Rajeev Suresh Samant, Founder and CEO, Sula Vineyards

Speaking with Jasmine Kohli, of India Infoline, Rajeev Samant, says: “We are currently not open to buyout as we have enough capacity for the next three years at least after our buyout of the Pimpane Cooperative Winery a year ago.”

Mar 11, 2010 04:03 IST India Infoline News Service

Rajeev Suresh Samant, Founder and CEO, Sula Vineyards, was born and raised in Mumbai, India. After schooling at Cathedral School, Samant gained admission in California’s prestigious Stanford University, from where he graduated with a Bachelor’s degree in Economics and also completed a Master’s degree in Engineering Management. In 1993 Samant decided to return to India to follow an entrepreneurial path. Realizing that Nasik had potential as a wine region, Samant established Sula Vineyards, Nasik’s first winery in 1999. It was a pioneering effort and today Nasik is considered India’s wine capital with 35 wineries. Sula Vineyards quickly established a reputation as India’s premier quality wine producer, and Samant was the first to introduce varietals such as Sauvignon Blanc, Chenin Blanc, Zinfandel and Riesling to India. In 2002 Sula was the first Indian winery to be the subject of a feature in Wine Spectator, the world’s leading wine magazine. Starting with a sale of 50,000 bottles in the first year, Sula emerged as India’s largest wine producer after completing a decade in 2010 with 3 million bottles sold. Sula Vineyards is also a leader in sustainable winemaking, and has created direct and indirect employment opportunities for thousands of rural youths.

In 1997 entrepreneur Rajeev Samant and Kerry Damskey, an eminent Californian winemaker started a winery on Rajeev’s 30 acre family estate and took the revolutionary step of planting French Sauvignon Blanc and Californian Chenin Blanc, varieties that had never before been planted in India. The first Sula wines, released in 2000, were widely acclaimed as India’s best white wines. Since its inception, Sula has rapidly established itself as India’s leading premium wine brand, helping spark a wine revolution that has seen consumption grow at 25% annually and several new wineries come up in the Nashik area. A second winery with three times the capacity of the first was completed in late 2004 to keep up with demand, and a third million litre winery started operations in 2006. Sula has expanded from the original 30 acre family estate to about 1500 acres (owned and contracted) under plantation, in Nashik and its premium sub-region Dindori, India’s upcoming wine region. Varietals planted include Cabernet Sauvignon, Shiraz, Zinfandel and Merlot along with Chenin Blanc, Sauvignon Blanc, Viognier and Riesling.

Speaking with Jasmine Kohli, of India Infoline, Rajeev Samant, says: “We are currently not open to buyout as we have enough capacity for the next three years at least after our buyout of the Pimpane Cooperative Winery a year ago.”

Your ‘Experimental Tasting’ is getting popular? Is Sula into co-creations with the Indian consumer?
We have been closely involved with consumers for the last 6-7 years. It is one of our primary marketing tools. We have a very simple mantra. We place our wines in front of our consumers and tell them what wine and Sula are all about, they automatically become our consumers. We are confident that we at Sula have a terrific product, which tastes excellent and is affordable.

Give us a break up of your products?
We have about 23 different wines today. We add approximately two-three new introductions every year. They are available at price points starting at Rs125 going all the way to Rs1000. This is a game changer initiative; until three years our lowest price point was Rs300 and today our fastest growing brand is in the Rs200 bracket leading to increased revenues and potential reach.

Comment on your Distribution and imports?
We have a wide national distribution network of 70 distributors within India; Sula also exports its wines internationally, as well as importing and distributing wines from leading producers worldwide. Our wines comes from New World regions like Australia, South Africa, Argentina and New Zealand as well as Old World regions like France, Portugal and Italy.

How different is the scenario now for obtaining Winery license?
When we started, we were to get a Central license and no FDI was allowed in wineries. All that has now changed. For setting up a winery at a state level, we no more require a Central license from Delhi, and there is now 100% automatic FDI in wineries. This fact is not so well known and it a big change compared to 10 years ago. At the state level, licensing is much easier than it used to be. In fact, there was a de-facto ban on new winery licenses in Maharashtra. In 1999, Sula was the first winery, which was granted a license, after 15 years but subsequently 75 new licenses have been issued. So it is completely a liberalized scenario, at present.

Any regulatory hindrance faced by wine sector?
Yes, today we have a lot of problems at the state level. In Tamil Nadu, all the retail is still owned by the state and they permit the sale of only those products that are produced or bottled in the state. There is no wine produced in Tamil Nadu, which means, there is no wine available in any store in Tamil Nadu. So the consumer has no access to our wine, except in the five star hotels.

Other states like Andhra Pradesh have 70% sales tax, then in Delhi and Jammu and Kashmir we are required to give 1 lakh label registrations; such issues make it difficult to sell our wine in these places.

Comment upon your international operations?
As of now we are more focused on domestic operations; 93% of our sales are in India and only 7% is exports. We do not expect this mix to change very much over the next five years. India is once again one of the fastest growing wine markets in the world. We will concentrate our focus and our resources very much on India for the next five years.

What is the retail- institutional sales mix?
The scenario has changed a lot. When we started 10 years ago, our institutional sales were almost 60% of our sales and today it has gone down to ~40-45%. So the retail market is growing much faster than the institutional market, which is very natural because earlier we had very little wine available in retail stores. Today we have very good affordable wines in stores. Earlier, not that many people drank wine at home but that is now changing fast, which is a very good thing. Retail will continue to be the main growth driver in future.

What trend are you seeing in the prices of grapes? What is your sourcing strategy?
Grape prices have come down significantly this year by Rs5000–Rs8000 per metric ton. This is mainly due to many wineries continuing to hold a large quantity of wine from the previous harvest in their tanks; they are unwilling to invest in new tankage due to cash flow issues. Sula buys some grapes from the promoters’ Dindori vineyards and some from contract growers.

Do you import any variety of grapes?
We do not import any grapes at all. All our wines are made from Indian grapes, and mostly from Nashik.

There are reports of a shakeout in the wine industry with many companies unable to sell their wine. How are you reading the situation?
There is definitely a shakeout which was bound to happen. A lot of people rushed into this industry in the last five years with very little understanding of what it takes to make good wine and market it effectively in India. Some of these new entrants were grape growers who saw this as a way to integrate vertically. But the skill set required is completely different. Some of these players are hurt very badly, especially the ones who were expecting an ongoing huge boom and crushed excessive grapes in the last two vintages. There is a divergent trend in the industry today with Sula and one or two other players going from strength to strength, but a number of other players are going bankrupt.

Do you expect a shakeout in the industry? Are you open to buying any of the wineries in India?
We have enough capacity for the next three years at least after our buyout of the Pimpane Cooperative Winery a year ago, so we don’t need to acquire capacity. Nor are there any strong Indian wine brands out there that interest us, as Sula is by far the strongest wine brand at this point and we would like to invest in our own brand. Therefore the answer to the buyout question is "No".

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