Tuesday, Oct 24, 2017
Industry & Trade | Agriculture | South America | Argentina

Argentinean wine industry

Argentina Aims to Double its Global Market Share in Wine


9 months ago

Alberto Arizu, President of Wines Of Argentina
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Alberto Arizu

President of Wines Of Argentina

Alberto Arizu is known for being the director of one of Argentina’s most prominent wine-producing companies: Luigi Bosca, founded by his grandfather.  Since 2010, however, he has also assumed an institutional leadership role at Wines of Argentina, the organization aimed at promoting all Argentine wine in the global export market.  As the millennial generation refines its taste – and opens its wallets – Argentina aims to promote its trademark Malbec and other varieties in the highly competitive global market.

While Argentina has been previously isolated from international capital markets, 2016 saw an opening for investment and greater exports. What does this mean for Argentine wines in terms of new opportunities?

Argentina started this process in the early 1990s. The country has always been a high wine consumer. Argentines once used to drink more wine than milk—90 liters per person per year—therefore exports were not a priority  [UdW1] for the producers, since they had a domestic market.

The '80s crisis had a big impact on the sector, which is why in the early '90s we decided to gain new market outside the country, since it was no longer possible for the industry to survive only by selling to the domestic market. Even though the conditions were not good for exporter during the '90s, as the peso appreciation made Argentine products rather expensive, we made the strong decision to be more competitive abroad. Between 1993 to 1997, USD 2.5 billion were directly invested in the wine industry. Many international companies got established here during that time, seeking the opportunities the country has to offer: good weather and appropriate land, and a well-organized wine sector, as we have a long tradition producing and selling.

In the mid-90s, Argentina exported around USD 15 million in wines; wine was not our strong suit. Today, we are selling more wines than we do meat, for example, reaching USD 1 billion of wine exports. Argentina was not even considered as a wine exporter 20 years ago, but we now have around 4% of the world’s market share.

 

The United States is a lucrative yet competitive market, where Argentina must compete all major players in the international wine market. Your success there is based on promoting the country as a brand. How do you focus the marketing strategy in order to obtain better access in these markets?

During my first term as President of Wines of Argentina, my commitment with the organization was to create a platform of communication, in order to market Argentine wines. Argentina now equals to Malbec, but the country produces other types of grapes as well. 

The uniqueness of Argentine Malbec does not come from us being the only or the strongest Malbec-producer in the world; it comes from our ability to produce a wine that perfectly fits the new trends of wine consumption in the world. We aim for the Malbec production to be associated with brand Argentina. We produce wines with a beautiful elegance and nice acidity, wonderfully aged and really versatile. We can produce sparkling wines with Malbec or sweet ones; young, vibrant, soft and drinkable wines, but also high-end barrack-aged wines that can compete with other wines of the world. For example, France produces excellent wines from Malbec, but they are not easy to drink as opposed to Argentine Malbec. 

Our talent and natural conditions—such as altitude, the use of glacial Andean water[UdW2]  for irrigation and the dry climate—allows us to produce wonderful wines that fit perfectly with the new consumers. In the last ten years, consumers have changed a lot. Millennials today have a larger impact on the wine industry today than the baby boomers had 30 years ago. Millennials in the US and the UK choose Argentine Malbec one of their preferred varieties.
 

Your goal is to double the market share that Argentina has in the world, which is part of Plan Vitivinícola 2020. How are you, as President of Wines of Argentina, promoting Argentine wines in order to achieve this goal?

At Wines of Argentina, we are commercial and marketing-oriented in our actions. The biggest challenge for the country in the next years is to promote exports without a competitive exchange rate, which was the most important driver for the past ten years. Even when we were a country isolated from the world, Argentina managed to sell its wines and to develop the brand name, thanks to certain macroeconomic conditions that helped. One of these conditions was the exchange rate.

When you see the distortions of the Argentine economic fundamentals, it is hard to understand that the country needs to find a good way to be competitive in the long-term. The biggest challenge nowadays is trying to achieve long-term competitiveness other than a high exchange rate. However, it is difficult, since there is still high inflation and the exchange rate has remained flat for some time. It is even worse if we see that in the past two years our competitors have devalued their currencies.



What is your perspective on Argentina’s human capital as an element of its wine export advantage?

Argentina has great talent. We are a greatly educated people, and we are very innovative. There is a new generation of wine makers that is very successful abroad. Our future is bright in terms of the human capital, particularly for the people who create the wines. 

I think that some tasks, such as the harvest, will eventually be replaced with technology, which will have an important impact on the business in the future. But the human talent is what sets Argentine wine apart. We need to be able to think with a longer economic horizon: instead of thinking 6 months ahead, we need to think 25 years ahead, like Australia and other countries do.

Innovation is key for the future in Argentina; not just in the wine industry. Traditional wine-making families, with experience and an established trajectory, are being complemented with the new generations. Wines of Argentina works in trying to combine the experience of the former with the innovation spirit of the latter. You can now see experienced and talented wine makers working with young professionals, creating new blends and understanding the marketing of the product. 

Wine makers today are quite different from the ones 20 years ago. Back then, wine was produced and then they tried to figure out how to sell it. Now, you asses what wines you need to produce and then you go to the vineyard in order to create the conditions needed to produce the certain type of wine.

I personally am one of the oldest of the new generation. Our experience in terms of the exchange of ideas and innovation in the last 10 years has been very positive.

 

There are many Argentine wines that have brand recognition. What does the brand Luigi Bosca have to offer to the Argentine consumer?

We are innovative, and we have a great team of wine makers and researchers. We have great vineyards in different valleys in Mendoza, and we also produce wine in Cafayate. Innovation has been permanent for us. I started to work with my family in 1992, back when we produced seven wines; we now produce more than 50. When we opened to international markets in the mid '90s, we immediately joined the wave of wine exports. We have been one of the most active companies in terms of exports, and always sold high-end wines. Exporting implies 60% of our business now. 

When you go from producing wine for just the one country to producing for 60 countries, it changes your mindset. When I think of wine today, I am thinking of Chinese, Japanese and English consumers; I am thinking of every nationality. 

We try to maintain our traditions and our spirit; I love it when people recognize our soul inside a glass of Luigi Bosca wine. When it comes to innovation, we are doing so all the time because we need to capture consumers from everywhere in the world. This has been our most important challenge, after more than one century producing wine.

When my great grandfather settled in Argentina, he started producing high-end wines, in a country where people used to drink without taking quality into consideration. High-end wines now entail a much larger share than before. For more than 70 years, Luigi Bosca used to be a very small boutique company. The company's big jump has taken place in the last 30 years, when we seized the new opportunities that come from opening the markets. Argentina changed significantly during that time, as today high-end wine consumption has gained market share. 

This is why we now produce more than 50 types of wines with different collections and concepts. All our wines have an international style, although some are better suited for the palate of American, British or European consumers. Nonetheless, all our wines have international recognition.

The most successful companies in the wine business can be described with one word: 'consistency'. It is not about having the best wine one year; it is important to have good wines every year. This means that to establish a brand you need time. Brands like Luigi Bosca compete in a market that has had one new brand per week in the past 10 years. The only way to compete in this kind of market is to be consistent. 

The wine business is rather particular, as consumers are not loyal; they are changing all the time—particularly Millennials. People are looking for what is next what is new. This means we have to create at least one new wine per year in order to capture the attention of consumers.

In the '90s, the wines were divided into old and new world ones. The old world had the prestige, the tradition and the history, and prices reflected that. The new world had a simpler message, an easier approach for the consumers and more affordable prices. Nowadays, all the wines are competing against each other. There is no longer a division, which means it is a much more competitive world than it used to be. 

This is the most competitive business of the world; there is no other business like this one. You have to get the consumers' attention, as consumers are constantly looking for new wines. You have to compete with the prices and the traditions of other companies. And then there is the definition of quality. Each person has their own perspective, their own idea of what quality stands for when it comes to wine. The only rational and comparable trait is the price. 

When people think of Luigi Bosca, their brain is stimulated in different ways. Each person has their own experience with the brand. We are not talking about the taste of wine any longer, but experiences. A brand name in the wine industry can have a much higher appreciation than a luxury car has. This is funny, as you need to sell 1,000 bottles of wine to even buy a tire of a luxury car. Wines represent something very curious for people and they are chosen as the best gift. When you choose a wine it says a lot about you; you are choosing a grape, a brand, a vintage.

It is very important to have a linkage between Argentina and wines. For many years, there was none, even when we already produced wonderful wines. Many countries have created a great image around their wine, even when their main industry is something else. For example, France is known for its wines, but its most important industry is armaments. When you think of France, you think of wine.

We once went on a tour with former President Menem, and we were in Malaysia, which is a Muslim country. The most important newspaper there came and interviewed some important businessmen of the group, which included Loma Negra, Bridas Group and Luigi Bosca. We were a wine bodega among huge companies, being interviewed by a Muslim newspaper. The next day I appeared on the front page talking about wine, while the other companies where barely quoted. Wine is much more than numbers, it conveys feelings.

The new challenge for Argentina is to promote our diversity in land and wines. We can produce all the grapes there are, because of the different combinations of altitudes and latitudes. We are working very hard with tailor-made marketing strategies. When we go to the US we find a more mature market, where they are open and looking for what is next. That is why we are strongly communicating our diversity. We do not just market Malbec; we promote Malbec from a certain valley and certain soils. 

But when we go to China, the consumer cannot tell Malbec from another wine, although there is a new generation of Chinese that have a much more Occidental taste and that is learning to enjoy wines from around the world. We have signed an agreement with the most powerful institution in terms of wine education in China, in order to develop the image of Argentine wines in this country. China is one of our top markets in terms of marketing strategy. It is a changing and competitive market. They used to be focused on prices and brand names alone; the new generation appreciates the wine.

 

Interview by Nicolas Carver, follow him on Twitter at @WorldTempo


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