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Home > Business > Special

Sula Vineyards: A success story

Kishore Singh | October 17, 2005

As Indians uncork more bottles of wine, the action's hotting up in Nashik, Maharashtra, where Sula Vineyards has divested a third of its shareholding for Rs 15 crore (Rs 150 million) to GEM India Advisors, and appointed Deepak Shahdadpuri and Alok Sama to its board.

With Sula having begun work on its third winery, founder Rajeev Samant says, "We wanted quick access to funds. Wine is an extremely capital intensive industry and we've been engaged almost consistently in construction, with demand showing no signs of slowing down.

"We've been borrowing heavily and the debt was making me feel uncomfortable, so we decided to divest through a preferential allotment of optionally convertible preference shares."

How capital intensive? According to Samant, to produce a litre of wine you need to build a litre of capacity as opposed to, say, beer where you can produce a litre of beer every eight days, so the turnover capacity is 40 times more than that of wine.

And with the Maharashtra state government making bulk wine imports unviable in a bid to provide the local industry a boost, Samant says there was no other way to "ramp up and grow sales".

"To match the 30 per cent growth in capacity every year, we can keep adding 1 million bottles every year for the next five years," he boasts. Sula will sell its first 1 million bottles of wine this year.

The new partners are friends, wine lovers, but more importantly, they bring years of financial experience to the Sula board. "If I need to go for a public issue a year or year and a half from now," says Samant, "I'll have partners who have the right experience."

While other wineries -- Grover, among them -- see the rapid growth as an alarming sign, Sula's well placed in terms of international visibility to have attracted the attention of some very big global wine companies.

Would Samant sell out? "I'm a businessman, I don't rule out strategic investment," he says, "and there's no doubt that Sula could be very useful for international wine companies investing in India. However, at this time, I'm not in talks with anyone."

Sula has 300 acres under wine grape cultivation in Nashik, a large chunk made up of contract farmers, and has begun to ramp up quality with its Dindori Reserve Shiraz, the first vintage of which sold at Rs 600 a bottle in India, and fetched as much as 30 at restaurants in London, where it competed favourably against Australian Shirazs. "We're going up the value chain," says Samant.

"A few years ago Indian wines sold for Rs 300, but we should soon be able to command Rs 800 for some of our wines." New on the inventory list is a Zinfindel red that is to be launched next week in Mumbai. "It's very important for us," says Samant, in terms of diversification into high-end quality, "a sort of jammy, fruity wine that people will love."

The Nashik rush has meant that a large number of wineries have mushroomed, often without the right technologies to make and market wine. "Whenever a new industry develops, lots of people fall by the wayside before some champions arrive," Samant explains.

"That's how the cluster of technology and expertise multiplies exponentially." N D Wines was one such development with excellent vineyards that failed to make suitable wine for the market. "We've de facto taken over the winery with a 10-year agreement whereby we're using their facility to make Sula wines," says Samant.

The third self-owned Sula winery will be ready with 60 per cent capacity by January 2006. And with a 20 per cent share of the market, Samant is confident that "our marketing strategies will ensure we're leaders in the wine segment in India".

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Number of User Comments: 1

Sub: Re: Sula Wines

The article on Sula Wines is good. But these wines are not availabile in Hyderabad retail shops, except in 5-star hotels. Pl convey this to ...

Posted by S.L. Narasimha Rao



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