Advice on doing business in Argentina

Sunday, 23. September 2018 - 15:15

François Lurton
owner, Bodega Piedra Negra

I arrived in Argentina in 1992 — my brother and I wanted to develop a new company in association with Nicolas Catena to produce wine for the local market. How different things look today; it is a mature market, so it is decreasing slowly in volume but people drink better and more expensive wines. In this regard, Argentina reflects world trends — consumers are looking for more freshness and fruitier wines than before. They don’t generally seek out older wines. Also the market for white wines is developing but rosé is still very small. However, sales of Piedra Negra have risen very quickly. I am very happy with the distribution in Argentina and the average price per bottle. 

In terms of distribution, supermarkets dominated the picture in the 1990s, but increasingly independent retail is commanding a greater share of the market. The on-trade has always been strong in Argentina. The mark-ups tend to be reasonable and many Argentines favour on-premise consumption, especially in Buenos Aires. Interestingly, Chinese-owned retail stores are becoming quite a strong presence in Buenos Aires, undercutting the competition by selling premium wines at very low prices. My winery does not sell any bottles to the Chinese stores.

The biggest and the most dynamic market is, of course, Buenos Aires. Seventy percent of the total volumes are sold in the wider metropolitan area. Rosario is also a very good place to sell; customers in Rosario tend to prefer more traditional wines but they also buy a lot of premium wines. Cordoba’s market is still very young but local consumers tend to favour low-priced brands, despite their high purchasing power. Mendoza is strong because of tourism, but very competitive, because there are few places to sell imported brands as local wineries naturally control this market. 

Like Spain, the large brands in Argentina dominate the supermarket shelves and wine stores, so as a niche brand we cannot hope to compete. Yet being known as an artisanal brand has its benefits; slowly but surely we’re finding our market of educated and curious consumers who are fed up of the big names. Thanks to a dynamic press, consumer interest in wine is rising all the time.

As elsewhere, there are risks inherent to this market; namely the danger of working with a bad partner, who pays late or often not at all. The Argentine economy is also very unstable so even if you are an Argentine producer, you have to be aware of the people to whom you are selling. Yet while Argentines are very proud of their wines, they’re also very curious about foreign wines. The problem is that the importation fees in Argentina are very high — having increased by 100 percent — so European wines are very expensive in the Argentine market. We imported a full container of wines from our estates in France and Spain, including some quite expensive ones, and they sold out in three months.

Aurelio Montes Senior
founder, Montes Wines, Chile

We have been doing business in Argentina for almost 20 years. As a Chilean company we founded Bodega Kaiken in 2002. Subsequently we began selling Montes wines to Argentina in 2004. The market today is very dynamic, although this is highly dependent on the current political situation. But overall the market is in growth for our wines — our strongest-performing Montes brand is Montes Alpha. The Argentines have been enjoying wine since the 18th century.

Much of our good fortune relates to the new president Mauricio Macri, who is a strong supporter of both domestic industries and opening up Argentina to free trade. Importing is much easier since he came to power, allowing us to import the necessary goods for our winery. Pricing is more stable and the rate of exchange against the dollar more favourable. In addition, the consumption of domestic wine is very strong in Argentina, although it once stood at 90 litres per capita. Between 2000 and 2012 it dropped another 20 percent; Argentina and Germany today are at the same level at approximately 24 litres. I must admit that the overall market has not grown at the rate I expected, although our brand is showing healthy growth. Generally Buenos Aires, Santa Fe, Córdoba, San Luis und Mendoza are the regions with a higher income. The north-east is still very, very poor. 

Risks include wildly fluctuating inflation. Look at the Youth Olympic Games in Buenos Aires in October 2018: though the cost frame had been fixed by the International Olympic Committee, the Games became 1,000 percent more expensive. Also remember that most Argentines are only in the market for local wine. To make a noise you have to offer wine styles that they don’t produce themselves.
Interviews by James Lawrence