ARGENTINA: UK beckons for Malbec

Argentine wine is in heavy demand worldwide, with US consumers in particular opting for its approachable wines. But the UK has proved to be a stumbling block. Patricia Langton reports on plans to crack this tricky market.

While many of the world’s wine regions are trying to avoid oversupplying the market, Argentina is in the enviable position of trying to keep pace with the strong demand for its wines. Nearly all the country’s top 10 export markets are in double-digit growth with the notable exception of the UK, the nut that Argentina can’t seem to crack.

Since 2005 Argentina’s exports to the US have risen from just 628,000 cases to 3.15 million cases last year and the market now accounts for over 30% of bottled wine exports.

Argentina’s success in the US is due to the American consumer’s enthusiasm for an approachable wine – Malbec – at a price that’s easy on the pocket thanks to a favourable dollar/peso exchange rate. The trend shows no sign of slowing with the US showing 17% growth for the first six months of this year compared to the same period in 2009.

The importance of the US is reflected in the way that Wines of Argentina’s promotional budget is carved up this year. This leading export market by far is getting 33% of the total funds followed by – in order of importance – Canada, the UK, Brazil and the Netherlands.

The UK still presents challenges

The year didn’t start well for Argentina in the UK. An additional paperwork requirement for some European markets was introduced by the Argentine authorities which affected shipments to the UK early in the year – February’s figure is just £301,028 but by March it was back up to the more usual £3,391,618.

Meanwhile, off-trade listings for Argentina, especially in the multiples, are far from numerous largely due to producers not managing (or wanting) to meet the prices that buyers demand. This results in the UK consumer getting little exposure to the country’s wines.

However, some producers are making good progress in the UK. Finca Flichman’s growth, in both volume and value terms, is stronger in the UK than in the US.

James Forbes at Stevens Garnier, Flichman’s UK importer, believes that the producer’s success lies in providing good value for money and an attractive wine style with careful pricing and promotional support (Flichman is one of the few to fund in-store price promotions) for its two key wines: Misterio (£5.99) and Gestos (£7). Flichman is also developing its UK on-trade business with the Tanguero and Caballero de la Cepa labels.

But, as Flichman’s export director Ricardo Rebelo explains, the aim is to sell higher priced wines in the UK too. He says: “We want to expand our business, consolidate our brand and go upwards in terms of portfolio. The US is more receptive to this; there aren’t the same barriers as there are in the UK trade. The UK consumer does not get the chance to taste really good wines.”

Viñalba wines, made by French winemaker Hervé J Fabre, are also selling well in the UK with listings in Majestic and Asda for the Reserve Malbec and Patagonian Malbec/Syrah respectively. Jon Pepper, commercial director at importer Buckingham Schenk, says: “Despite being a premium-priced brand in a recession-dominated market, Viñalba is having a superb year in terms of sales. The
brand’s strategy focuses exclusively on communicating a quality message – the recent competition results take Viñalba’s tally to 42 medals and five trophies since it launched in 2008.”

The strategy behind the brand therefore focuses on PR and in-store marketing such as shelf barkers featuring press quotes and trophies as well as features in retailer magazines with the aim of achieving full-priced sales.

Meanwhile, brands such as Argento have shifted their focus to the on-trade and other areas of distribution. The brand has targeted hotel and pub groups and operators in the catering industry and this year Argento sponsored a steeplechase at Cheltenham Race Course. A tie-up with British Airways has also boosted its visibility on a global level: Argento Malbec and Chardonnay are now available in 187.5ml PET bottles for many of its passengers.

Supply issues and the future of Malbec

Malbec is Argentina’s priority grape by some distance and the variety fronting the export business. However, this year’s harvest hasn’t been a generous one due to unfavourable weather conditions. Spring frosts in most regions and bad summer hail in Mendoza were significant factors that resulted in low yields despite a significant amount of new plantings coming on stream and higher grape prices.

The cooler areas of Mendoza including the Uco Valley were particularly affected by the adverse weather conditions while the east of Mendoza fared better and yields from vineyards in that area were much more abundant. Quality Malbec grapes were around 15% down on 2009 which is making life difficult for producers with rising sales.

“We hope that the situation for Malbec will improve next year. A normal harvest would increase the production from the premium zone between 15-20% and we also have new plantations,” says Trapiche’s Carla Castorina.

Castorina also agrees that this scenario gives producers the opportunity to sell more wines blended from Malbec and/or other grape varieties. Statistics recently published by Argentina’s INV (National Institute of Viticulture) show a significant increase of Malbec plantings (74% up since 1990) followed by Bonarda, Cabernet and Syrah.

Finca Las Moras has 200 hectares of Bonarda planted across various regions and sells a varietal wine through the Co-op (£5.99). The producer strongly believes that diversity is important for Argentina’s success in the UK.

Alberto Arizu, the new president of Wines of Argentina, sees good progress for Bonarda which he describes as “a unique grape produced in Argentina with an interesting character”.

Juan Lo Bello, sales manager for UK, Europe and Asia at The Argento Wine Company, agrees. He says: “Bonarda is a brilliant grape variety and Argentina does it very well… but UK consumers know very, very little about it, much less than about Malbec.”
Argento is cautiously introducing the consumer to alternative grapes.

Last year an Argento Malbec/Tempranillo blend was introduced in the on-trade “to provide a point of difference but still convey the Malbec message”.

Given the choice of grapes available (see box, right), more diversity will undoubtedly come from Argentina but for the UK at least it’s a case of learning to walk before it can run.

Lo Bello concludes: “Before venturing into different grape styles we need to ensure that the Malbec category is already well established with the UK wine consumer.”