Argentinian wine: sales up but accounting in the red

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It is harvest time in Argentina. Despite an increase in sales during the pandemic, the wine industry is grimacing with the drop in revenues from wine tourism and accounts in the red due to the depreciation of the peso.

In the province of Mendoza, where 70% of Argentinian wine is grown with the majestic Andes mountain range as a backdrop, Eduardo Pulenta, owner of the 135 hectares of the Pulenta Estate bodega, prefers to see the glass half full.

“We are happy because the pandemic has increased consumption and local tourism. The effect is even felt internationally, we can see it in our exports, ”he says, while the pickers are busy in the southern autumn harvesting the fleshy bunches from this arid soil.

Still, the horizon is bleak for Argentina’s wine sector.

While consumption has indeed increased globally and Argentinian wine has taken advantage of its competitive price to gain market share, the prolonged economic crisis in the country, high inflation and the successive devaluations of the peso (38% in 2019, 28% in 2020) threaten the profitability of the sector, which has just suffered six consecutive years of decline in its turnover.

And many wineries fear they won’t be able to last longer.

“Cash flow problems”

“We live with a currency, the peso, which devalues. If this has given back a great competitiveness to bulk wine, the imported dry materials that we need [bouchons, bouteilles] conversely cost us a lot of pesos. Margins tend to shrink, ”explains Hervé Birnie-Scott, director of the cellars and vineyards at Chandon Argentina.

“That’s why almost all Argentinian wineries have cash flow issues,” he adds.

According to a report from the National Institute of Viticulture, the year 2020 ended with “a rebound in wine consumption on the domestic market of + 6.5% compared to 2019”.

For export, bulk wine took advantage of the devaluation of the peso to increase sales in volume, especially to the huge Chinese market, according to a study by the Center for Economic Studies of Argentina Wineries.

However, “it was not the same for the turnover in dollars which decreased especially for the bottled wines, a lowest since 2013”, one indicates the same source.

With inflation that will reach 36% in 2020, the highest in Latin America after Venezuela, “we have to juggle to make wine merchants understand” that we cannot maintain the same price every year “, explains Mr. Pulenta.

“Own identity”

To succeed, many bodegas are betting on striving for more quality, beyond the renowned Malbec (red).

The winegrowers agree on the success of the last harvests. With an extremely dry spring and summer, “2020 was warmer, which allowed us to have more concentration, more color, more polyphenols, more tannins”, describes Javier Lo Forte, oenologist at Pulenta Estate. .

Hopes are also supported by the maintenance of the upward trend in consumption: “it continues to increase in these first months of 2021”, welcomes Mariano Di Paola, director of winemaking of Rutini Wines, a domain of 400. hectares located between 1,050 and 1,200 meters above sea level.

Hervé Birnie-Scott, a Frenchman who has lived in Argentina for 30 years, believes that the quality of “New World” wines is now recognized, but that wineries still face the challenge of finding their “own identity” by leveraging soil diversity.

“We must strive for even more quality, towards wines that reflect the particularity of the grape varieties and the soil where it was cultivated. And, little by little, the consumer will seek out this typicity, the singularity of the variety cultivated in a particular terroir ”.