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Argentina Wine Report

What is the future of Argentina’s exports?

November 2, 2011 by Redacción | in Exports, News

This question is answered by Argentina Wine Report (AWR),a report developed by the analysis team of Área del Vino, conducted by Javier Merino, based on important sources such as the World Bank, Euromonitor and Trade Map.

Argentina Wine Report, a report made by the analysis team of Área del Vino, reveals that up to now, Argentina has experienced a fast growth, driven in the past few years by the international crisis throughout 2008 and 2009. This way, the export sector went through a successful decade in which the share reached 5.3% in value in the main markets and climbed to 8.8% in volume (excluding United Kingdom).

The share of Argentina’s bottled wines in the 5 main foreign markets has grown in the last few years based on a cost equation and an appropriate exchange rate in comparison with the currency appreciation experienced by competing countries, “underlined the report.

It is worthy to remember that the world went through a strong structural change and the portion of imported wines grew by 40% in only 20 years, mainly due to “new consumers” made up, to a large extend, of countries whose domestic production is almost non-existent or is not enough to meet domestic market’s need.

“If the world will experience again a recession in the next months, the situation will be so difficult for various countries whose expansion is based on exports, as it is the case of Argentina, “warned the report.

Internal structural changes

The progressive increase in internal costs and the associated change in the mix of products show that Argentina will not focus its competitiveness on the price segment of USD 15-20, nor on the range of USD 18 (FOB) per case, as it did in the last decade.

The report pointed out: “in the case of certain varietals, like Malbec, the growth of supply has been behind demand, causing a phenomenon of a relative shortage, strongly leading to a rise in prices.”

After the “push”, it is necessary to attain strength

The push made by the “trade down” phenomenon (world consumers choose wines within a lower price segment but with the same quality) is evident in the market share reached by Argentina in markets like United States and Canada, and the considerable increase experienced in the Netherlands.

In the United States, it was clearly observed the impacts of the crisis on the Argentine wines’ sales. The share climbed from 3.6% to 6.1% between 2008 and 2010. “After this fast-growing period, the share continued to go up but at a lower rate, “revealed the report.

In Canada, Argentine wines reached a significant share in the past few years, going from 3.82% in 2008 to 6.19% in 2011 and in the months after the crisis, they grew considerably.

In Brazil -the analysis pointed out- Argentina lost share. The share among the origins of imported wines hit a record of 25.5% in the middle of 2006 and then it slowly started to go down up to 22.6% over the last 12 months to July 2011.

Lastly, in the Netherlands, Argentina has a good performance; it gained share taking advantage of trade down, going from 1.8% to 4.6% between 2005 and 2011 (according to data up to January 2011).

Firstly, “trade down” shows a minor effect in almost every market (according to the current scene, provided that the international crisis does not get worse). “It seems to be an influence the fact that several wineries can no longer keep themselves in certain price segments, losing their prized value for money, “highlighted the report.

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