ARGENTINA: Where are the Latin Lovers?

Despite the country’s many positive image builders – its natural beauty, the tango, food, football – as well as a good value offering, Argentina’s UK wine sales are lagging. Patrick Schmitt investigates

If it was less of a sleeping giant and more of a small child Argentina might be tempted to stamp its foot and cry, “it’s not fair”, before turning its back on the UK market and marching off elsewhere. Why? Because despite the country’s positive attributes, and persistent presence in Britain, it can’t seem to take a greater share of the shelf, or consumers’ shopping baskets.
However, if it were to lose its patience, and shift its emphasis to other markets, Argentina would lose a loyal following in the UK, as well as an increased likelihood of real growth in the year ahead. This is because, more than ever, there is a belief that a mature and measured approach to Britain’s retail environment will pay off for South America’s largest producer. One reason is that the distraction posed by Australia’s almost ceaseless price promotion may well diminish with last year’s drought and ongoing water restrictions. Second is the boost offered by the presence of a generic Wines of Argentina office in the UK. Third is the effect of retailer range extensions and Argentine brand revisions.
Nevertheless, there is evidence that some producers in Argentina are already moving emphasis to markets other than the UK, frustrated with the competition, price compression and consumer conservatism.
“A lot of focus has switched to the US,” says Dominique Vrigneau, buying director for Thierry’s, UK agent for Familia Zuccardi. “The US has discovered Argentina and is prepared to pay a lot more for the wines, and the two countries trade in the same currency, so the weak dollar doesn’t affect the price.”

Similarly, Juan Canay, export director, Trapiche, sees an increased effort on the North American market and offers a further explanation for this: “In the last two years the Wine Spectator and Wine Enthusiast have given Argentine wines good write-ups, and in the US market, these magazines have a big influence, and they have driven demand.”  
Hence, the US, which is already more than double the size of the UK market for Argentine wines in both volume and value, has seen 72% growth (January to October 2007, Caucasia Wine Thinking).
And early this year, for the first time, the Wine Advocate ran a standalone feature on Argentina because “5% of Argentina’s wines scored 96 points and above, which is unusual for any country, and three quarters achieved 90 points or more,” records James Forbes, UK director at Wines of Argentina. This will add more fuel to the excitement surrounding Argentine wines in the US.
Forbes also notes that it is only a matter of time before Canada overtakes the UK as Argentina’s second largest export market by value (it is already number two in volume). Moreover, Simon Farr, deputy chairman at Bibendum – creator, with Bodega Catena Zapata, of the Argento Wine Co – comments how the Argento brand is “roaring away” in a range of markets, and Scandinavia in particular, but not the UK – Caucasia stats show the brand stalling at around 130,000 cases. He also notes: “We are about to open up in the US – we hadn’t so far because of brand registration problems – and we are already having our hand bitten off.”
But, there are still further reasons for Argentina to retain a serious interest in UK retail. As Canay says, “If you can sell your wine in the UK market then you can sell in other markets – many look to the UK as a leader.” Supporting this viewpoint, Maria Ines Pina, export manager for Concha y Toro’s Trivento comments: “If it works in the UK, it can work all over the world.” And while she accepts that it is “a hard fight” to get shelf space in Britain, once listed, there is the advantage of a “knowledgeable consumer”.

Furthermore, as Greg Wilkins, director at Brand Phoenix, UK off-trade agents for Trapiche, sums up on this subject: “While the US market on face value looks great – the duty tariff is not as high and the retail pricing is good – the country has its own challenges, not least the distribution system and getting the right distributor. And in any case, if you are to build a brand, you have got to be available across the world, you can’t pick and choose markets.”
It’s also worth noting that while export figures to the US do show a vast volume increase, it appears to be at the expense of Argentina’s average price per litre, which has dropped over 17% to US$1.83, below the UK’s $1.96, which is up 8.8% (January to October 2007, Caucasia Wine Thinking).

Measured approach
However, to look now at the UK market in more detail, while Argentine exports to Britain are showing a healthy rise of 9% in volume and almost 19% in value, the actual off-trade sales figures according to Nielsen are where the problem lies – Argentina is growing at a slower rate than the total market. At the end of last year, Argentina was increasing volume sales in Britain’s off-trade by 1.5% to almost 1.4 million cases, but then total wines sales were up 4.6% to over 95.7m cases (Nielsen MAT to WE 01.12.07). The country’s value figures make for better reading, up 6.3%, but then the market as a whole was up 6.8%.

In short, Argentina’s share is 1.4% (volume and value), with an average price 21 pence below the overall market median – £3.78 compared to £3.99 (Nielsen MAT to WE 01.12.07). On the positive side, Argentina’s average price is five pence above rival and neighbour Chile.

Forbes explains the situation in Britain. “Argentina is not interested in buying market share quickly, we want to build value,” he says, reminding that Argentina’s export figures are increasing in value, more than volume. “We want to explain to the trade and consumers that Argentina produces very good wine that is fairly priced, if not, in fact, underpriced.”
And Argentina is fortunate to have a large, if stagnating, domestic market, removing the need to dump large quantities of low priced wine on export markets when a surplus exists. However, it appears Argentina’s failure to enlarge its share of the UK market is not simply due to a less aggressive promotional strategy than other countries.
“Put Chile and Argentina on the same space and do the same deal, and Chile outsells Argentina two fold,” says PLB’s John Osborne, after six year’s experience managing the country category for the importer. “The quality in Argentina is there, the raw materials are cheap, the currency is worth very little and there are very competitive producers; but Chile is doing better.”

So what is the problem? For Osborne and others, Argentina, it seems, suffers a few serious setbacks. One is a strong image for the country in the UK. And grouping the wines under the heading “Americas” in many retailers doesn’t help matters. Then there’s the absence of a large scale brand leader, let alone a handful. “There isn’t the trust for Argentina that there is for Chile and there are no mass-market brands building its reputation,” says Osborne, who has been researching the reasons for the lack of multiple retail success for the UK agent’s High Altitude brand.
Certainly, there’s plenty for Argentina to draw on when it comes to image building. As Trivento’s Ines says, “Argentina is an easy country to fall in love with, with the tango, the food, football, and now rugby, and then there’s Buenos Aires and Patagonia.”
Argento, for example, is even launching a website called Real Argentina which gives consumers the opportunity to find out more about the country’s culture, not just the wines. And Bibendum’s Farr sees real potential for British consumers to pick up on “the emotionally engaged Latin culture that is such a contrast to the Anglo Saxon one”.
He mentions the likes of gap year travellers as a target audience for the website, and the possibility that Argentina could become as popular a destination as Australia for this age group.

Sense of discovery
In fact, it appears Argentina could benefit from a younger buyer. “Dunhumby research at Tesco has shown that Argentina attracts a slightly older market, 45 to 60 year olds, who don’t want to buy Blossom Hill, but something a bit different,” records Osborne.
Interestingly, the lack of mainstream high volume presence for Argentina does benefit the category in one sense – it gives consumers a feeling of discovery. It also makes the country attractive for the on-trade or independent and online retailers.
Laithwaites, for example, has doubled its Argentine wine range to 60 lines, the largest in the UK according to buyer Thomas Woolrych, that is, aside from the Gaucho Grill’s London retail outlet. “Argentina is 4.2% of our mix and was up 57% in sales at the end of last year,” he recalls. “It does everything we want from our end – it is about adventure, discovery, and there is great diversity.” On the latter point, it is worth adding that Laithwaites’ new Argentine range includes 17 different varietals and is split 50-50, red and white.

Nevertheless, as Osborne states, “Argentina has found a niche, but the question is, how can it access the mass market?” As mentioned above, the category does require stronger and larger brands. As Finca Flichman’s vice president Ricardo Rebelo points out: “We need leading brands and we also need the support from the multiples to give space to the category.” And some point out that supermarket buyers are cautious when it comes to Argentina. “There’s an element of safety first,” says Farr, while Ines adds, “Buyers don’t always want to take a risk on something new, they like to stick with brands or countries they know will work.”
Nevertheless, Tesco’s Argentine wine buyer, James Griswood, says, “We increased our Argentine range in August last year by an additional nine wines so it now totals 22.” However, the supermarket’s best performer, and almost UK market leader, is Tesco’s own label. “The branded wines just don’t seem to have the customer attraction that equivalent wines from Chile or Australia do.”
So what of the future? As noted at the outset, both range extensions and brand revisions should help grow Argentina’s market share. Forbes in particular highlights the investment by Finca Las Moras, which, with Argento, leads the Argentine brand charts in the UK off-trade. The wine, represented by Chalie Richards in the UK, is running a campaign this year entitled “Perfect Harmony”, designed to represent the winery’s relationship with its environment. Advertisements use imagery based on the Yin and Yang symbol, and the PR campaign, including a new website, is hoped to increase awareness of both the brand and promote the San Juan region of Argentina.  

Then there’s Trapiche’s projected performance, which, according to Wilkins, will be impressive. “I think 2008 will be an extremely good year. In 2007 we did almost 50,000 cases and we hope to more than double that this year.” Ines is also optimistic for Trivento. “At the moment, we are the number-four branded Argentine wine in the UK and our five-year plan is to be number two,” she says, recalling significant investment in the winery and vineyards.
Walter Carol, export director at La Riojana, the co-op behind the Inti brand, is hopeful too. “We changed our strategy for Inti,” he says, “from big promotions in 2005 to selling value in 2006. While our sales were down 30-40% in 2006 we recovered them in 2007 at higher prices.” He also sees the potential in particular for fairtrade and organic wines from Argentina, and the company is launching a fairtrade brand called La Posada for the UK and hoping to introduce its organic brand, Ecologica, which is performing well in Nordic countries.
Pernod Ricard’s involvement is always of interest, and the company’s Graffigna brand is “getting traction,” according to Adrian Atkinson, wine development director in the UK. “The global priority including the UK is with Graffigna and it is targeted at the multiple specialists. Etchart is aimed at the on-trade through Matthew Clark.”

Innovation imperative
Finally, it’s worth adding that Finca Flichman has launched Gestos through Majestic, which is an equal blend of Malbec grapes from different altitudes.
Already, Forbes reports strong performance for Argentina in Majestic and Oddbins, the latter apparently experiencing a 64% increase in Argentine wine sales from November to December 2007. Here, the popularity of Argentina’s flagship varietal Malbec and value for money are proving a powerful combination. In these outlets and elsewhere, there’s also the potential for the country to further develop organic labels and fairtrade brands – an area some believe is currently untapped in Argentina.
Overall, Wilkins warns that brand owners must “Make sure the innovation is there – it’s not just another Malbec or Cabernet – and that the wines are stylistically suitable for the UK.” He also stresses that “The retailer is looking to Argentina to make its case with brands and then Argentina will get the exposure it would like – that’s the way it works.”
However, it’s interesting to note that Patrick Jestin, CEO of Dourthe-Kressmann, has found it easier to build distribution for Clos de los Siete “than for a Bordeaux brand”, despite the company’s long-running expertise in the latter.
Lastly, with projected price increases for many of Europe’s major wine regions, such as Rioja, Chianti and Châteauneuf du Pape, not forgetting New World giant Australia, Argentina has a strong chance to steal at least some of the limelight in 2008 – that is, unless all the marketing budgets are switched to the US. 

 © db February 2008