Wine Exports Remain Strong in Argentina

Certain goods have proven to be recession-proof during the early months of 2020, in spite of the obstacles presented by the global pandemic. Although international trade has been significantly strained, certain products from certain regions continue to see strong sales. Argentinian vinters, for example, are not only making plans to withstand the crisis, but to increase their overall wine exports as well.Confronting ChallengesRaúl Jofré, the founding chairman of RJ Viñedos - a winery from Mendoza which exports 80% of their produce to 15 countries - said that “for those who make high-end (wine) it was necessary to take extreme care at different times of the vegetative cycle that could trigger risks for the harvest." But, fortunately for his vineyard, “the (climate) incidence was practically nil.”This 2020 vintage can be described as “reduced, atypical and historical." Prior to the pandemic, vintners were dealing with adverse weather conditions. Local producers endured a mix of frost and drought, which reduced wine production in 20%, but curiously ended up producing grapes of very high quality. And in the middle of the harvest –which thankfully started earlier this year - the pandemic came at full speed."The harvest itself was delayed by least 20 days, but mainly due to causes originating in the climatic conditions and not due to problems with labor” said Raúl Jofré. Adding that “This climatic conditions were the main trigger for the special characteristics of the harvest." So they foresee “a year of great wines!”Exports on the riseThe scenario is quite complex, considering the 30% reduction of local consumption. Though export figures, released by the National Vintners Institute (INV, in its Spanish acronym), are showing positively shocking results.In the first months on 2020, wine producers exported 38,6 millions of liters more than during the same period last year, according to the Argentinian Vintner Corporations. Meanwhile the INV shows an increase of 36% in exports, until April. With a 8.9% increase in bottled wine, 115% in bulk wine and 37.2% in sparkling wine.

Wine exports by type for 2019 and 2020 (Source: Los Andes)

“These (export figures) are a consequence of agreements made in the second half of 2019 and the replacement of the end-of-year sale,” Jofré said. He is worried about a drop in shipments for 2020. So they have “changed the focus of the company's strategy, not only concentrating the activity in some markets but also trying to broaden the spectrum of customers.”Historically, wine producers in Argentina have focused in the domestic market. Almost 70% of the wine is locally consumed. While the rest is exported to the United States (31%), the United Kingdom (13%) and Canada (8%), Brazil (7%) and the Netherlands (3%). But today, the goal is reaching other markets.

Argentinian wine exports 2000-2015 (Source: Quaterra)

Reaching the Chinese market Just this month, three local institutions signed a new treaty. Aerolineas Argentinas – a state run airline -, the Argentinian Chancellery, and COVIAR, jointly agreed to start shipping wine to Shanghai. Under a preferential tariff, local producers will be able to take advantage of the outgoing flights that go to China to bring medical supplies. “As we know it is a punctual and temporary agreement that some wineries in the country could possibly use,” said Raúl Jofré.Every flight has a capacity of 128 tons or a 170 cubic meters. According to Chancellor Felipe Solá, wine exports generate around $800 million per year, though Argentina is currently not well positioned in the Chinese market.According to Raúl Jofré, “the dynamics and growth of the economic activity in a market the size of China, has necessarily generated growth in the demand for wines.” But says that reaching that market “turns out to be a difficult task”. His winery RJ Viñedos, has just established trade links with China in the last 5 years. Though, Raúl says they ”can now have expectations of growth and continuity in the penetration of our products in the market”The pandemic has proven to be difficult for vintners, starting from an early harvest influenced by climate conditions. But in spite of dealing with issues related with shipments, they have benefited from earlier agreements. The second quarter of the year will be difficult for wineries, but there certainly seems to be some silver lining to the current situation.