Strictly private and confidential

Overview of Indian wine industry

November 2008
Strictly private and confidential
Contents

Section

1 Indian Wine Industry 1

2 Taittinger SA 6
Section 1
Indian Wine Industry

1
 Indian Wine Industry

Indian Wine Industry

Competitive Landscape
Industry overview Sales of Wine by Sub sector (2007)
The Alcohol drinks market is segmented into beers, ciders & FABs,
Alcohol
Key
market
players
segmentation
wine Total Volume
spirits and wines. The wine Industry is further divided into Still light
grape wine, Sparkling wine, Fortified wine & vermouth and Non-grape Sub Sector Total Value ($ mm) (Liters mm)
industry market shares
wine Still light grape wine 128.7 7.2
The Indian alcoholic drinks market is currently valued at $23.5bn in 2007 Still Red Wine 60.7 3.6
with a growth of 13.2% from 2003, wine representing 0.8% of this total
The Indian wine market currently stands at 8.2mm liters in terms of Still White Wine 68.0 3.6
volume, with a CAGR of 30.4% from 2002 and is expected to grow to Still Rose Wine _ _
32.8mm liters by 2012. This represents a growth of 32.1% since 2007 Sparkling wine 31.2 0.5
The number of wineries in India has grown from 30 in 2004 to around 62
Champagne 23.3 0.1
Source: Euromonitor in 2008 with the state of Maharashtra accounting for almost 97% of total
wine production with 58 wineries out of the total 62 Other sparking wine 7.9 0.3
The countrys 3 main wineries include Sula vineyards, Chateau Indage Fortified wine & vermouth 3.7 0.5
Source:though
Wine, Euromonitor
small in market vineyards and Grover vineyards
Port / Oporto 3.7 0.5
The three players together contribute around 90% of the market with
size as compared to other Indage Group holding 44%, the majority share in the Indian wine market Sherry _ _
Indian wine companies
categories need
in the alcoholic The domestic brands are more affordable in comparison to the new Vermouth _ _
to focus on theindustry,
quality ofhas
the world wines from Australia and Chile Nongrape wine _ _
beverage The key brands in the market include Chantilli, Riviera, Vino, Vin Ballet,
wine to compete indeal
the current Ivy and Sula Total 163.6 8.2
attracted a great of the
market scenario.
countrys attention in recent Wine Sales 2002 2007 Recent Trends
Further
years.strategies
A CAGR offor Indian
around Increasing awareness and availability of domestic brands has enabled
wine companies would be wine sales to grow at double-digit rates. Wine is perceived to be more
30% over the last ten years, sophisticated and healthier than spirits
based
wine hason combining
attracted highof Affordable wine introduced in small packages and increased distribution
alternative distribution of wine was the main reasons for the higher growth rates in 2007
participation from local Still light grape wine recorded the highest growth in terms of value and
channels, brand
entrepreneurs, building,
foreign liquor volume from $95.4mm and 5.4mm liters in 2006 to $128.7mm and
bottling of imported bulk wine 7.2mm liters in 2007 respectively. This represents almost 34.9% growth
companies and private equity in value and 33.4% in volume
and strategic
firms. alliances
This has for
caused Indias wine imports in 2006 amounted to $9.9mm as against $1.16mm
of exports. This is positively impacted by the ruling of the WTO in favor of
selling imported wines.
increased local interest in the an appeal made by the US and EU against the high customs duties
various growth drivers, imposed by India on wines and spirits
Wine consumption in India is still in its infancy with manufacturers are
Foreign wine
industry companies
structure and focusing on providing wine at economical prices. Within Still Red wine,
targeting the Indian wine
strategic decisions shaping Rs300-500 ($6-$11) is the most popular price band, in which almost 59%
of the wines sold in India are priced
market,
the strategic alliances
Indian wine for
industry In India, the cost for setting up a wine plant is quite low, between Rs10
import and distribution could 15mm ($0.2$0.3mm). As a result many entrepreneurs, Indian and
foreign, are entering the market
be the suitable mode of entry Wine drinking is becoming more acceptable in restaurants. The on-trade
channels have played the most important role in the increasing
awareness and sales of wine in India
Source: Euromonitor, press

2
Indian Wine Industry

Key Players Brand Shares of Still Light Grape Wine (2003-2006)

% Total
Established in 1982 Volume Brand Company 2003 2004 2005 2006
Located in Narayangaon, Pune Sula Vineyards Samant Soma Wines Ltd 10.9 13.7 13.9 15.7
32 labels spread in 2500 hectors
Chantilli Champagne Indage Ltd 4.9 6.4 10.4 11.8
Production capacity : 15 million liters
Market share: 44% Riviera Champagne Indage Ltd 9.5 12.3 13.3 11.5

Key Brands: Marquise de pompadour, Ivy, Joie, Grover Vineyards Grover Vineyards Ltd 12.4 11.4 10.5 10.4
Chantilli, Figueira, Riviera, Vino Sparkling, Vin
Vino Champagne Indage Ltd 4.9 6.5
Ballet, Hammer
Vin Ballet Champagne Indage Ltd 4.0 5.1 5.9 5.8

Ivy Champagne Indage Ltd 1.6 2.1 2.0 1.8

Established in 1997
Others 56.6 48.9 39.1 36.6
Located on the outskirts of Nashik
Sales: Over 2 mm bottles in 2007-08 Total 100.0 100.0 100.0 100.0
Market share: 18%
Brand Share of Champagne (2003-2006)
Key Brands: Dindori Reserve Shiraz, Sula Red
Zinfandel, Sula Cabernet Shiraz , Satori Merlot, % Total
Madera Red, Sula Sauvignon Blanc, Sula
volume Brand Company 2003 2004 2005 2006
Chenin Blanc, Madera White, Viognier, Dia Moet & Chandon Moet Hennessy 54.7 55.7 56.0 56.0
White, Sula Blush Zinfandel (LMVH Moet India Ltd
Hennessy Louis
Vuitton)
Established in 1988
Located in Nandi Hills, Bangalore Dom Perignon Moet Hennessy 43.8 41.5 41.5 42.0
(LMVH Moet India Ltd
Wine Production: 10 lakh cases
Hennessy Louis
Over 200 acres under plantation
Vuitton)
Market share: 9%
Key Brands: La Rserve, Sauvignon Blanc, Others 1.5 2.8 2.5 2.0
Cabernet Shiraz, Shiraz Rose, Viognier and
Clairette Total 100.0 100.0 100.0 100.0

Source: Euromonitor, press

3
Indian Wine Industry

SWOT ANALYSIS

4
Indian Wine Industry
STRENGTHS
Favorable demographic conditions coupled with rapid urbanization and
improved customer attitude and lifestyle is increasing wine consumption
The government in India is protective towards the wine industry, as it is
labour intensive, adds a lot of value to the primary agricultural product,
and is an attractive source for taxes and duties
In India, the cost for setting up a wine plant is quiet low, between Rs.10
15mm ($0.2$0.3mm) with a capacity of 100,000 liters
Organized retailing of wine has now been introduced in the state of
Maharashtra. Wines can now be sold in supermarkets and grocery
stores with a license
Good Climate for growing wine grapes
Five-star hotels, pubs and bar-cum-restaurants are the primary wine
selling outlets in the country as 63% of the sales are through these
channels. The government has allowed hotels to purchase imported
goods duty free, up to a limit of 5 to10% of their foreign exchange
earnings
OPPORTUNITIES
Indias economy grew by an average of 6.6% annually between 2000
and 2006 and is expected to grow by 6% to 7% over the next 10 years.
There is a large potential consumer segment that could take to wine
drinking
There is an emergence of lounge bars and gourmet restaurants coupled
with the new concept of wine bars
Wine tourism and wine tasting is becoming popular in the state of
Maharashtra, which contributes 97% of total wine production in India
Organized retailing of wine has now been introduced in the state of
Maharashtra Wines can now be sold in supermarkets and grocery stores
with a license
Indian government through its policies, encouraging the growth of wine
industry Key policies include,
License to set up wine bars and permission of wine sale in beer bars
Licensing procedure for setting up wine units simplified
100% exemption from excise duty for 10 years for the state of
Maharashtra
Foreign direct investment (FDI) with no approval from government /
RBI
Provision of infrastructure facilities such as wine parks and wine
institutes
Source: Rabobank research dated February 2008, press
WEAKNESSES
Production of wine in India is characterized by small holdings which is a
major constraint in economies of scale for processing
In wine distribution, logistics is the most difficult challenge in India,
especially for temperature for storing sensitive products like wine
Around 80% of wine consumption is confined to major cities like Mumbai
(39%), Delhi (23%), Bangalore and Goa. The non urban areas still
account for only 20% of the market
Quality wines are priced relatively high
Land ceiling regulation imposed by the government restricts the
companies to purchase agricultural land more than 10 hectares, limits
wine companies in expansion
Packaging costs account for another 35% of the production cost which
are approx. 40% higher than international benchmarks
THREATS
Global warming is expected to cause problems for coastal wine grape
growers, and is expected to make any sort of viticulture impossible
The wine industry is low capital intensive which has made easier for the
new players to enter the market. This is expected to increase competition
between the domestic and foreign players
Wine substitutes like beer and spirits are expected to negatively impact
the wine market due to better availability and affordability
The wine industry in India has always faced the threat of prohibition to
drinking alcohol. Despite the increase in awareness, many states still
face the prohibition imposed by the government
The unit prices of wine are expected to increase in future due to increase
in input prices of raw materials and increasing overheads like
transportation and storage costs
5
 Indian Wine Industry

Outlook

The Indian wine industry is

currently on an upswing.
Production and consumption
are expected to increase by
25% to 30% over the next 5
years. Being in the early stages
of market growth, the industry
enjoys protection from the state
as it stands low in cost Forecast Sales of Wine (2007-2012) Forecast Sales of Wine by Sub-sector (2012)

competitiveness when Total

Total Value Volume CAGR
compared with the global
Sub Sector ($ mm) (Liters mm) (2007-2012)
benchmarks Still light grape wine 571.6 30.5 34.7
Still Red Wine 271.9 15.4 35.0
The industry is expected to Still White Wine 299.7 15.1 34.5
Still Rose Wine _ _ _
evolve further with intensifying
Sparkling wine 81.2 1.1 21.1
competition, and more Champagne 61.5 0.3 21.4
investments in wineries, Other sparking wine 19.7 0.8 20.0
bottling facilities, their Fortified wine & vermouth 9.1 1.2 19.6
Port / Oporto 9.1 1.2 19.6
distribution, promotions and
Sherry _ _ _
advertising. Such investments Vermouth _ _ _
will result in the expansion Nongrape wine _ _ _
phase in the lifecycle of the Total 661.9 32.8 32.2
industry, leaving the emerging
phase

6
Indian Wine Industry

Commentary
Wine consumption in India is expected to triple within the next three years. Lifestyles in urban areas and some semi-urban pockets are developing. By 2011,
Asia will account for 4.8% of world wine consumption.
The Indian wine market is expected to reach $661.9mm in value and 32.8mm liters in terms of volume by 2012, posting a growth of 32.2% and 32.1%
respectively over 2007
The sales of wine through on-trade channels are expected to be marginally faster than off-trade sales. On-trade volume sales are expected to be driven by the
establishment of exclusive wine shops while off-trade sales will be driven by non-specialist stores like supermarkets
Organic wine is unlikely to take a significant place in the market, given the total absence of organic wine till 2007. Moreover, no major domestic vineyards are
involved in organic farming and the high prices of organic wine further discourages its demand
With the entry of new players such as Seagram and United Spirits in 2007, and a number of other players such as Diageo said to be keen to enter the market,
competition is expected to intensify
Indian companies like Champagne Indage and United Spirits through acquisition of foreign companies are trying to set up production facilities in countries like
Australia, Argentina, France, Italy and South Africa, where domestic consumption is strong
Support measures from the government in policy and infrastructure provision will be an incentive for more investments particularly from liquor players who have
established distribution networks
Currently the wine market is expanding with new entrants and increasing awareness among consumers. The highly concentrated industry dynamics are set to
change with the entry of several spirits majors and foreign entities. More fragmentation is expected in the industry with several competitive groupings
comprising many players entering the market
The positioning of Indian wine as a high-quality product is a critical factor in making wine more popular in India. However, mass marketing could lead to a
situation where the brand image of Indian wines is lowered to just an alcohol substitute, whereas imported wines served in elite restaurants and homes have a
higher value perception
Source: Euromonitor, Rabobank research dated February 2008, press

7
Section 2
Taittinger SA

8
Taittinger SA

Taittinger SA

Company overview Key management and board members

Headquarters: Reims, France Name Position Experience/Affiliation
Founded: 1734
Description: Founded by Jacques Fourneaux, the company produces Pierre Taittinger Director General Domaine Carneros,
and distributes champagne and wines in Europe and the US Executive Samazeuilh
The company was acquired by Starwood Capital Group, a real estate
investment company, for $3.2bn on January 3, 2006. Thereafter, on June Grald Frre Director Groupe Bruxelles lambert
1, 2006, French bank Credit Agricole du Nord Est bought the Taittinger SA, Chrome Corporation
champagne house and associated vineyards for $849.6mm
Taittinger group operates through 290 subsidiaries involved in hotels and Gerard Mestrallet Director Paris EUROPLACE, Suez
restaurants, light industry and luxury and real estate activities. Hotels &
SA, Compagnie de Suez
Restaurants accounted for 71% of 2004 revenues; Luxury Goods 16%;
Champagne & Wines 12% and Finance & Real Estate 1%. The company
specializes in Bordeaux wines and its champagne is distributed in Investors:
around 120 countries across the world
Caisse Rgionale de Crdit Agricole du Nord Est
Taittingers key brands include Vins De Bordeaux, Vins Du Monde,
Niepoort Port, Defender Scotch Whisky, Glengoyne, Calvados, Brandies
and Vodka Krakus & Kalinka
Competitors Financial Information ($mn)

Company Country Sales (mm) Assets (mm) 2003 2004 LTM (June 2005)
Moet & Chandon France $1,777 $2,316 Revenue $1,020.2 $1,108.4 $1,123.5

Boizel Chanoine France 492 1,265 Growth% 8.6% 10.2%

Veuve Clicquot France 446 902 EBITDA 216.1 230.1 178.4

Vranken-Pommery France 393 1,419 Margin% 21.2% 20.8% 15.9%

Yantai Changyu China 359 445 EBIT 110.0 124.0 77.2

Laurent-Perrier France 353 960 Margin% 10.8% 11.2% 6.9%

Champagne Vranken France 300 628 Net Income 31.6 51.4 36.4

Schlumberger AG Austria 285 174 Margin% 3.1% 4.6% 3.2%

Maison Burtin France 221 565 EPS $9.10 $14.81 $10.48

Source: Company website, Capital IQ, press