Nashik: India’s largest wine maker is leaning harder on experiences and premium bottles to steady the business after a tough quarter underscored how fragile demand can be in pockets.
Sula Vineyards told investors its Q3 FY26 performance was weighed down by a one-time, tactical destocking in Karnataka—its second-largest market—undertaken to right-size channel inventory and protect working capital amid subdued demand.
Founder and CEO Rajeev Samant said the move, though painful for near-term revenue and margins, leaves the company better placed for “healthier and more sustainable growth” once consumption normalises.
Excluding the destocking impact, management said, revenue would have been broadly in line with last year’s third quarter.
The tone on the call was noticeably more optimistic about the demand environment. Maharashtra, Sula’s largest market, has returned to consistent single-digit growth after months of sluggishness, while Telangana—its third-largest—has bounced back following the resolution of a licence-renewal bottleneck.
Outside the top three states, markets such as Uttar Pradesh, Rajasthan and Goa, as well as the CSD (defence canteen) channel, posted healthy double-digit growth, with CSD sales up nearly 40% on a nine-month basis.
The company also said it gained market share in the domestic elite and premium segment across corporation markets for which industry data is available, including Karnataka and Telangana—an important signal as price-led competition remains intense at the lower end of the category.
Within Own Brands, the elite and premium portfolio held steady at about 80% of the mix. The standout was The Source range, which delivered strong double-digit growth in Q3 and over the nine months, lifting its share of Own Brands by about 250 basis points to ~11%. Sula recently added a Chardonnay to the line and is accelerating listings across states and institutions, positioning the range squarely in the ₹1,100–₹1,500 band in Maharashtra—below where management expects entry-level EU imports to land once duties start to ease.
Wine tourism becomes a second engine: If bottles disappointed, beds didn’t. Wine tourism revenues surged 34% year-on-year in Q3 on the back of a 17% rise in footfalls, stable average room rates and the opening of a third resort, The Haven by Sula.
The company added 50 keys in the quarter—30 in October and 20 in December—taking total capacity to 154 rooms, nearly 50% higher than a year ago. Despite the expansion, occupancy held near 80%, with The Source and Beyond resorts reporting higher utilisation.
The business clocked its highest-ever single-day revenue and footfalls over the Christmas weekend, a record that was beaten again during the Republic Day long weekend in January. Wine tourism now contributes over 11% of quarterly revenue, and Sula plans to allocate the bulk of its capex over the next two years to this segment, targeting another ~50% increase in room inventory.
The quarter’s adverse state mix—particularly the reduced share of high-margin Karnataka—compressed gross margins by about 270 basis points. EBITDA fell to ₹32 crore from ₹53 crore a year earlier, with margins contracting by roughly 800 basis points. For the nine months, EBITDA declined 30% year-on-year (excluding a one-off benefit last year).
Costs were largely contained, barring higher “other expenses” linked to the partial-quarter operations of the new resort. Net debt, however, improved sequentially to about ₹319 crore, helped by lower capex and government incentive receipts, and management expects further reduction by March as inventories normalise.
On the looming India–EU free trade agreement, Samant struck a balanced note. The proposed duty cuts apply only to wines above a minimum import price, and the glide path is expected to be gradual—mirroring the Australia deal. At a 75% duty, a €2.50 CIF bottle could retail around ₹1,700 in Maharashtra, he said, leaving over 95% of Sula’s portfolio—priced below ~₹1,600—relatively insulated in the near term.
Only two Sula labels currently sit above that threshold, together accounting for about 4% of value sales.
Still, the company is not waiting it out. It is stepping up quality, expanding premium listings and keeping a close watch on pricing power above the ₹1,300 mark, while remaining cautious about further hikes.
Management also signalled a selective return to imported-wine distribution over time, leveraging Sula’s nationwide sales network once economics improve.
With destocking behind it, demand improving in core states and wine tourism firing, Sula expects Own Brands to return to growth over the next couple of quarters and margins to “gradually revert” toward normalised levels. The past 18 months have been choppy for the Indian wine market, but the company is betting that experiences, premiumisation and a tighter channel strategy will help it navigate both domestic price wars and the eventual arrival of cheaper European bottles.