Sula Vineyards: Navigating Challenges, Uncorking Growth in Q3 FY26

Sula Vineyards Limited, India's leading wine producer, recently shared its financial and operational performance for the third quarter and nine months ended December 31, 2025 (Q3 & 9M FY26). The period, described by management as 'challenging' and perhaps the 'toughest quarter since listing,' saw the company grapple with a tactical destocking initiative in Karnataka and subdued demand in certain markets. Despite these headwinds, Sula Vineyards demonstrated resilience, with robust growth in its Wine Tourism segment and strategic advancements positioning it for future expansion.

For Q3 FY26, Sula Vineyards reported a total revenue from operations of INR 195.7 crore. While this represented a 9.7% year-on-year decline, primarily due to the destocking in Karnataka, the company's gross profit stood at INR 116.9 crore. Operating EBITDA for the quarter was INR 32.0 crore, reflecting a 39.8% year-on-year contraction, and Profit After Tax (PAT) came in at INR 9.1 crore, a 67.6% decline from the previous year. The gross margin contracted by 269 basis points, mainly attributable to an adverse state mix with lower contribution from high-margin markets like Karnataka. However, management emphasized that excluding the one-time destocking impact, Q3 FY26 revenue was largely in line with the prior year.

Segmental Performance and Strategic Focus

The Own Brands segment, despite the destocking impact, saw its Elite & Premium share remain steady at 80% in Q3. The 'Source' range continued its stellar performance, delivering strong double-digit growth in both Q3 and 9M FY26, becoming an increasingly significant contributor to the business. Management highlighted that the 'Source' range's share within Own Brands rose from 8.5% last year to 11% in Q3, underscoring its growing relevance. The company further strengthened this portfolio with the launch of 'The Source Chardonnay' in January.

In terms of geographical performance, while Karnataka faced challenges, Maharashtra, Sula's largest market, returned to consistent single-digit growth. Telangana, the third-largest market, recovered strongly in Q3 with double-digit growth following the conclusion of its license renewal process. Other key markets like Uttar Pradesh, Rajasthan, Goa, and the CSD channel also delivered healthy double-digit growth, with CSD sales up nearly 40% year-on-year on a 9-month basis.

*9M FY25 Financials include one-time WIPS unwinding benefit of INR 10.4 Cr.

Wine Tourism: A Shining Star

The Wine Tourism business emerged as a significant growth driver, posting yet another record quarter with revenue at INR 22.0 crore in Q3 FY26, a remarkable 33.7% year-on-year increase. This robust performance was fueled by strong double-digit footfall growth, up 17% year-on-year, and the successful launch of 'The Haven by Sula', the company's third resort near York Winery, Nashik. The resort added 30 keys in October and 20 more in December, three months ahead of schedule, expanding the total room capacity by approximately 50% to 154 keys. The new resort has already seen strong acceptance, achieving an occupancy of 63% in its very first quarter, while existing resorts like 'The Source' and 'Beyond' also saw improved occupancies.

Wine Tourism's contribution to total revenue increased by 360 basis points year-on-year to 11.2% in Q3 FY26, up from 7.6% in the previous year. The company also celebrated new milestones, including record single-day revenue and footfalls during the Christmas 2025 weekend and the Republic Day long weekend in Q4, indicating sustained momentum.

Strategic Outlook and Future Initiatives

Sula Vineyards is optimistic about a healthy recovery going forward, supported by a rebound in Own Brands and continued strong growth in Wine Tourism. The company's growth strategy for the next three years (FY25-FY28) focuses on accelerating earnings growth with improved EBITDA margins and capital efficiency. Key initiatives include continuous product development, calibrated capacity expansion to 19.2 million liters by FY26 with 33% lower capex, and expanding market penetration for 'The Source' and 'RASA' brands.

Furthermore, Sula plans to significantly expand its D2C wine business, leveraging its growing wine tourism footprint. The company is also exploring strategic investments and acquisitions in the Wine Tourism and Indian AlcoBev Industry. On the sustainability front, Sula continues to meet over 60% of its annual energy needs through solar power and has installed 2 MW of battery energy storage, alongside rainwater harvesting and optimizing packaging materials.

Management addressed the India-EU Free Trade Agreement, noting that the framework is balanced as duty reductions apply only to wines priced above EUR2.5 per 750ml bottle CIF, protecting over 95% of Sula's portfolio. The company has been proactively preparing for this, strengthening its premium brand listings. This forward-thinking approach, coupled with disciplined capital allocation and a focus on high-growth segments, positions Sula Vineyards for sustained long-term growth and market leadership.