Break point for Argentina

Source: Winesur

Wine Consumers
Break point for Argentina

A turn in the world consumption trends, focused on the highest price ranges, gives oxygen to the bottled wine. Argentina makes moves in this direction and, even with elevated production costs, manages to remain in the game.

The strong growth of Argentina’s wine exports reported in the past ten years was propelled by bottled wines, mainly by Malbec. However, recent statistics reveal that total wine sales abroad have increased by 41% compared with last year, due to bulk wine exports that grew by 222%. The bottled wine suffered a 3% fall.

The phenomenon of the wine in bulk is a response to Argentina’s great use of the worldwide price rise of this product. In January 2008, the price of a 9-liter case reached USD 8.3, almost twice the value of 2004 (USD 4.8).

As regards the drop registered in bottled wines, the main cause is the loss of competitiveness originated by the high internal inflation. Likewise, the real exchange rate favoring Argentine wineries has declined by 50% in only five years (since 2006).

Nonetheless, what is the way to cope with this complex situation? This time, global consumption trends are favorable for Argentina.

Javier Merino, director of Área del Vino, highlighted that a gradual change is taking place in the global pyramid of still wine consumption. Currently, 1,949 million 9-liter cases are consumed within the price segment of under USD 27 per case, 489 million in the USD 27 – 40 range and 286 million cases of wines over USD 40. This data derives from the last Meeting of Situation Analysis conducted by the Argentine Society of Wine (SAV) in Mendoza, according to Área del Vino’s statistics based on Euromonitor.

This is the reason why trends are positive for Argentine wineries, which have lost competitiveness in the low price ranges. Based on statistics, 72% of the 1,949 million cases of wine bought in the lowest segment are made by the country that consumes them. Meanwhile, imports of wines in bulk account for 22% and for 6% in the case of bottled wines. In this case, the opportunities for Argentina lie in the regions of high productivity (in bulk) and in nearby markets (bottled).

In respect of the medium price range, figures are even more encouraging for Argentina’s export wineries. Consumption experiences a 1.4% annual increase and the ratio of imported bottled wines keeps growing (61%), whereas the 39% correspond to the local production.

Finally, the highest price ranges enjoy the ideal situation. Consumption goes up by 3.8% yearly and 68% are imported bottled wines. The remaining 32% are from local production.

In conclusion, the global consumption growth of the most expensive wines is good news for Argentine wineries, as it is difficult for them to keep the profitable margins.  With higher prices, the pressure on costs falls and there are more possibilities of making profits, provided that wines are sold on time and correctly, of course.