Update Argentina – Seeing is Believing

Wine exports for Argentina reached a new record at the end of last year and news of a generic promotions office for Argentine wines has been welcomed by the UK trade, reports Patrick Schmitt.

Wine exports for what is reputedly Latin America’s most lively nation, Argentina, reached a new record at the end of last year. From January to September 2005, the industry recorded a 30% value and 24% volume increase in wine sold to foreign nations. But in the UK, Argentina’s second largest export market, the South American producer’s share of the shelves stalled at 1.5%. Why? What could be holding this category back in Britain?

Exports to the UK from Argentina have, in fact, increased, but the rate of sales growth is still behind that of many competing countries, a situation which some suggest is because Argentina lacks a generic body  devoted to promoting its wines in the UK. After all, the long-held belief among trade circles is that Argentina is a sleeping giant, just waiting to wake.

As Louise Hill, marketing manager at Stratfords Wine Agencies, sums up succinctly, “The future potential for Argentina is enormous. Where else in the world produces wines from such pure fruit, practically organically grown, crafted with modern techniques, available in healthy commercial volumes and presented to the UK at such extraordinarily good value?” However, as she continues, “There’s no good having something wonderful to sell if you don’t tell your audience that it is available.”

Hence, citing the decision by Argentine producers to open an office in the UK dedicated to promoting Argentine wine, she concludes, “The opening of the new generic office is the best favour the Argentineans could have done for themselves and it can’t come soon enough.”

It is a brave move too. With only, as stated above, 1.5% of the UK market, Argentina lacks what Leandro Bastias, brand manager for Trivento, calls “critical mass”. Without that, Argentina has little money for funding a marketing push in the UK, but without the push, it is unlikely to ever generate the capital needed to support such an operation. Yes, it is a case of the chicken and the egg.

An office not unlike that for Wines of Chile is due to open however, although already there are signs this may take time to emerge – at the time of writing a meeting to decide budgets was already due to be postponed. Further, as Charles Hawkins, managing director of Charles Hawkins & Partners, fears, “Even when Wines of Argentina is set up, it is likely that it will be hampered by in-fighting.”

And while news that a generic office will open this year is certainly positive, it may not be the cure-all some hope it will be. For a start, the country has already lost a lot of ground to other nations who have been pushing hard for some time to build an image for themselves. Also, as Argentina has a history of somewhat short-lived attempts to promote itself, there is a danger people will be doubtful of the long-term future of a current attempt.

As Nikki Fletcher, PR coordinator at Thierry’s Wine Agencies (agents for Santa Julia) points out, “The on/off nature of generic activity from Argentina over the past few years has lost us some credibility and we need to turn this around.” Her advice is for those promoting the country “to develop an integrated plan on both the trade and consumer side that has long term objectives”. She also calls for the appointment of “charismatic people to run the office, who have a fundamental understanding of the UK trade but also the passion to be ambassadors of Argentine wine over here.”

Obvious perhaps, but what does Pernod Ricard’s Adrian Atkinson, chairman of the Executive Importers’ Committee have to say about the proposed push? “We will create and communicate a cohesive vision and image for Argentine wine in the UK,” he begins. “The stategy is simple; to deal with the fundamentals, capitalise on the trade support, promote Argentine wine effectively, create consumer awareness and ultimately growth.”

Focus PR will apparently continue its role in publicising Argentine wine, while the new office will concentrate on retailer promotions, consumer sampling and work with the on-trade.

But where do the real opportunities lie for Argentina? For Atkinson, “value for money at the £5 level” is certainly something Argentina has to offer, while, “Malbec, Syrah and Pinot Grigio”, taking a varietal perspective, “are key,” he adds. Sparkling wine too has “great potential”, according to Atkinson. He highlights the advantages of Argentina’s cool climate and high altitude in “producing quality Chardonnay”, while adding that in Argentina, “The production costs are significantly lower than in, say, the US, Australia or New Zealand, while Argentina has the technical backing of leading Pernod Ricard brands and Moët.”

However, the real volume drivers for Argentina will be strong brands at key price points. Presently, much of the success of Argentina’s leading brands in the UK off-trade is fuelled by discounting. At the time of writing, for instance, La Riojana’s Inti, Argentina’s biggest brand in Britain, which shifts almost 200,000 cases (ACNielsen October 2005) through the multiples, was on a January offer of £5.99 down to £2.99 for its Chardonnay/ Torrentes and Cabernet/Shiraz in Sainsbury’s. Although Steve Barton, director at Brand Phoenix, UK agents for Trapiche in the off-trade, says, “There’s nothing wrong with deals – the consumer loves them – it does show how immature the category is if it is those styles of lines which dominate the category.”

Nevertheless, he and others see the potential of Argentina’s largest producers, of which there are three or four really significant players, when it comes to supplying the largest multiples, although he does also point out that Argentina has, in the past, been hamstrung by logistics. “If gondola ends are to be booked then you must deliver on time and in the right configurations,” urges Barton, “and hence retailers tend to rely on a proven supply base. Argentina hasn’t yet got traffic of containers, making space on them very hard to get.” There are a handful of producers, he adds, “who can genuinely deliver in this market. Penaflor, producers of Trapiche, produce 23m cases of wine, which is more than Southcorp used to before it was bought by FGL Wine Estates. It has the capability the top accounts in the off-trade require.”

Certainly, Argentina’s second biggest brand, Argento, which sells some 100,000 cases (ACNielsen October 2005) through the UK retailers, has ambitious aims for growth, and a separate company has even been formed to ensure its success. Called the Argento Wine Company, its backers are Dr Nicolas Catena, Bibendum Wine and The International Wine Investment Fund of Australia. As Amelia Nolan, newly appointed general manager of the company (and previously in charge of sales development at Constellation’s Cellar Door), says, “Through the formation of the Argento Wine Company we see a huge opportunity to work closely with the trade to drive greater consumer awareness of the Argentine category. With our focused approach to the category via the Argento brand we hope that the trade will work with us to develop a model for success for Argentina similar to that accepted for the likes of Chile, Australia and the US.”

A fresh approach
For Stevens Garnier’s Tracey Smith, brand manager for Finca Flichman, there is already “a move to give Argentina more space on the shelf. Buyers recognise the need to keep the range fresh,” she says, “and they are devoting more time to Argentina. Sainsbury’s spent a full week in Argentina in August and while 90% of trips by the multiples to South America are devoted to Chile, that is starting to change.”

Interestingly, Belinda Stone at Hayman Barwell Jones, who looks after Trapiche in the on-trade, says that prices of Chilean wines “are starting to inflate as people are demanding it more”. This is encouraging buyers to consider Argentina, a country on-trade buyers, at least, have “a lot of faith in the quality for the price.” Certainly, to return to the off-trade, Maria Gallup, category buyer for wine at the Co-operative Group, believes the opportunities for Argentina, “are rife at the moment. If last year’s pricing issues with Chile continue for the 2006 vintage, 2006 could be very significant for Argentina.” She also says that the Co-op is increasing its Argentine range this year, and that the retailer will be running its “first dedicated Argentine promotion in the summer.”

Of course, one historical threat to the good value Argentina offers UK buyers has been the volatility of the peso. As Barton says, “It’s perhaps no coincidence the leading countries in the UK wine market are some of the most stable economies.”

However, with increased economic stability in Argentina, there are signs that the wine buyer is growing in confidence when it comes to the country. There is also a growing branded presence, and it is now down to generic promotions to really attract the consumer. Familia Zuccardi’s export manager, Marcelo Marasco, in particular would like to see, “The Argentine lifestyle and diversity,” publicised. He sees the country’s “passion and culture”, as unique, and believes this aspect of Argentina should be emphasised.

But whatever the approach, at least the aim to open an office dedicated to the UK shows committment to the market, something that should give wine buyers assurance, and hopefully, useful feedback for producers in Argentina. Barton certainly believes the country’s days as a niche category in the UK are numbered. “We are convinced that in five years time the consumer will be happy buying into the Argentine category. We think it will be a 5% market share, 6m case scenario.”  db February 2006