Argentina - No more tears

Selling wine is never easy, but Argentina has had a harder time than most. Can Mauricio Macri’s new government help?

Argentina doesn’t do things by halves. From a political landscape marked by a myriad of military coups, a wildly gyrating economy and the dramatic and sudden rise of Malbec, when something happens it often seems to happen… acutely. And fast. With the recent appointment of the new president, Mauricio Macri, it seems that the tradition of dramatic changes is due to continue – but this time, it seems, for the better.

The US is Argentina’s biggest wine export market, and the success of Malbec in the country can be attributed largely to the excellent value provided by the wines. In a growing market, Malbec presented a new, exotic grape variety which was not only incredibly fruity and easy to drink and therefore ideal for American palates, but also sold at affordable price points.

Talk to influential members of the US wine trade, and you tend to get a similar view: that the surest way into the US market is a flagship varietal. For New Zealand it was Sauvignon Blanc, for Australia Shiraz, and for Argentina it was Malbec. However, while a flagship can offer the first step in the door, it takes innovation to stick around and become a long-term staple on the wine list. A country has to develop their initial offering with new styles of wines; different grapes and vintages, new levels of quality and different price points. It’s the only way to continue to generate interest and avoid fading into the background.

Here Argentina has struggled of late. According to data from the IWSR, exports of Argentinian wine grew by almost 500% from the year 2000 – 2012, when they reached their peak. The last few years since they have shown a slight decline.

These figures show the changing landscape of the US wine market, and why the need to keep up with market trends can be so vital to success. 30% of US regular wine drinkers ranked the statement ‘I am willing to pay a little extra in order to get gourmet products and services’ as important to them; this figure was 35% amongst Millenials. The trading up trend presents a great opportunity for wine producers to make great wine and sell it at higher price points.

Unfortunately, Argentina has had to battle with more than the usual difficulties a producer and source country faces when establishing itself in a new market. The Economist newspaper has been particularly scathing of the country in recent years, accusing it of having ‘weak institutions, nativist politicians, lazy dependence on a few assets and a persistent refusal to confront reality’. High inflation, export taxes, an artificially strong currency and difficulties in making the banking system function have combined to make it hard for producers to continue to supply the world with low price, good quality wines.

In true Argentinian style, Mr Macri’s first actions as president have been dramatic; he has eliminated export taxes and currency controls, causing the peso to decline by more than 30% and inflation to rise even higher than it already was. Despite high inflation, these changes should begin to present a much-awaited opportunity for Argentinian wine producers to develop ‘brand Argentina’ abroad. He is right not to wait: according to our US Landscapes 2015 report, just 15% of US regular wine drinkers are aware that Argentina produces wine, a figure which has declined significantly in both the long and short term.

Author: Eva Maitland