India's changing lifestyle drives Fratelli Wines growth

India has emerged as one of the fastest growing wine markets in the world and 23% of India's demand for wine is fuelled by the capital. Delhi based industrialist and wine enthusiast Kapil Sekhri's Fratelli Wines is the latest entrant into India's growing wine market and has already sold over 15,000 cases of wine across 600 outlets in India in its first year of operations.

Fratelli, which in Italian, means brothers, and true to its name, Fratelli is an Indo-Italian joint venture conceived by three families. The partnership marries business and distribution capabilities with the expertise of wine making from Tuscany.

Below is an edited transcript of Kapil Sekhri, co-promoter & director at Fratelli Wines's interview on CNBC-TV18. Also watch the attached the video.

Q: You typically come from a business class family where you have handled the leather and footwear arm of the business, you have also done rubber and you are doing pretty well. How were you introduced to the world of wine?

A: It was just through various talks I had with Andrea and Alessio who are friends of ours for last two decades, then the Mohite-Patil's of Maharashtra. We have been working in Maharashtra for the last now 20 years, so we are very comfortable working there and we saw this wine revolution coming in. We were not completely new to the agricultural industry because we were in the agro-processing of edible oils. So we knew what it takes to work in the interiors of Maharashtra. We were very comfortable with getting into a new product. Wine also is a changing lifestyle, so we see a lot of long-term potential in wine.

Q: How has this foreign partnership, this Indo-Italian joint venture helped you, helped your business?

A: The biggest thing that we have to understand about wine is that it is 90% agronomics and 10% processing. Agronomics is a knowledge which is developed over generations, not even over years and that knowledge is what Italy possesses. Actually if you see the roots of wine making, they actually originated from Tuscany. They actually taught the Romans and the Romans took it then to the other parts of Europe. So that knowledge is what we wanted to bring to India.

Q: What has set us really apart from the others in the business as of now is that we did not set up the winery first and then the vineyards. Our whole focus was the vineyards, because wine, as a product, if you talk to anybody will say that 90% wine is made in a vineyard. So if you don't have good grapes to work with, you can't have good wine. So we as a USP control 330 kilometres of trench line under our direct control. We have 350,000 plants directly under our control. We have 58 tanks which have been brought in from Italy, not made here, just plugged in. The whole structure has been designed in a way that we can crush the grapes in the shortest possible time in the industry to retain the freshness in our wine. Could you explain how the entire process works - from growing grapes in the vineyards to getting your bottles into hotels. What are the different kinds of wines that you serve?

A: First, you have to focus on the vineyards and before you focus on that, you really need to be able to work on the soil, because it's really all about the soil. Once the grapes are in your hands then the process gets fairly simple. There is a de-steamer, there is a pressing machine. The pressing machine then takes the grape juice into the fermentation tanks, then we do the filtration and then the bottling. After the bottling, the product gets distributed.

The government has been very liberal in the wine policies compared to other alcoholic spirits. So we are able to now sell directly from our winery to a consumer who can walk in. I can serve him by the glass, I can sell him a bottle. So I have three licences in the winery, one to sell to B2B, second to the consumers and third also as a server. In different markets obviously, there are different tax regimes still in the country. So you have to play with the dynamics. We happen to focus more on Delhi because I have been a Delhiite, been brought up here. These are my roots. I know the people here. I can understand the market better. I can understand the psyche better.

Q: This is your first year of operations - how has Fratelli Wines positioned itself in the Indian market? What are the various cities that you are present in? What are the kind of tie-ups and partnerships that you have done so far?

A: In total, we have three sets of sub-categories in our portfolio. We will start with Fratelli Classic Red and a Fratelli Classic White which is a very easy drinking aperitif wine for young consumers. Then we have our single varieties. The Chenin Blanc which won the international wine challenge abroad, then we have Sauvignon and Chardonnay. We have the Cabernet Sauvignon, Cabernet Franc & Shiraz, the first time in India, a blend, Merlot, Sangiovese, in the mid segment. Then we have a 10th wine in our portfolio which is Sette. Sette for us is more of a signature wine which we want to deliver and showcase to the world that India can make absolute world class wines. Only 1% of our grapes will go into Sette.

Each wine is made in a very old world manner which is that it's been aged in the new French oak barrels for at least 14 months and then further 12 months in the steel tank. So a 2009 harvest will get released in 2012. We are doing a very select sale of these outlets. Here, we are trying to tie up with the individuals rather than outlets who love wine as a passion. This wine is for those kind of consumers whom you are encouraging to buy in lots. You buy a lot of 100 bottles, we will keep the 100 bottles for you in the winery for a year. We will keep on sending you testing notes, how the wine's evolving. You want us to keep again for another year, we will do it at a cost. But this is the kind of another new that we have started a new concept that India can also make wines which can actually be aged and 2009 probably should be waited till 2014 before you actually open the water. This is what completes our range.

We are currently present in six states and 10-12 cities. We are waiting for the April 2012, so as soon as the new financial year starts, we will definitely be in UP, in Haryana and simultaneously we are looking at Goa, Tamil Nadu, Andhra, and West Bengal. There are certain higher taxes on wine coming out of Karnataka because of the tax regulations, so that market I can't comment on yet, but we would love to be there because Bangalore is buzzing.

Q: Talking about tax legislations there are different tax duty structure across different state governments. So what drove you to Delhi and to North India then?

A: Delhi, definitely not for the tax reasons, because taxes are very high. I am from Delhi. I live, breathe, eat Delhi. I travel 20 days in a month, most of our business interest of the family is out of Delhi but we will never leave Delhi. Delhi is in our blood and this is our base camp. We come back to get rejuvenated. We love it. We love every bit of Delhi. We love our open spaces, we love the culture and I know Delhi as a market.

The team also understands Delhi as a market and I think the fabulous thing that's happened to Fratelli was coming into Delhi. I should have in fact started from Delhi.

Q: Do you really think Delhi as a market has potential for wine?

A: Superb. It is only going to get better because Delhi is already at 55,000 cases. Delhi saw one of the highest growths in the wine consumption over the last year. We are currently targeting 20-25% market share next year in Delhi and I think that we will hit the number but we will not hit the market share because I think Delhi market would have grown more than we are anticipating.