Sula Vineyards Sees Telangana Catching Up With Maharashtra In Wine Demand, Says CEO

Sula Vineyards, India's largest wine producer, has noted a major shift in its consumer landscape, with Telangana emerging as a surprising new growth market. Chief Executive Officer Rajeev Samant said that despite a challenging second quarter, wine sales in Telangana are catching up with those of Maharashtra and Karnataka, traditionally a core region for the company. 

Although, he mentioned that Telangana’s profitability is constrained by high state taxes.

Sula’s sales remained stable, but were impacted by the drop in profitability as its traditionally lucrative Maharashtra market reported a decline in sales. The wine brand has faced pressures in its key urban areas, with cities like Mumbai and Pune showing signs of a slowdown. “In the last couple of quarters, we’ve seen a deceleration in key markets with about 90% of our sales concentrated in urban areas, where we’re noticing some consumer stress,” Samant added.

Wine tourism remains a bright spot for Sula Vineyards, as Samant shared a cautiously optimistic outlook for the remainder of the year. With numerous festive days and advance bookings, Sula’s vineyard-based tourism offerings are expected to pick up significantly in the second half of the third quarter. This growth, Samant noted, could help offset some of the challenges in the retail market and is anticipated to contribute positively to the company’s revenues.

Despite these positive developments in Telangana and in wine tourism, Sula's consolidated revenue for the September quarter fell by 1.1% year-on-year to Rs 132.36 crore, while net profit dropped sharply by 37% to Rs 14.48 crore. Ebitda also declined by 24% to Rs 33.6 crore, with margins slipping to 25.4% from 33.1% last year. Samant attributed the decline to challenges in urban markets and the ongoing political considerations in Maharashtra, where upcoming elections may result in excise restrictions impacting sales.

Sula Vineyard Q2 Highlights (Consolidated, YoY)

• Revenue down 1.1% to Rs 132.36 crore versus Rs 133.69 crore.

• Ebitda down 24% to Rs 33.60 crore versus Rs 44.20 crore.

• Ebitda margin at 25.4% versus 33.1%. 

• Net profit down 37% to Rs 14.48 crore versus Rs 23.09 crore.

Samant remains optimistic about long-term growth, announcing that four new brands, including the popular Dindori Shiraz, were recently approved for sale through Canteen Stores Department, an important development for Sula’s sales reach. The company also has its sights set on re-entering Andhra Pradesh after a five-year voluntary hiatus.

The CEO expressed cautious optimism for a rebound in the fourth quarter, pointing to rising wine tourism and strategic growth in new markets as promising signs for Sula’s future trajectory.

Shares of the company fell as much as 8.13% to Rs 382.35 on Wednesday after the company announced earnings in the post-market hours late Tuesday. The stock has fallen 18.94% year-to-date and 21.09% over the past 12 months.