(Reuters) -Indian winemaker Sula Vineyards reported a nearly 87% tumble in its quarterly profit on Wednesday due to softening demand from budget-conscious urban consumers for its more affordable wines.
City dwellers, stretched thin by slow wage growth, have been tightening their belts for several quarters, pressuring sales at consumer-facing corporations, from Dove soapmaker Hindustan Unilever to Yippee noodles manufacturer ITC.
Consolidated net profit at Sula, which draws the bulk of its revenue from urban areas, sank to 19.4 million rupees ($221,272) in the first quarter ended June 30, from 146.3 million rupees a year earlier.
Sula’s own brands business — including Dindori, The Source and eponymous wines and makes up nearly 90% of revenue — clocked an 11% decline in revenue in the quarter.
“Own brands growth was muted due to continued urban demand softness,” CEO Rajeev Samant said in a statement.
Sula’s wine tourism division posted a 22% growth and record occupancy, benefiting from affluent consumers splurging at its resorts and tasting rooms as they seek new experiences.
Still, that was not enough to cancel out the decline in the company’s mainstay wine business.
Total revenue fell 8% to 1.18 billion rupees.
Expenses, on the other hand, increased 6%.
But Sula may be looking at better quarters ahead as consumer goods makers, including ITC and Hindustan Unilever, say they expect easing inflation, lower interest rates, and income tax cuts to reverse a monthslong slowdown. ($1 = 87.6750 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai; Editing by Ronojoy Mazumdar and Savio D’Souza)
