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Argentina’s Upscale Producers Say Bulk Labels Could Diminish Category’s Prestige

December 28, 2012

While Malbec exports continue to gain upmarket traction, Argentina’s high-end winemakers fear that a push by bulk producers could diminish the country’s image as a quality player.

High-end Malbec sales have been rising—an encouraging sign, says Laura Catena, managing director at Bodega Catena Zapata, whose wines are imported to the U.S. by Winebow. From 2010 to 2011, the $10-to-$15 segment increased by 15%, while $15-to-$20 segment rose by 32% and the combined $15-to-$25 tier was up 41%, according to Catena.

“People now recognize Malbec as a varietal with a pedigree,” Catena says. “It’s now rare to see a wine list without one. It has retained an aristocratic feel while also becoming one of the varieties people know.”

“Malbec is the No.-1 South American wine in Houston,” says Rigo Romero, beverage director for the Cordua Group, which has seven Latin cuisine restaurants in the Houston metro market. “Unfortunately, importers are now bringing in a lot of bad Malbec to meet demand, so I have to be very careful what I pick.” Romero offers 80 to 110 wines on the list for the three-unit steak house chain Churrascos, owned by Cordua Group, and more than half the wines are from Argentina or Chile. Hot-selling brands include Catena, Luigi Bosca, Dona Paula, Humberto Canale and Norton.

Argentine bottled wine exports to the United States ranked fifth behind Italy, Australia, Chile and France in the U.S. in 2011, according to Impact Databank. With bulk wines included, Argentina is in third place—behind only Italy and Australia. But Argentina’s bottled wine shipments were essentially flat from 2010 to 2011, at 6.1 million cases, while bulk wine more than doubled to 7.3 million cases during that same period.

Pasternak Wine Imports CEO Jim Galtieri worries about that bulk wine trend. “One of my fears is that Argentina may be going down the same path as Australia,” he says. “It began with Shiraz—Australia was establishing its upper bench of quality, but as demand continued, a lot of bad Shiraz started coming in. At Pasternak, we’re focusing on finding better distribution for our high-quality Argentine brands. It will work only if customers are willing to buy $15-to-$20 wines. Argentina hasn’t established itself yet as well in that category.”

Hot sellers for Pasternak are Bodegas Caro’s Aruma Mendoza Malbec ($15 to $16 a 750-ml. bottle) and Amancaya Gran Reserva Cabernet Sauvignon-Malbec ($20).

Catena believes inflation and rising overheads may slow the bulk wine trend over time. Meanwhile, quality producers continue to up their game, often by focusing on varietal and appellation diversity. “We have seven wine regions in which Malbec thrives in many different ways,” says Lis Clement, marketing manager for Wines of Argentina. “A Malbec from Catamarca is different than a Malbec from Tupungato or Patagonia. This is our aim now: to show the world how diverse and rich Malbec in Argentina can be.”

An economic headache has been created by Argentina’s restrictive currency regulations. There’s a 90-day limit by which money made from U.S. wine sales must be transferred to Argentine banks or penalties apply. With the country suffering from 24-percent inflation, the government wants the dollars invested back into Argentina. But the restrictions have created extra paperwork for exporters and have sometimes slowed inventories.

“The situation certainly has created red tape and paperwork—it’s not business-friendly,” says Alex Guarachi, CEO of TGIC Importers, which handles the Achaval Ferrer, Kaiken and Norton brands, among others. “If you don’t get paid in 90 days, if you’re even one day late, you will be penalized with fees.”

Despite those hurdles, “the wine business is booming in Argentina,” Guarachi says, noting that the Achaval Ferrer Finca Bella Vista Malbec ($120 a 750-ml. bottle) is selling well. At entry level, Achaval Ferrer Malbec Mendoza also is growing, both on- and off-premise, Guarachi says. At the lower price points (around $10), competition has been tough, but in the $15-and-up range, Guarachi says business is robust. The Norton Reserve Malbec ($16) and the Norton Privada ($22), a Malbec-based, Bordeaux-style blend, are selling well.

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