pestel analysis for grover vineyards

8/9/2019 Pestel Analysis for Grover Vineyards

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WINESCI 706

THE BUSINESS OF WINE PRODUCTION

Assignment on

Introduction and PESTEL analysis for Grover vineyards

Name:

Student Id:

Email:

Siyamalan Subramanian

1522273

[email protected]


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1. INTRODUCTION

Wine industry is in a nascent stage in India. Estimates suggest an enormous

growth potential of this sectors. India is recording strong growth in Wineconsumption, mostly among younger people with good income in the main cities.

Wine consumption in India is still limited but the growth trend is impressive at a

rate of 30% India appear to be hot on agenda of worlds best wine makers.

Grover Vineyards, in Dodballapur, 40 km north of Bangalore at the foot of the

Nandi hills uses French grapes Vitis vinifera in its vineyards in Bangalore. It exports

wine worth $435,000 every year. "The Grover range produced from high- altitude

vineyards north of Bangalore, with help from the ubiquitous Michel Rolland of

Pomerol, is extremely respectable. The reds, particularly the Reserve red, are a

distinct notch above the slightly dull Clairette-based white. Fifteen years ago, the

Grovers took on the task of reviving wine drinking in India. The company, together

with Mr. George Vesselle accepted the immense challenge of growing for the first

time French varieties of grapes, suitable for wine production in India. Grover

Vineyards is jointly owned by Kanwal Grover and Veuve Cliquot. Kanwal Grover is

advised by two top French winemakers, Michel Rolland and Georges Vesselle. The

vineyards are planted at 2,000 feet above sea level and some varieties can produce

two crops a year. Still white and red wines from Bangalore Purple, Cabernet

Sauvignon, Shiraz and Thompson seedless grapes are made under the supervision of

winemaker Bruno Yvon. The white is medium-dry and fairly bland; the red is

cabernet-style with good depth of fruit.

Bangalore, with the ideal combination of rich, well drained soil, warm sunnydays, cool nights and temperate climate, was finally selected over six other places as

the most suitable site. Thirty-five important varieties used in France for making wine

were planted. In the next five years there was an emissary of French oenologists to

study their adaptability to Indian conditions, as well as to assess the quality of wine

they would ultimately produce. Finally, in 1988 Grover Vineyards was established

on 40 acres of land at the foot of the Nandi Hills. Here nine varieties which had

responded well to Indian conditions were planted on an industrial scale. Today,


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Grover Vineyards has over 200 hectares under plantation. Unlike other wine makers

in India, Grover Vineyards is the only company which shuns ordinary table grapes,

while exclusively using French wine grapes, selected from the original thirty five

varieties of the Vitis vinifera species. The company has export target of 25% of itsproduction for the current year i.e. 1.5 lakh bottles. Exports are mainly to France, US

and UK. APEDA has chosen Grover Vineyards for bronze medal for the excellence in

export for the year 2003-04.

2. PESTEL ANALYSIS

There are many macro environmental factors that could have an impact on

Grover Vineyards in the near future. It includes Political, Economical, Social,

Technological, Environmental and Legal factors.

2.1. POLITICAL FACTORS

Alcohol is a state subject in India and is regulated by state governments,

which are responsible for production, distribution, levy of excise duties and taxes on

alcohol and also for prevention and management of alcohol abuse in the state. Wine

as an alcoholic drink cannot be sold directly by Wineries and government takes

complete control over the same.

Coming to wine production, Maharashtra and Karnataka are the two major

wine producing states. About 9,700 hectares of land is under grape cultivation in

Karnataka where Grover Vineyards is located, and the estimated annual production

is little over 1.5 million litres. Compared to that, Maharashtra has about 40,000 acres

under cultivation, producing about 21 million litres annually. That's about 94 percent of the country's total wine production. The state has around 51 wineries which

include some of the largest producers like Sula Vineyards, Champagne Indage and

United Spirits. Karnataka, which has just two wineries Grover Vineyards and

Hampi Heritage Vineyards - is hoping to invite more wine investment through its

new policy.

The two states have been up in arms over their wine production. Karnataka

recently decided to give its local wineries a boost by increasing the excise duty on


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wine made outside Karnataka state to Rs 300 (NZD 9 ) a litre from Rs 10 (NZD 0.3) a

litre. This is a response to Maharashtra state which, seven years ago, established a

wine policy that exempts local wines from a whopping 150 per cent excise duty that

other wines had to pay. Further in Karnataka state, where Grover vineyards islocated, the grape wine production units have been declared as the Horticultural

and Food Processing Industries, and accordingly are liable to receive all the

incentives and facilities that are meant for such industries.

In order to promote wine tourism, the licensed wineries will be allowed tosell the wines to those visitors who are interested to buy wines for self consumption

and this will also have a positive impact on Grover Vineyards.

2.2. ECONOMICAL ASPECTS

With its fast-growing economy and expanding middle-class, India is a new

market for both wine consumption and production, but the local industry is still

taking baby steps. India is a country where abstinence from alcohol is rooted in

religion and politics. But cultural changes brought on with the opening of the

economy have seen some segments of this essentially conservative society shed their

prejudices against alcohol consumption. Sales of whiskey and beer have shot up in

recent years, and now urbanized Indians are showing marked preference for wine.

From a non-existent market over a decade ago, wine production and consumption is

growing 25 per cent annually and expected to maintain that momentum for the next

five years. The wine industry is relatively small but holds enormous potential given

the low per-capita consumption, high growth in disposable incomes and

urbanization. Every year 1.6 million cases are sold, of which some 20 per cent are

imported, mainly from Europe. Over 50 local wineries have been set up in recent

years, most in and around Nashik in western state of Maharashtra, the principal

wine district. Other vineyards are located in Bangalore and the highland state of

Himachal Pradesh. Realizing that support is crucial for the nascent industry, the

government is providing financial concessions and facilities such as wine parks to

give a boost to the sector.


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Currently, the industry is in a rough patch owing to global recession, a drop

in tourist traffic following the Mumbai attacks and tax issues. A global glut of wine

and domestic overproduction by grape farmers led to unsold stocks. One of the

country's largest wineries, Chateau Indage, has been in dire financial straits, mainlydue to its acquisitions of wineries in Australia and South Africa. A court recently

gave the company a temporary reprieve from liquidation, allowing it some time to

sort out debt of about 100 million dollars. Further Grover vineyards, countrys most

premium winery got a major pull back in its exports to France and UK following

global economic slowdown since 2009. And overall sales in domestic market had

begun to slide for Grover from the year 2009. In this context, they launched a low

quality product in the brand name of Sante but this may also have a negative impact

as this may erode the brand image of Grover Vineyards as they remained in

premium segment with high quality wines.

2.3. SOCIAL ANALYSIS

Wine is a complete lifestyle drink very much related to health which can be an

extension of the consumers personality. Traditionally wine does not figure out great

in Indian culture with very low per capita consumption rates. Though most of the

Indian consumers are unable to relate themselves to wine but off late they have been

able to associate with it. Increasing awareness of wine as a separate drink other than

spirits has made it more socially acceptable. Increasing health consciousness and the

increasing spend on corporate and personal entertainment has given a boost to this

sector. The increasing awareness in Government authorities to encourage wine

drinking compared to spirits has certainly brought cheers to the companies in the

sector.

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

litre/person/year. The biggest consumption is however confined to major cities like

Mumbai and Delhi followed by Bangalore, Chennai, Nashik , and Pune. Grover

Vineyards enjoys complete domination over Bangalore and stiff competition against


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its rivals in other major cities. Further in India, majority of sales have stayed on

traditional still red and white wines. Wine produces in India have two different

demographies in the Indian market upon which to focus: the upper class and the

general consumer. While the upper class prefers the classic presentation, i.e., realcork, full bottle size, and dry red and white wines, the growing consumer class in

India gravitates towards approachable wine packaging, i.e. screw caps, half bottle

sizes, and sweet wines.

Grover vineyards products range mostly for upper class which includes La

Reserve (Cabernet Sauvignon Shiraz blend), Sauvignon Blanc ,Viognier, Chenin

Blanc, Shiraz rose, Cabernet Shiraz and Blanc de Blancs de Clairette.

2.4. TECHNOLOGICAL ASPECT

Wine making is a specialised line in India till now unlike in countries like

France, Italy, Australia or Argentina where even the farmers have their small

wineries. The technology in wine industry is common and independent. Business

can have access to those technologies in regards of making wines fairly easy. Few

years back, wine making machinery was imported but now-a-days they are available

indigenously and machinery suppliers also offer technical know-how. Some

machinery suppliers are also providing some costly and crucial facilities including

laboratory testing on rental basis with the help of truck mounted mobile machines.

Grover vineyards have recently renovated its wine making facility in 2008 and are

currently up to date with most of modern techniques widely used in wine industries.

New wineries like Chateau deOri are adopting techniques like Gravity Flow Winery

were, the transfer of wine is done by gravity and use of pump and other oxidation

problems are avoided. And the company should also adopt Microoxygenation to

reduce the cost of its wines and to stay in competition. Continuous investment on

innovation and up gradation of facility is need as it is facing stiff competition from

its peer Sula wines.


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2.5. ENVIRONMENTAL ASPECT

Cost implications and location advantage plays a very important role for any

wine industry in India. In case of distribution of wines, retailers play a major role

and it will be entirely based on location. Historically, retailers were primarily locatedin Southern India, due to better distribution technology, and a greater degree of

Western influence in the region. Importantly, the Southern region, where Grover

Vineyards is located offers more organized transportation systems and cold storage

facilities. This infrastructure provides reliable delivery and minimizes product

deterioration and damage. This enables Grover to reach its quality product to its

consumers. Western India has the highest per capita income in India and the

strongest consumer product awareness. And recently organic concept is growing

among all Indian food industries and people are becoming more conscious on

environmental issues. Similar situation may arise for Grover on whether they have

to switch to organic wine. Currently Grover is using Glass bottles and its good for

environment as it can be recycled.

2.6. LEGAL ASPECTWine is one of the highest taxed products in India as it is considered a luxury,

not a necessity. The use of wine is discouraged by Indian Constitution. The central

government normally declares the federal customs duties applicable to imports

during the union budget held on the last week of February. Customs duties for most

products have declined since the year 2000; however, taxation on alcohol has been

an exception to this decline, and, as it is considered a negative product, the duty has

actually increased to its current rate of 150% ad valorem. Mahatma Gandhi and

Dr.Bhimaro Ambedkar, two leaders in the drafting of the Indian constitution, were

teetotalers in their day, but believed that it was the responsibility of the states to

regulate alcohol. Moreover, Article 47 of the Indian Constitution states that, The

State shall regard the raising of the level of nutrition and the standard of living of its

people and the improvement of public health as among its primary duties and, in

particular, the State shall endeavor to bring about prohibition of the consumption


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except for medicinal purpose of intoxicating drinks and of drugs which are injurious

to health.

Wine has traditionally been considered a type of liquor whereby the

government morally obligates itself to protect Indian citizens from its misuse.Methods of alcohol control include: serving alcohol only at specific outlets or during

specific hours; prohibiting alcohol in religious places, educational institutions and

underage drinkers; and the official age of legal alcohol consumption being

established at 25 years old. Other legal issues involve stringent laws and a plethora

of duties and fees such as excise duty, license fee, sales tax, brand/label registration

fee, import/export fee, vend fee, gallon age fee, turnover tax etc. The alcoholic

beverages sector being a State subject, States/Union territories frame their own

policies and taxation regime. Rates of such duties and fees vary widely from State to

State. Unlike most Indian states, Maharashtra and Karnataka is promoting wine and

is facilitating wine grape growing and wineries as an important sector of agriculture.

Wine is still clubbed with spirits for licensing and taxation by all states and its

production and marketing still subject to all the checks and controls that constrain

growth of a healthy domestic industry. Grover Vineyards is enjoying the states

regulation with low cost and low competition but its growth is hindered in other

states because of these legal issues.


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REFERENCES

1. Profile of Grover Vineyards,

http://grovervineyards.in/Profile-Grover%20Vineyards.pdf

2. Economics of alcohol in Karnataka in the background of the Indian,

dspace.vidyanidhi.org.in/dspace/bitstream/2009/3634/6/MAN-2005-002-5.pdf

3. Karnataka Grape Processing and Wine Policy 2007, www.indianwine.com

4. Karnataka to open two new wine parks, Sep 16, 2009,

www.businesstoday.intoday.in

5. Indias wine industry suffers growing pains, Jun 7, 2010,

www.monstersandcritics.com

6. Grape Wine, www.mofpi.nic.in

7. Comprehensive Study on Indian Wine Market,

www.indianwineacademy.com/ComprehensiveStudy_IWM_Reference_Section.pdf

8. Notes on Wine and Social Justice in India, Sep 25th, 2008, www.reignofterroir.com

9. High time India raises a toast to wine, June 18, 2010; www.business.rediff.com

10. www.rabobank.com: The Indian wine industry uncorked

http://www.rabobank.com/content/images/Rabobank_The_Indian_wine_industry

_uncorked_intro_tcm43-57618.pdf

11. Johnson, G and K Scholes, Exploring Corporate Strategy 6th edition.
http://www.indianwine.com/http://reignofterroir.com/2008/09/25/notes-on-wine-and-social-justice-in-india/http://reignofterroir.com/http://www.rabobank.com/http://www.rabobank.com/http://reignofterroir.com/http://reignofterroir.com/2008/09/25/notes-on-wine-and-social-justice-in-india/http://www.indianwine.com/

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