CHAPTER I INTRODUCTION CHAPTER ONE INTRODUCTION 1.1 Background of the Study Wine is an ancient potation particularly for the classic Old World wine regions of the world. The Old World wines belong to the legendary winemaking regions of France, Italy, Spain, Germany and Austria. The vintners from this region perceive wine as a mark of cultural heritage and emphasize on the importance of "terroir" in making the Old World wines unique. In contrast the New World wine regions of United States, Australia, Chile, Argentina and South Africa highlight the versatility of the wine grape varietals and the expertise of the winemaker in producing such fine wines. Truong (2012) noted that the countries belonging to the New World wine region took competitive advantage of the off - cycle growing seasons in the southern hemisphere to boost the export market of their wines. Additionally, the New World nations like United States and Australia benefitted from ample land while Chile. Argentina and South Africa benefitted from cheap labour that gave further fillip to winemaking in these countries. The study of Truong (2012) further stated that the appearance of the two new super powers - China and India and their developing taste for wine has been instrumental in reshaping the global wine industry. Still in an emerging stage, the domestic wine industry is primarily oriented towards the domestic market and less towards exports. It is chiefly driven by positive consumer trends induced by rise in discretionary spending potential (Jacob, 2008; Berry, 2010). Traditionally, wine does not figure prominently in the Indian potation and the consumption trend is heavily weighted towards liquors like whisky and rum. However, it is expected that in the coming years wine would supplement rather than replace these spirits (Truong, 2012). Wine production in the country is concentrated in the states of Maharashtra and Karnataka. Maharashtra is in the forefront in domestic wine production with Nashik evolving as the main wine district. The wine boom in Maharashtra State may be attributed to the 'Maharashtra Grape Processing Policy', 2001 which encouraged a host of small vineyard owners in Nashik District to branch into winemaking. However these small wine producers were not aware of the fundamentals of wine business as a result of which they became burdened with huge financial losses. The situation was worsened due to the Mumbai terror attacks of 2008 and economic slowdown of 2009 which slackened wine sales throughout the country. On the contrary, the deep 1 pocketed medium to large scale wineries in Nashik District were able to overcome the dropping sales period by employing several strategic moves. Such circumstances led to an unbalanced growth wherein the wineries became extremely polarized in Nashik District. The overall situation pointed to a growth pattern that severely lacked inclusiveness and benefit for all the industry participants. 1.2 The Purpose of the Study The lopsided growth of the wine sector in Nashik District remained in news particularly in the years between 2009 and 2011. The wine industry in Nashik District was marked by the emergence of a single large player while the smaller wineries were growing sick and shutting down their business. During this period a number of articles appeared in periodicals emphasizing the need to enquire about the growing sickness of the small scale wineries in Nashik District and to device alternative strategies for improvement. In the light of these information acquired from various quarters, it seemed necessary to undertake a deep probe into the root causes of the growing sickness of the smaller wineries in Nashik District. Additionally, the phenomenon of urban micro winery which is known to give impetus to small winemaking units by expanding the consumer base through 'taste and tourism' appeared to be a plausible solution. Considering the success of the urban micro wineries in the New World countries of United States, Australia and New Zealand, it was thought appropriate to follow a detailed investigation on the applicability of this concept to the smaller wineries. Besides this, it was also felt that there has been a lack of micro level study- on the prime wine producing areas in Nashik District and a dearth of academic research on the socio - economic aspects and environmental impacts of the wineries. All these factors depicted the wine scenario in Nashik District as a dynamic field of study, worth an investigarion. 1.3 Research Objectives The prime objectives set for the thesis are: 1. To identify the wine producing areas in Nashik District. 2. To study the leading wineries and assess their role in the development of Indian wine industry. 3. To trace the potential areas of expansion of the wineries in and around Nashik District. 2 4. To understand the socio-economic aspects and environmental impacts of wine industry with special reference to wine tourism. 1.4 Methodology The present research work is based on both primary and secondary sources of data. The wine producing talukas of Nashik District were chosen as the spatial unit of study. Out of the 37 wineries located in the study area, a total of 25 wineries were surveyed in 2012, 2015 and 2016. These wineries are spread over 5 talukas of Nashik District. Random sampling technique was employed for selecting the wineries to collect data. Primary data were collected from intensive winery surveys with the help of well framed questionnaires (Appendix I). Workers employed in the wine sector of the study area were also surveyed, among which 37 were vineyard workers and 50 were winery workers (Appendix II). A total of 41 respondents also participated in the questionnaire survey on environmental impacts of wine tourism, ranging from local farmers, winery workers to facility managers of large and medium scale wineries and small scale wine producers (Appendix III). In addition, a survey of 104 wine tourists was also conducted (Appendix IV). The database was updated in 2016. A total of 4 field visits were conducted, each of which had duration of 7 to 10 days. Personal interviews were conducted with the winery owners, winery facility managers, winery employees, vineyard workers and wine tourists. Focus group discussion with small scale wine producers were also arranged to get insight about the growing sickness of the smaller wineries. The database was updated at regular intervals through personal communication like telephonic conversation and email correspondence. This firsthand information helped to outline the general performance of the leading wineries, to understand the socio-economic conditions of the workers, to profile the wine tourists and assess the overall environmental impact in the vicinity of the wineries. The data generated through questionnaire survey were analysed with the help of descriptive statistical procedures using MS - Excel application. Data pertaining to environmental aspects were processed by quantitative techniques of Fisher's"t" test employing Minitab statistical software. Attitudinal survey of the host population (local winery employees) on the possible environmental impacts of wine tourism on the fragile rural countryside of Nashik District was carried out using Likert scale and 3 the inferences were statistically represented. This was accompanied by qualitative interpretation of data obtained through field observation during frequent visits. Data pertaining to the investment pattern in the winery and the wine production cost as well as returns on investment in winemaking were collected through personal interview of the winery proprietor. Numerical analysis and subsequent tabular representation of the data was done to show winery assets, cost structure, returns on investment and profits. Financial analysis such as net present value (NPV) was done to test the profitability of the project and internal rate of return (IRR) was worked out to evaluate the financial feasibility of the investment in the winery. Additionally payback period (PBP) was also determined from a risk analysis perspective as longer pay back periods are generally not desirable from investment positions. Problem solving techniques like 'root cause analysis' was undertaken for the purpose of identifying the underlying factors for the increasing sickness of the small scale wineries in the study area. For the present work, the 'root cause analysis' of the sick small scale wineries has been done by means of the '5 Whys' problem solving approach and the entire investigation was modelled using a fishbone diagram. The '5 Whys' approach involves repeatedly questioning 'whys" until the primary 'root' cause is defined. GIS platform is being used for the purpose of mapping of the surveyed wineries. The winery site positions were derived from Google earth and their geographical locations were confirmed during the field visits with the help of GPS survey. They were subsequently mapped in relation to the viniculture zones using Arc GIS software. Wine grape growing area delineation was based on data obtained from National Research Centre for Grapes (NRCG), Indian Grape Processing Board (IGPB) and GPS fieldwork. Keeping in view the concept of waste minimization for yielding positive environmental footprints, the alternative use of wine grape pomace was discussed in terms of grape seed oil. The market value of the wine grape pomace was calculated by considering the number of grape seed oil containers sold, which then multiplied by the unit retail price gave an idea of the revenue from