaining and socialising or drinking at a friend's home, they will spend Rs 1,000-1,200. For gifting, they may spend above Rs 1,200," she says.

Even today, the bulk of the estimated three million cases India produces caters to the lower end of the market, wines that are priced below Rs 600. The Indian wine market, in terms of overall revenues, is quite small -  CEO of Grover Zampa Sumedh Singh Mandla estimates it at about Rs 1,000 crore, growing at 15 per cent. However, his company's premium segment is growing faster, some proof that there are takers for more expensive wines too.  Of the 200,000 cases it produced in 2015/16, the economy and premium portfolio comprised 1,15,000 cases. The premium segment grew 40 per cent in volume and over 50 per cent in value, the CEO says.

Industry watchers say the premiumisation strategy makes a lot of sense. "Research shows that when it comes to alcoholic beverages, there is a trend towards premiumisation," says Sonal Holland. "People are moving towards higher priced products and this typically happens when, as a country, you are in a state of transition. There is an upwardly mobile consumer class that wants better drinks. Keeping that in mind, it is not incorrect for a winery to reinvent itself and its portfolio of products."

Though Grover Zampa has been the most consistent with its premiumisation strategy, every major winery has been experimenting with a top-end product. Fratelli has Sette (Rs 1,800) while Sula launched Rasa Cabernet Sauvignon (Rs 1,750) last year. Sula produced just 500 cases of the 2014 vintage.

Premium wines have higher margins, one more reason why it is good thinking.  "The incremental cost of making a premium wine is not so high. I have an opportunity to improve my profitability by being in the premiumisation game," says Holland. The additional cost is that of newer and more expensive oak barrels. "The extra cost is your capital locked in because you are keeping the wine in the barrel for slightly longer. However, the cost of raw material doesn't go up exponentially, as you don't end up paying the farmer so much premium for better quality grapes," she adds. 

CEO Mandla says Grover Zampa is "coming close to positive EBIDTA this year". Data from Registrar of Companies show the company made a loss of Rs 3.40 crore on sales of Rs 35 crore in 2013/14.

Holland, nevertheless, has two concerns about premiumisation. "One, it is not about flaunting a price point. You have to ensure that the quality is commensurate with the price - if it is not, you are doing yourself more disservice," she says. Second, very limited edition, like with Insignia, doesn't make a dent in the market. "It doesn't have a commercial impact. It is super easy to make a top quality wine in low volumes. The challenge is to produce several bottles of such wine," she says.

Subhash Arora, Founder President of the Delhi Wine Club, feels there may not be enough takers for premium wines in India as yet but thinks it is a good strategy from several perspectives. "It forces the company to think about good quality. It also forces the consumer to think there are good quality wines. It helps in marketing the regular wines as well," he says.

For Karishma Grover, premiumisation is more than a marketing gimmick. Focus on quality is at the heart of the company. "This has been our ideology since conception. We were always smaller. All our money went into production. It was a passion project that my grandfather started (Kanwal Grover; the first vineyard came up in 1992). La Reserve was the red wine standard in India and still is," she says.

Karishma Grover represents the third generation of the family passionate about wine making. Her father, Kapil Grover, is the Chairman of Grover Zampa. The Grover family is one of the largest shareholders in the company (over 38 per cent stake). Close to another 30 per cent is held by a fund owned by wine connoisseur Ravi Viswanathan. The rest is held by various companies and individuals.

While the focus was always on quality, Grover Zampa has upped the game over the past four years.  "We are getting more experienced with tropical viticulture - it is the only country in the world where there is no dormancy. If you go to France, in December, the vines are asleep. We don't have a winter like that," Karishma Grover says.

India also has other challenges, such as the monsoon season, when the roots of the plant often struggle to handle the moisture. "A lot of it was about what viticulture is good for India, Bangalore versus Nasik (Grover Zampa has vineyards in both the places). Quality comes from the vineyard, and over the last two years, we have been upping our vineyard game. We are getting better and better results," says Grover.

The quality of its Cabernet-Shiraz has risen a notch, she claims. So has its flagship La Reserve - so much so that it motivated the marketing team to repackage it earlier this year and price it higher. La Reserve now costs about Rs 1,000; it was priced at Rs 800 earlier. 

The story of Insignia, the Rs 5,000 wine, is also about the pursuit of quality. "We found a great quality vine from a vineyard in Bangalore. We decided to take all the ripe berries and fermented them in barrels. It is 100 per cent Shiraz from a single vineyard," she says. The wine was hand-crafted: The fruit was not crushed and treated with a pump; it was hand-pressed and extracted gently. It was also hand bottled. However, at just 300 bottles, it is as exclusive as it gets. It will never reach the masses. And like Sonal Holland hinted, it would never make a dent commercially. But then many things at Grover Zampa are not marketing- and sales-led.

"Availability and visibility has never been our strong point," Karishma Grover says. "Our strength has always been technical." That's a gap CEO Mandla has to urgently plug for its oaky, intense wines to fly.