Argentinean Wine: Striking a Balance

March 28, 2011 By Mike Veseth in Argentina, China wine, economic crisis, Economic impact, Flying Winemakers, globalization, history, Hong Kong, wine awards 1 Comment

Old and New at Mendel Wines

Balance is the key to great wine (and profitable wine business, too). I was reminded of this truth many times during our visit to Mendoza, where wine makers are trying to chart a course between and among several extremes:

Competitive export sales versus the challenging domestic market;
Reliable value wine sales versus potentially more profitable premium products;
Popular and successful Malbec versus TNGT — The (speculative and uncertain) Next Big Thing.

The key to long term success involves finding the right balance in this complex economic environment.

Thinking Global: Anabelle Sielecki

I want to use this post to consider three types of balance that I think are particularly interesting in Mendoza – the balance between crisis and opportunity, local and international winemaking influences and the simple tension between the old and the new. We learned about all three dimensions during our brief visit to Mendel Wines in Lujan de Cuyo.

Crisis and Opportunity

Mendel is both very old and quite new. The vineyards are old, planted in 1928. Somehow these Malbec vines survived the ups and downs of the Argentinean economy. The winery is almost as old and has a certain decaying charm. It stands in stark contrast to Salentein, O. Fournier, the Catena Zapata pyramid and the many other starkly modernist structures that have sprung up in this part of the world.

The winery project is quite new. Mendel is a partnership between Anabelle Sielecki and Roberto de la Mota and is the result of a balance between crisis and opportunity. When economic crisis struck Argentina ten years ago, opportunities were created for those with vision and entrepreneurial spirit. Anabelle and Roberto seized the moment and purchased these old vines and well-worn structures for their new super premium winery project.

That their impulse was timely and wise may not have been obvious at the time (crises are like that), but it is perfectly clear now. Wine Advocate named Mendel one of nine “Best of the Best” Argentinean wineries in a recent issue.[1]

Old and New

The winemaking that goes on in Mendel is also a combination of old and new. The technology is modern, of course, with stainless steel and French oak very visible. The setting, however, constantly reminds you of the past and the vineyard’s and winery’s history. Walking through the winery, for example, I was struck by the big concrete (or were they adobe?) fermenting tanks – a blast from the past for sure.

No, we don’t use them to ferment the wines anymore, Cecilia Albino told us, but we put them to good use. Peek inside. Sure enough, the tanks were filled with oak barrels full of wine aging quietly in the cool environment.

[Interestingly, I saw concrete tanks again during our visit to Achaval Ferrer. Roberto Cipresso, the winemaker there, built the tanks because he uses them at his winery in Montalcino.]

Mendel also illustrates the balance between local and global that characterizes wine in Argentina, where much of the capital and many of the winemakers come from abroad. Roberto de la Mota, partner and chief winemaker at Mendel, personifies this balance. Roberto is the son of Raúl de la Mota, who is sometimes said to be Argentina’s “winemaker of the century” so important was his work in developing quality wine in this country.

Roberto naturally grew up in the wine business both here and in France, where he sought advanced training on the advice of Emile Peynaud. He was the winemaker at Terrazas, Chandon’s still wine project in Mendoza, and then at Cheval des Andes, a winery with connections to Château Cheval Blanc. I think it is fair to say that Roberto’s resume represents a balance between local and global, between deep understanding of Mendoza terroir and knowledge that perhaps only international influences can provide.

Acting Local: Roberto de la Mota

Local and Global

I asked Roberto if it was important that Mendel is an Argentinean project and not owned by a foreign multinational. Yes of course, he said, but he hesitated a bit and I think I see why. Many of the influences and markets are international, but people, vines and inspiration are purely local. Not one or another, but intertwined, balanced.

And this thirst for a complex balance defines the future. Talking with Anabelle over coffee in Buenos Aires, she was ambitious to break into new markets – Hong Kong, China, and so forth. Anabelle is an architect — another field where global and local intersect. She is married to Héctor Timmerman, Argentina’s Foreign Minister and former Ambassador to the United States, so her international interest comes naturally.

Meeting with Roberto at the winery in Mendoza, he was interested in learning even more about his vines and terroir so as to better develop their potential. And to bring more of the classic Bordeaux grape varieties (like Petit Verdot) into the mix.

Mendel has charted its balanced course quickly, purposefully and well. It is a perfect illustration of both the tensions that define wine in Argentina and the potential for success if a clear but balanced path is boldly taken.

[1] The other “Best of the Best” wineries in Wine Advocate issue 192 are Achaval Ferrer, Alta Vista, Catena Zapata, Viña Cobos, Colomé Reserva, Luca, Tikal and Yacochuya.

What’s The Next Big Thing in Wine?

March 21, 2011 By Mike Veseth in Argentina, Australian wine, Barefoot wine, Economic impact, Supply and Demand, The Next Big Thing, wine brands, wine markets, wine price 18 Comments

Is Moscato The Next Big Thing (TNBT) in wine? That’s the question Liza B. Zimmerman asks in an article in the March 2011 issue of Wine Business Monthly titled “A New White Zin is in the House.”

Moscato wines sales soared by 91.4 percent by dollar value according to Zimmerman’s article, compared with 4.9 percent overall market growth (Nielsen off-premises survey data for the 52 weeks ending October 16, 2010). That’s a big surge in sales, albeit from a relatively small base.

Move Over White Zin

Some of the increase probably comes as consumers switch over from White Zin, as the article’s headline suggests. The decline in White Zinfandel sales is accelerating as measured by Nielsen, with a 7.4 percent decrease in the most recent month reported in the same issue of WBM. Since White Zin sales are huge (almost double the sales of Red Zinfandel, for example, and slightly larger than Sauvignon Blanc in the Nielsen rankings), it wouldn’t take many consumers switching from White Zin to Moscato to generate big growth numbers.

Wineries have been quick to respond to the trend. Sutter Home, the White Zin king, has a popular Moscato Alexandria. Robert Mondavi Woodbridge and Gallo’s Barefoot Cellars are in the market, too, and yesterday I saw an advertisement for a Moscato from Columbia Crest. Now that I have started to pay attention, I am seeing Moscato everywhere.

I associate Moscato with low-alcohol fizzy Moscato D’Asti wines from Italy, but Zimmerman points out that Moscato can be made in a variety of sparkling and still styles, which she sees as a plus. The fact that the wines do not typically cost an arm and a leg is an advantage, too. I will be interested to see to what extent Italian producers will benefit from the Moscato boom or if American wineries will capture much of the market growth.

TNBT Effect

Now to be honest, I don’t really care if Moscato becomes The Next Big Thing — I’m more interested in TNBT wine phenomenon itself. Many of the winemakers and winery executives I talk with around the world display an understandable fascination with TNBT. White Zin, which once defined TNBT here in the United States, shows that fads and trends can at least sometimes develop staying power, as the huge sales figures make clear. But TNBT of today cannot afford to get too comfortable — there’s always another NBT on the horizon.

Some of my contacts in Italy worry about Pinot Grigio (PG), for example, which was TNBT for a while and continues to grow in the U.S. market. Nielsen reports sales of Pinot Grigio/Pinot Gris totalled $751 million in the sales vectors they monitor in the 52 weeds ending January 8, 2011 — much higher than White Zin’s $425 million for the same period. The Italians are glad that PG sales are growing, but they worry that their share of this market may be crowded off the shelves by U.S. PG wines (from Sutter Home, Barefoot Cellars, Columbia Crest and Woodbridge, for example).

And, of course, they are concerned that the market will swerve and TNBT will shift in some other direction entirely, leaving behind a smaller market niche.

Is Torrontés TNBT?

So when I was getting ready to visit the wine country in Argentina I found two groups interested in the question, is Torrontés TNGT? — the hopeful Argentinean producers and fearful makers of Pinot Grigio back in Italy!

Torrontés is an interesting candidate for TNBT. Some people see it as Argentina’s signature white grape variety, ready to take its place along side Malbec in the market place. While Malbec has its roots in France (it is one of the classic Bordeaux blend varieties), Argentinean Torrontés is thought to be theirs alone — a cross between Muscat (think Moscato) and the Criolla or Mission grapes planted by the early settlers. It is or can be intensely aromatic and some of the wines I’ve tasted (the Doña Paula, for example) seem to be all about flowers more than fruit or minerals. Distinctive, but everyone’s cup of tea.

Having read so much here in the U.S. about the amazing TNBT potential of Torrontés, I was a bit surprised at the reactions I found in Argentina. Some of the wine people we talked with were clearly enthusiastic and ready to ride the wave if and when it came, but others had doubts.

The optimists view Torrontés as the next wave of distinctive “Blue Ocean” Argentinean wines. Malbec paved the way, then Torrontés broadens the market, then Bonarda and so on each filling a unique market niche.

More than one person talked about the potential for Torrontés in Asia, pointing out how well it pairs with Asia food. Of course everyone in the world who makes white wine with good acidity dreams about selling their wines in Asia, so this is hardly an uncontested market. And it is also useful to remember that while you and I might like the taste of Torrontés (or Alsatian Pinot Gris) with Pad Thai or Kung Pao Chicken, most Asian consumers believe that wine should be red and that it is not necessarily meant to be consumed at meals. So caution is warranted.

Parallel (and Ambiguous) Universes

I was surprised at the number of wine people who were Torrontés sceptics. Some were concerned that Torrontés lacks the quality to be an important grape varietal. They would rather focus on quality international varietals like Chardonnay and Cabernet Sauvignon, to complete directly based on quality and price rather than trying to develop a new but possibly marginal market segment.

Torrontés is like Pinot Grigio, only it’s good, one expert told us with a grin — and with obvious disdain for both wines. Although Italian Pinot Grigio can be excellent, its reputation is influenced by simple basic products that flood the market and I think there is concern that this could happen with Torrontés in Argentina.

The parallels with Italian Pinot Grigio are interesting. The best of the Torrontés and Pinot Grigiot wines come from particular geographic areas (Salta in Argentina, for example, and Alto Adige in Italy), but expanded production would probably come from other zones where the quality is not as high. As TNBT effect strikes, if it does, the initial quality could be undermined as output expands. The concern is that Argentina is not as established as Italy in world wine markets and its reputation might not be able to withstand a wave of mediocre wines.

But perhaps it is the nature of TNBT phenomenon that hot products simultaneously exist on many levels, simple and complex, highest quality and no-so-good. Perhaps that is the key to their success. Maybe it is the diversity (or is it ambiguity?) that allows fads or trends to evolve into TNBT.

Although wine snobs almost universally reject White Zinfandel, for example, some good wines of this type have been made, including an early vintage by Ridge Vineyards that I talk about in Wine Wars.

If this is true, then maybe Moscato and Torrontés have a chance!

Bodegas Salentein: World Class Wine Tourism in Mendoza

March 15, 2011 By Mike Veseth in Argentina, wine tourism 2 Comments

Arriving at the hospitality center and Killka art museum.

We came to Bodegas Salentein because I wanted to see the state of the art in wine tourism in Argentina. Wine tourism is a big and growing business and I wanted to gauge its development here in Mendoza.

Wine tourism is increasingly important on both sides of the market. Many consumers look for ways to deepen their wine experience by visiting the places, meeting the faces and developing a personal relationship with wine. Producers have much to gain, too. Wine is a relationship business and meeting consumers, distributors and wine critics at the winery is an effective way to make or maintain these connections. Direct (and full price) cellar door sales are a priority, too, as well as the opportunity to exploit other revenue streams ranging from t-shirts and corkscrews to space rental for special events like weddings and conferences. (George Taber’s book, In Search of Bacchus, is a highly readable examination of this global industry.)

Bodegas Salentein provides the most complete wine tourism experience that we found in the Mendoza region. It is a world class operation and a tribute to the “if you build it they will come” school of thought. As you look at the photos here, imagine how empty the landscape would have appeared just a dozen short years ago and what a miracle it is that thousands of wine tourists now flock here each year to visit Salentein and the other spectacular wineries that followed in its wake.

Arrivals/Departures

You approach Salentein, located in the Valle de Uco about 90 minutes by car south of Mendoza city, by driving up the long entry road shown above. You arrive at the main hospitality center, which contains a reception center, gift shop, restaurant and Killka, a spectacular modern art museum built to display part of the owner’s collection. Another beautiful building, the “Chapel of Gratitude,” is just down the road.

The winery.

Incredibly, you have not yet arrived at the winery. To get there you pass through the reception center and walk down another dramatic lane (this time through a vineyard) to arrive at one of two wine production facilities on the property. The photos here don’t really do justice to the experience, so I have embedded a short video below that includes some aerial footage — scroll down to check it out.

The winery’s architecture is even more impressive than the museum’s, especially inside, where winemaking is organized around the “cathedral of wine” barrel room, laid out like a cross around a mosaic compass rose. Entering the vast space, you really do feel like you are in a cathedral. I could hear the click, click, click of our friend Scott’s camera as he tried to capture every line and curve of the stunning building’s architecture.

Posada Salentein completes the package with a 16-room inn and gourmet restaurant that serves creative cuisine paired with estate wines. It is hard to image a better way to visit the Valle de Uco than to stay here among the vines and to exploit the restaurant menu to answer burning questions such as “how does Malbec go with fresh local trout?” (Perfectly, as it happens, based on our experience.)

The inn and restaurant.

Bodegas Salentein hosts 25,000 to 30,000 per year according to Lorena Cepparo, who heads the Hospitality and Tourism Business Development department. Salentein is a destination winery that is high on the hit list for every Valle de Uco wine tourist (O. Fournier is another “must see” in the area.)

Dutch Treat

The typical “day tripper” experience, according to Lorena, involves a tour, tasting of three wines and lunch at the restaurant — an appealing combination. But the basic package is just a start and can be customized in many ways depending upon the particular interests of visitors. International visitors come from the winery’s main export markets: the U.S., Brazil, Canada and the Netherlands.

The Netherlands? Well, yes. Lorena explained. The winery’s owner is Dutch (Salentein is the name of a Dutch estate) — click to visit Mundo Salentein, the ambitious Dutch website. And Holland’s Princess Máxima is from Argentina, Lorena said, so the Dutch are understandably crazy about all things Argentine. Who can blame them?

It seems to me that Bodegas Salentein sets a high standard for wine tourism here in Mendoza and, as the first destination winery built in the Uco Valley, it has inspired others to try to match or exceed their facilities and services. Bórmida & Yanzó, the local architect firm that designed Salentein, has gone on to create an incredible collection facilities here (click on the link to see what I mean). The contrast between their cutting edge architecture and the starkness of the high desert vineyards makes wine tourism here a unique experience.

But Wait … There’s More

I went to Bodegas Salentein looking for a wine tourism story and I found it. Salentein is an audacious bet on the wine tourism concept in the the relatively remote Valle de Uco.

But as I talked with Loren, COO Andrés Arena and legendary (for his work at Catena Zapata) winemaker José Antonio Galante, I began to realize there there is much much more to Salentein than the beautiful buildings and sophisticated visitor experience. Especially now that the talented Galante is on board as winemaker, Salentein’s ambition continues to soar.

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Bodegas Salentein from John Stevens on Vimeo.

Thanks to everyone at Bodegas Salentein for showing us their facilities and answering all of our questions. Special thanks to Andrés Arena, Chief Operating Office, José Antonio Galante, Chief Winemaker and Lorena Cepparo, Chief of the Office of Hospitality and Tourism Business Development.

Extreme Wine: A Certain Idea of Malbec

March 9, 2011 By Mike Veseth in Argentina, extreme wine, wine research, wine science, wine tourism Leave a comment

One of my goals in coming to Mendoza was to add to my collection of Extreme Wine stories (yes, I’m working on another book). I was thinking that the story would be the Great Malbec Boom, one of the most extreme regional wine surges in recent years.

The Malbec boom may still make my extreme wine list, but a fellow wine economist suggested a different entry: Tempus Alba‘s ambitious project to create an extreme wine, one that uniquely captures the essence of Malbec. Here’s the story of Vero Malbec.

One Hundred Years of Winegrowing

The Biondolillo family has been in the winegrowing business in Mendoza for more than 100 years. This means that they have lived through booms and crises, both in the wine industry and in the Argentinean economy more generally. Aldo Biondolillo, who holds a Ph.D. in Economics from the University of Minnesota, is the third generation to make a living this way. His sons Leonardo and Mariano are in the family business, too, and there is a very young fifth generation in the wings (if you look closely you can see their fingerprints on the wine label in the video above). Theirs is the kind of business that necessarily looks to the long run.

When Aldo began the Tempus Alba project in the 1990’s he was looking for a way for his family to continue the winegrowing tradition well into the future. He knew that they couldn’t live on grape sales alone and becoming a bulk wine producer would be a dead end road. Commodity pricing — of grapes or bulk wine — often puts an emphasis on cost more than quality – and there is always some one who will charge less. Economic theory teaches that product differentiation is key to escaping the commodity trap. But how?

Aldo’s project is ambitious: to create not just another good Malbec, but a different idea of Malbec.

His method is to isolate the purest or perhaps just the best Malbec vines in the region from among the many different clones that have been planted here over the years. The goal is to identify the truest clones and, in the long run, to make them available to other wineries who could join a circle of producers making unique wines – unique in terms of the particular grape clones and then unique once again as expressions of their respective terroir.

In Malbec Veritas?

And so Aldo and family began, planting 800 different Malbec cuttings in the Mother Block. The 800 vines were narrowed in stages to 589 vines and then finally 20 by teams of experts. After 10 years of hard work, the project’s first commercial Malbec was made in 2007.

It is called Vero Malbec (vero is Italian for truth, although the letters are also the initials of Aldo’s grandchildren). The Biondolillo do not claim that it is the original Malbec brought over from France or The One True Malbec. It is their version of the truth, seen from their family’s particular 100 year perspective.

Everyone knows that I don’t rate wines or give tasting notes, but I found the Biondolillo’s version of the truth very appealing (as have a number of wine critics). It will be interesting to see how this wine develops over several vintages. It will be even more interesting if Aldo’s dream of a winemaking circle evolves, so that a group of Mendoza winemakers adopt the Tempus Alba clones and produce their own unique wines, perhaps along the lines of the Coro Mendocino project that I wrote about a while back. (Hmmm … they could call it Vero Mendocino!)

Our visit to Tempus Alba’s beautiful winery in Maipu was informative in several respects. First, It was interesting to see a project that is at once so scientifically ambitious (the labs and the clones) and, through the winemakers’ circle idea, so socially progressive. Although there is a lot of plant science employed here, however, the work to narrow down the cuttings was done using nose and palate, not by sequencing grape DNA.

I accused Aldo of being an empiricist in his search for true Malbec and someone in the group said, “Well of course … he’s an economist.” Aldo and I reacted in the same instant, “No, no, no!” we said in unison, shaking our fingers. We know that most economists are more comfortable with theories that with facts. (It is an old saying in economics, for example, that a theory cannot be refuted by facts – only by a more appealing theory will do the job). Wine theories are well and good, but it’s what’s in the bottle that really counts.

Stop and Think

I was also fascinated by the visitors to Tempus Alba. The other wineries we visited in Mendoza were fairly remote and sometimes difficult to find; most had guarded gates meant to restrict entry to those with pre-arranged tours. Tempus Alba’s winery is in the Maipu valley, an area with lots of wineries and a good many backpacker hostels. The courtyard was filled with the rental bikes of the 20-somethings who travel from winery to winery as long as they can manage to stay upright. The action in the restaurant and on the deck overlooking the vineyard was young, lively and fun.

I’m not sure the 100+ per day biking visitors (a big wine tourist number by Mendoza standards) buy much wine, but they appear to have a great wine experience – almost a unique one it seems to me. The self-guided tour shows them the winery, teaches some viticultural science, and even exposes them to the family’s “dogma” or guiding principles. Then it is up to the sunny deck to taste the wines and have a bite to eat. Many will be untouched and just enjoy the good wine, food and company, but some will stop and think, and that seems to be the idea behind Tempus Alba’s whole approach.

Is Tempus Alba’s Vero Malbec really unique? I won’t judge the wine, but certainly the idea is completely different and a potentially important addition to the rich mosaic of Mendoza wine.

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Update: Leo Biondolillo writes

“Answering your question of Is Tempus Alba’s Vero Malbec really unique? in my personal opinion, every wine is unique or every good wine must be unique… that is the magnificent wine world.”

Argentinean Wine: A SWOT Analysis

March 5, 2011 By Mike Veseth in Argentina, Brazil wine market, BRICs, China wine, economic crisis, Economic impact, emerging wine regions, exchange rates 11 Comments

The first thing we did when Sue and I arrived in Mendoza was to walk to the offices of Área del Vino, the group that publishes Vinos y Viñas magazine, the WineSur website and provides economic and strategic analysis to the wine industry here. We met with Javier Merino, Área del Vino director, and Gonzalo Merino, director of WineSur. They got our visit off to a flying start.

Our discussion was wide ranging. Gonzalo is working on new media projects to expand the market for Argentinean wine and reach a new generation of consumers. Javier was just back from Hong Kong and China and keen to discuss the potential new markets there. Both were happy to talk about controversial questions, such will the Malbec boom be sustained and whether Torrontés really is The Next Big Thing.

Their analysis has been very useful to me as I have met with wine-makers, winery owners and managers. Based on all these discussions I have prepared this SWOT analysis, which represents my current thinking about Argentinean wine today. This is a work in progress (and necessarily very brief), so I welcome comments that correct my thinking or re-direct my analysis.

Strengths

Argentina has many strengths. The most important may be that it has a “hot” brand, its signature Malbec. When wine enthusiasts think of Argentina they think of Malbec and vice versa — a strong identity that many wine regions envy.

But, as I will explain in future posts, Argentina is not just Malbec (or even just Malbec and Torrontés as some writers propose). Quality extends across a broad spectrum of wine varieties, styles and price points, which is a very good thing.

Weaknesses

That said, the industry is very dependent upon exports of Malbec to three main markets, the United States, Brazil and Canada. There would be trouble if Malbec exports to these markets were to falter due to either a decline in demand to a shift to some other “hot” variety.

The domestic market for wine is very substantial, but it is still dominated by low-price basic wines — another weakness. The Argentinean industry would be much stronger if a larger domestic market for quality wines could be developed.

Water is also an issue here as it is in many wine regions. Not an issue today, Javier told me, but for the future. And of course the future is fast approaching.

Threats

There are a number of very serious economic threats that cloud the short term outlook. Domestic inflation is high in Argentina. The government estimate is about 10%, but I failed to find anyone who thinks that it is less than 25%. Production costs are rising rapidly– labor, grapes and other inputs are increasingly expensive. Land prices for new vineyard projects seem to be growing exponentially.

Revenues are not increasing at the same rate, with the result that margins are being squeezed. In fact, the pressure is on to cut prices in the competitive U.S. market. It is not clear how long the current combination of rising costs and falling revenues (or soft revenue growth) can be sustained.

I visited several wineries that were clearly focused on increasing efficiency in an attempt to claw back margin without sacrificing quality. But I also heard rumors of wineries that were taking the perhaps desperate move to source lower cost grapes from other regions to stay in business. The concern was that quality would suffer and The Brand undermined.

Opportunities

There are many opportunities and they fall into two categories: new wines and new markets. By new wines I mean a movement to expand Brand Argentina beyond value Malbec, both into the higher reaches of the wine wall and into other varietals. I’ll be writing more about this in future posts.

I’ve already written about the new markets. As I listened to Javier discuss the great potential in countries like Brazil, with large and growing populations and fast economic growth I knew just what he was talking about: The BRICs (and the New BRICs). Javier believes that the BRIC-like markets are the key to the next stage of Argentina’s export growth. Because geography still matters in both wine and economics, Brazil is a particularly attractive target, but both Hong Kong and China are high on the list.

Argentina’s China card is that its wines could fill an open market niche. Not cheap bulk wines like those from Chile and Australia. And not overpriced prestige labels like those from France. Quality Malbec from Argentina would be more affordable (and in most cases better) than the French and of course much better than the bulk wines. Distinctive, too, on several dimensions.

But China’s a tough market to break into, as I have said before. China will require patience and good luck as well as good wine.

The new market with the greatest potential for Argentinean wines may be Argentina itself. Nearly everyone I talked with said that the best thing that could happen would be for the domestic market for quality wine to expand, making the industry less dependent on exports and less vulnerable to inflation and exchange rate changes.

Bottom Line Analysis

So what’s the bottom line? Well, of course, I believe that the long run opportunities are important, but it seems to me that the short term threats are on everyone’s mind right now, in particular, the inflation-exchange rate squeeze. If inflation continues at high rates and the U.S. dollar – peso exchange rate stays stuck at about 4 pesos per dollar, some producers here will be squeezed out of the U.S. market. Perhaps they can sell to Brazil or on the domestic market, but the prospects are not good if everyone tries to shift focus at once.

What is keeping the exchange rate stuck at an over-valued level? Politics and fear, I suppose. There’s a presidential election in the fall and everything here has taken on a political significance, so it is no wonder that holding the line on the exchange rate (and denying that an inflation problem exists) would be political, too.

And then there is the fear. Argentina has experienced inflation-devaluation vicious cycles in the past. Inflation leads to a falling currency, which adds to inflation pressures, which forces the currency down even more. Etc, etc. There’s a worry here that lowering the exchange rate would set the cycle off once again and nobody wants that.

Fear and politics are powerful forces. Argentinean wine, for all its strengths and opportunities, is caught in the squeeze.

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Thanks to Javier Merino, Área del Vino director, and Gonzalo Merino, director of WineSur for meeting with us in Mendoza and to everyone who has talked with us about wine economics in Argentina during our stay here. Watch for future posts that examine particular elements of the Argentina wine story in more detail.

Argentina: You’ve Come a Long Way, Baby

March 1, 2011 By Mike Veseth in Argentina 4 Comments

I’m here in Mendoza looking for clues to the future of Argentinean wine and it is pretty interesting work. To Malbec … and Beyond!

Many of the wines we are tasting here are distinctive and delicious. The industry’s future is bright if certain economic problems can be overcome (stay tuned more about these challenges in upcoming posts).

The Real Argentinean Wine Miracle

As I have talked to winemakers and industry experts it has slowly dawned on me what a miracle these fine wines are. Not a miracle of nature — Mendoza has long been known to possess superior terroir — but a bigger social and economic miracle. The fundamental idea of Argentinean wine has been transformed in just a few years.

The excellent wines we take for granted today did not exist in a serious way just twenty or twenty-five years ago. The standard of wine was hopeless low and the industry’s health was no better.

Why were the wines so bad? Well, Argentina has been a boom and bust economy for many decades and quality wine is a long term business. It is difficult to keep a focus on quality when both consumers and producers are riding an economic roller-coaster. This is one reason family-owned wineries are important here as in other parts of the wine world. Families can often think in terms of generations while financial investors focus on quarterly reports.

Industrial organization also leaned away from quality for many years. Growers would sell grapes to producers (who sought low prices) who would make bulk wine and ship it by rail to Buenos Aires, where negociants bottled it under their own labels and sold it to bargain-hunting consumers. This is not a supply chain that favors quality over cost.

Bad Incentives Make Bad Wine

A stubborn grower, and there were a few, who insisted on producing high quality grapes got the same payment per ton as his high-yield low-quality neighbor. No quality premium existed because all the grapes went into the same pink bulk wine.

Even the grape varieties reflected this sad story. Malbec is on everyone’s short list of hot selling wines today. But back in 1968 Malbec made up less than 20% of Argentinean production.

Nearly half (43%) of the wine grapes grown were pink-skinned heavy-yielding Criolla (Mission grapes), which were made into the cheap oxidative wines stored in large wood casks. Not much varietal flavor made it through the aging process, or indeed survived fermentation in the absence of temperature control.

The wines that resulted, given the prevailing cellar practices, had almost nothing in common with the wines of today except alcoholic content. Since Argentina’s present as found here in Mendoza is so delicious, I set out to find examples of the past so that I could better gauge the degree of the transformation.

I didn’t find what I was looking for at the nice shop on the main square in Mendoza (or earlier in Buenos Aires, either). So I went looking at the Central Market in the heart of town, where wine tourists seldom go but typical families shop for fish, meat and vegetables. There I found the dinosaurs — styles of Argentinean wine still made for consumers with a taste for the past.

What I Found at the Market

I suspect that the bottles at the top of the page are Criolla blends and the closest thing to the old wines. They sure looked like they were very oxidized, with brownish sherry like color. Market price = 9.80 pesos, or just under $2.50 per bottle. They were displayed on the top shelf of the wine wall, up close to the florescent lights. Perfect storage conditions!

You can buy wines like this and other inexpensive products in big refillable jugs, too, at an even lower unit price. I saw these jugs back in Buenos Aires, too, and I am sure that they are ubiquitous outside the tourist zone.

The last photo shows cheap wines I found at a tourist shop a few blocks down from the central market. The sign offered six bottles for 42.90 pesos (less than $11).

The Taste of History

So what does history taste like? Well, history is pretty bland if you go by the glass of vino tinto I was given, poured from the big jug, while waiting for my take-away empanada order.

But I hope you will understand that I did not actually taste these wines. I wimped out. My time in Mendoza is too short to drink bad wine with so much great wine available. But even if I had bought them all and pulled the corks, I would not have experienced the true taste of Argentinean wine past.

During our visit to Catena Zapata winemaker Pablo Sanchez advised me that even the most basic wines today (which make up the majority of sales in the domestic market) are far superior to the old pink wines. Better practices in the vineyard and the cellar today have raised the standards here just as they have for basic wine in the United States and almost everyplace else.

The bad old days of Argentinean wine are [thankfully] lost to history. The wine has changed but, more important, the idea of wine is transformed. The future? Well, that’s another story! Stay tuned.