More sales and less profits, Argentine wines with a half-full glass

More sales and less profits, Argentine wines with a half-full glass

Wine bottles at the FECOVITA plant, in General Gutiérrez, Maipu department, in the Argentine province of Mendoza, on September 29, 2020

Wine bottles at the FECOVITA plant, in General Gutiérrez, Maipu department, in the Argentine province of Mendoza, on September 29, 2020

The demand for Argentine wines in the international and domestic markets led to a vigorous increase in sales so far this year, a few months marked by the pandemic, good news for this sector, whose profitability has been falling for five years.

Climate factors and political decisions helped overcome the challenges of the pandemic and achieve higher dispatches.

In Mendoza, the heart of the production and the treasured Malbec grape, the covid-19 arrived in March, when much of the harvest was finished because the higher temperatures of this year brought the harvest earlier.

The industry was exempted from sanitary restrictions to curb infections that have added more than 900,000 since March, with more than 24,000 deaths in this country of 44 million inhabitants.

Between January and September, the sector registered an export increase of 40.57% compared to the same period of 2019 and in September a record of fractioned shipments, with more than 20 million liters, reported the National Institute of Viticulture.

But the glass is still half empty. The drop in the price of wine, the habits of consumers who migrate to cheaper labels and the Argentine economic crisis are damaging the profitability of the sector, which has been falling for five years.

– Toast while you can –

“The pandemic brought us many surprises,” Gustavo López, manager of Fecovita, which groups 29 wine cooperatives with more than 5,000 producers, confessed to AFP.

With restaurants and hotels closed due to the pandemic and the economy in recession since 2018, domestic wine consumption increasing by more than 10% in the first half is worth a toast.

“At the beginning of the compulsory confinement the consumer changed his habits, he had an availability of money that he did not spend on other things such as fuel or outings and, luckily for the wine, this led to greater consumption,” López explained.

The sale to the domestic market found a direct route in the gondolas of supermarkets, warehouses and kiosks, although with bottles of lower average value.

“Clearly it is the pandemic, the quarantine, which allowed for greater wine consumption in Argentina,” he remarked, although he considers that, once the pandemic is over, demand will drop.

Exports also grew, although above all of bulk wine.

Bottled wines increased their export volume by 2.4% in the 12 months to June, but in that period prices in dollars fell by 11.4%, which reduced turnover by 8%, according to Bodegas de Argentina, the chamber of the sector.

The fall in turnover affects more the small producers with less capacity to compensate with volume the price reduction.

“The increases in exports are linked to our exchange situation, today we are really cheap,” Alejandro Vigil, an agronomist and producer from Mendoza, told AFP.

The Argentine currency traded at 82.72 pesos per dollar on Friday, but on the black market it hit a record of 167 pesos.

“Today we can export, which does not suggest that we will have the same situation in the future. The markets are volatile and are driven by prices,” Vigil said.

In early October, the government raised tariff refunds on exports of fractionated wine, bulk, sparkling wine and must from 3% to 7%. It also expanded benefits with the aim of increasing the export of bottled wine from 700 million to 1,000 million a year.

– Without foreign tourism –

In the Uco Valley, the winery corridor is a tasting circuit that contributes 9% of the sector’s income.

But with closed borders and circulation restrictions, the wineries only receive local tourism.

In the middle of a mountain landscape and surrounded by vineyards, they offer open-air tastings or send bottles home and sell virtual tasting.

“In Mendoza, wine tourism, enograstronomy, was designed for a number of people that came weekly from abroad, so we have an oversize that we cannot cover with Mendoza’s internal tourism, but hey, we are working,” Vigil said.

The industry does not escape the evolution of the pandemic and the economic context.

For a few weeks the sources of contagion moved from Buenos Aires and its periphery to the rest of the provinces, including Mendoza.

At the end of the first semester, Argentina reached its highest unemployment in 15 years (13%), poverty stood at 40.9% and the fall of the economy was projected at 9.9% according to the International Monetary Fund.

vid-sa / nn / rsr / dga


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