Gaucho club

Fed up with playing second fiddle to Chile, the Argentinean wine industry is putting its money where its mouth is and investing in a UK generic campaign, says Robyn Lewis

THE EXPORT figures for Argentina last year make for an encouraging read.  The top five markets are all showing significant growth and there are several new markets growing rapidly, albeit off small bases.

The US, UK, Brazil, Holland and Canada occupy the top five positions (in that order) with Brazil and Holland showing the most impressive set of figures at the top end of the table. According to the export statistics Brazil is up 66.8% and Holland by 74% by volume respectively, and price per case is up 3% in Brazil to US$16.59.

Perhaps less excitingly, the price per case has risen only 1.2% in Holland to US$22.63 but the US, while managing just 21.9% rise in volume, has posted a 7.3% rise in price to US$22.27. Markets on the rise include Russia up 114.2% in volume to 170,538 cases; Columbia up 184.5%; Poland up 142.6% and Uruguay up 139.7%.

Australia too has put in an admirable performance recording a whopping 1,952.9% rise in volume, but, literally, at a price – with the price per case down 44.5% from US$29.15 in 2003 to US$16.19 last year.

There were far less encouraging performances from Austria, down 48% by volume and Belgium, down 23.6% by volume, as well as Hong Kong and the Czech Republic, both of which saw a drop in price per case of 16% and 21.2% respectively from US$28.05 to US$23.56 in Hong Kong, and US$22.57 to US$17.77 in the Czech Republic.

"The Argentine industry does face external and internal obstacles going forward," says Diego Mohammed, export manager of the Finca La Celia winery.  "Within Argentina more aggressive support from government policy for export activity is needed.

Externally, a low image for Argentinean wines and high competition from New World wines are challenges we face.  On a more positive note, the economy is stable and will remain positive for the Argentine industry, and there is further potential growth in markets such as the US, UK and Brazil in the short term and Scandinavia and Canada in the long term."

Others such as Jean-Marie Chadronnier, CEO of Dourthe, which is the international distributor for Clos De Los Siete, look to Eastern Europe and Asia for future growth.  "We are already distributing Clos De Los Siete in emerging markets such as Russia, Ukraine, Poland and Kazakhstan, as well as in China and Korea.

These are the areas we feel have significant development potential.  Next year we are hoping that the US will provide the greatest development and, of course, the UK is still a priority market for us due to its size in volume and value.

We also see the range of buyers and the appreciation of quality products of many in this market.  There are difficulties, however, as the increase in the level of promotions required by the market creates some difficulties when establishing a solid distribution foundation for a premium wine from Argentina, like ours, around the £10 mark."

Poor UK performance

And so to the UK, then, which we have all but ignored so far.  The export statistics show that, while it remains the second most important market in 2004, it was a disappointing year.  Last year’s exports to the UK rose by a mere 2.9% to 1,903,271 cases and the price per case went up to a measly US$16.32, by far the lowest in the top 10 markets.

This can only be classed as a poor performance, especially coming hot on the heels of those stellar results from across the pond.  In the off-trade ACNielsen results show Argentina down 20% in volume (MAT to week ending 27.11.04) and down 19% by value (MAT to week ending 27.11.04).

That leaves it with just a 1.3% share of market by volume and by value (MAT to week ending 27.11.04) down from 1.7% last year (MAT to week ending 29.11.03). 

This places Argentina well below Chile, which has grown market share over the same period, up from 2.9% share by volume in 2003 to 6.1%, and 6% by value this year (MAT to week ending 27.11.04), and above New Zealand by just 1% in volume and 0.2% in value.

In terms of average price per bottle in the UK off-trade, however, there is better news. Argentina has managed to increasethe average to some £3.69 from £3.64 (MAT to week ending 27.11.04), which is a larger increase than Chile which is up just 2p to £3.74.

However, this increase pales in contrast to the 11p increase seen by South Africa and 13p by Spain.  This comparison with Chile is, in fact, a useful one as, often in the UK off-trade in particular, the two categories are lumped together under the South American banner.

So what do the Argentineans think about the juxtaposition? "Chile is certainly our number one competitor," confirms Jeff Mausbach, Asian export manager and public relations director at Catena Zapata.

"Our geographic proximity means that we are often placed side by side in the South American sections and, as a result, consumers naturally think of the two together. We feel we have unique growing conditions in Argentina that will give us the eventual advantage over Chile in the future.

Chilean wines, however, have a great deal more recognition in the international wine market and so the approach will demand a concerted and diligent effort on behalf of the Argentine wineries to spread the word of the quality level of Argentine wines and the value they represent when compared to wines from Chile."

Mausbach goes on to point out that in the UK Catena Zapata is focusing a great deal of its time and resources within the on-trade sector, which is where it believes this message comes across best.

"Our goal is to show leading managers and sommeliers in the UK on-trade that we can compete with top wines from any other wine growing sector.

At the higher end of the spectrum we are conducting a great many tastings and premium ontrade events with our top-end wines in order to show the trade that Argentina, and Catena Zapata in particular, has something special to show in terms of this level.

Also, the emergence of the gastropub phenomenon has opened a great deal of doors for wine in the on-trade arena, and we are working with our importer Bibendum to take  advantage of these opportunities."

On-trade branding

The ACNielsen figures for the UK on-trade demonstrate a steady increase for Argentinean wines over the last three years.  They show an increase in volume from 78,000 cases in the year to September 2002 to 105,000 cases in 03, rising to 175,000 in the year to September 04.

That figure gives Argentina a full 1% share of the sector from just 0.5% in 02, but again the numbers do not compare favourably with Chile, which enjoys 6.4% market share of the UK on-trade (year to September 04).

The importance of the on-trade to the UK market is now being recognised by Argentine producers, it seems, who see the potential the sector offers not only for value growth but also in terms of building brands. According to John West, brand director of Moët-Hennessy UK, which is responsible for Terrazas, the company’s strategy of driving value rather than volume places a firm emphasis on building the brand within the UK on-premise.

"This sector is critical for building brand image and creating value and is therefore a priority for Terrazas.  As consumer’s tastes evolve, incorporating new varietals and origins into their drinking habits, the wine lists follow the pattern and are continually expanding.

The offer of an Argentine Malbec being one of the country’s flagship varietals, satisfies both consumers and restaurant owners by giving a distinctive choice and the chance to keep on discovering."

Building brands within the category has long been a priority for many producers and there have been some notable successes – Argento and Lo Tengo, to name but two – but many believe there is far more work still required in this area for Argentina to really make an impact on the UK.

"When we are thinking about opportunities for future growth, developing four or five consumer-led brands as with Australia and California, is a key priority for the Argentinean industry," says Tim Ranscombe, director of South America at Brand Phoenix, which distributes the Trapiche brand in the UK off-trade.

"Providing entry level and mid-priced wines will drive trial and awareness and there is opportunity to dual promote the brand and the country," he argues.  "These brands do have to come from producers that are able to cope with the commercial and logistical demands of the UK market, however.

With Trapiche, for example, the brand and packaging were thoroughly researched with the UK consumer and we emphasise the need for at least four to five years of sustained brand investment with through and abovethe- line activity – from price to packaging to retailer-led consumer-based activities."

Generic presence

The point that Ranscombe makes about dual promotion of brand and country is an interesting one, as Argentina has not invested in a generic office in the UK and therefore suffers, some say, from a lack of consumer awareness.

Comparison with Chile’s success and generic presence have not gone un-noted in the trade.  Since the Wines with Rhythm consumer campaign that ran in 2003, there has been little generic activity in the UK – until now that is.

News that Wines of Argentina has appointed Focus PR to run a generic campaign in the UK has reached the ears of the trade.  "The Wines of Argentina board has decided to appoint a PR agency in 2005 rather than a generic office at this stage for economic reasons," confirms Julian Orti, export director at Trapiche.

"It was felt that hiring a PR agency would be cheaper than setting up a whole office from employees, to hiring an office plus all the equipment, etc.

In many ways this is a good move as, by the time an office could have been set up and the right people appointed, a lot of time would have passed and we would have missed opportunities."

At this early stage (at the time of writing the announcement was less than 24 hours old) plans are sketchy, but Bernardo Hoffman, marketing manager at Wines of Argentina, confirmed that there will be a significant PR push this year in the UK.

"Plans for a new generic campaign are at the creative stage and we are working with an advertising agency on that.  We are looking forward to a year that will see Wines of Argentina strengthen its position in the UK and the campaign will target both trade and consumers.

Our aims are to grow listings of Argentina’s wines and to heighten consumer awareness of the quality and range.

Elements of the campaign will include, among other initiatives, the creation of an agents’ committee, targeted informal tastings for trade journalists and wine writers, the organisation of press trips and ongoing liaison with members of the media and the wine trade."

Going forward, Hoffman admits that setting up a permanent generic office in the UK is still a possibility, a move many here and in Argentina would welcome, pointing out that the UK is the one place where this approach has been proved successful.

"The UK wine trade is very well coordinated and they would welcome this kind of support from the Argentine wine industry," says Alfredo Matilla, export director at Familia Rutini wines. "In the US, for example, it would be a different story as the market is too fragmented, but all over Europe the approach has potential, especially if generic offices were established in zones such as Eastern Europe, Central Europe and Scandinavia rather than by country."

It will be interesting to revisit the Argentina UK figures in a year’s time to see the effect of a 12-month PR campaign, and even more interesting to see if this will persuade the  Argentineans to invest in a permanent UK generic office.  Watch this space.