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INVESTMENT OPPORTUNITIES Wine Industry in Argentina Unique Terroir + Tradition + Freedom to Innovate = Extraordinary wines to meet global market needs Photo: Carlos Calise. Courtesy of Wines of Argentina Highlights >> A GLOBAL OPPORTUNITY The international wine market has continued to develop over the years. Consumers have become increasingly sophisticated and enthusiastic about new varieties and fl avors. World consumption is expected to grow 6% over the period 2008-2012, driven by new consumers in high potential markets such as the United States, China, United Kingdom, Russia, Brazil and Japan. In world markets, the so-called New World producers are coming on strong with a growing share of global exports. In this context, Argentina has a unique opportunity being both part of the New World as a key wine exporter in the global market and of the Old World thanks to its long-term tradition in wine production. Argentina combines terroir, expertise and freedom to innovate and is rapidly unleashing all its potential to meet global market needs. >> GROWTH POTENTIAL The Argentine wine industry was transformed during the past decade. Growth and modernization positioned the country as a key global player. Today it is both one of the largest domestic markets and one of the main global exporters. But it is poised for more: wine exports grew 29.0% in 2008 alone. Dynamic players and innovation continue to improve the industry’s prospects, yielding endless possibilities along the way. During the fi rst four months of 2009 glass-bottled wine exports continued to increase and were up 8.7% in volume notwithstanding the global economic downturn. >> MAGNIFICENT TERROIR High quality soils irrigated by the clean, fresh melt-waters of the snow-capped mountains, bright sunny days and dry weather provide ideal agro-ecological conditions for wine production. Argentina’s wine region extends over 2,400 km along the foothills of the Andes giving Argentine wines distinctive and diverse fl avors. Ranging from award wining Malbecs to unique varieties such as Torrontés, Argentina produces a myriad of remarkable white, red and rosé wines. >> TRADITION AND KNOWLEDGE Producers, agronomists, oenologists and workers have accumulated a profound knowledge of the wine industry over nearly two centuries. During the last two decades, unprecedented levels of investment fl ows from domestic investors as well as major global producers from countries such as France, Italy and Spain, professionalized the industry creating a new breed of highly qualifi ed agricultural engineers, sommeliers, oenologists and wine technicians. While a signifi cant number of universities off er specialized world-class degrees, international and national wine experts and sommeliers have become integral and vital players in the ongoing development of this industry. >> QUALITY-VALUE ADVANTAGE Argentina off ers outstanding natural and human resources in addition to relatively low production costs. This combination results in high quality wines at competitive prices, with quality-value ratios that rival European and even other New World wine production. This becomes increasingly relevant in the face of a complex global scenario, where consumers and investors refuse to give up quality but insist on more aff ordable prices. A well- integrated and developed value chain supports the competitiveness of the wine industry and its fast expansion. >> ENDLESS OPPORTUNITIES The industry’s rapid growth and auspicious prospects have created a wide array of investment opportunities. Vineyards, wineries, wine-tourism and winery-themed real estate developments are expanding fast. The industry’s high returns, competitive cost structure and promising sales projections continue to pique investors’ interest with new players coming into the market every day. High export growth is also creating an expanding demand for key supplies, such as glass bottles, cardboard cases, labels and capsules, giving rise to attractive investment opportunities. June 2009 3 I. Why Invest in the Wine Industry in Argentina? Photo: García • Betancourt. Courtesy of Wines Argentina ADVANTAGEOUS GLOBAL MARKET TRENDS period to 2012. Indeed, taste profi les are also changing as consumers become more sophisticated and demand In with the New. Worldwide wine production reached higher quality wines. 269.4 million hectoliters in 2008, a slight increase of one million hectoliters in comparison to 2007. As part Globetrotters. Wine exports represented 37% of of a longer-term trend, global production grew by 4.5% world consumption in 2008, compared to 18% in the early between 2002 and 2008 and is expected to expand by 1980s and slightly up from 35% in 2006, which means 3.8% between 2008 and 2012. The trend is explained that more than one-third of world wines are consumed by production growth in the New World countries outside their countries of origin. World consumption of (Argentina, Australia, Chile, New Zealand, South Africa imported wines is expected to continue rising in the next and the U.S.), which has balanced out the decrease in fi ve years, mainly fuelled by German, U.S. and United Old World wine production. Nevertheless, traditional Kingdom imports. New World countries have taken wine growing countries of Europe, such as Italy, France advantage of the rising demand and have been expanding and Spain, still lead production and represent 46.4% of their worldwide market share against Old World exports. worldwide wine production. The U.S., Argentina and In 2008, the market share of Old World countries and Australia concentrate another 17.1%. As a result, 63.5% New World countries was 60.6% and 29.7% respectively. of the world production of wine is dominated by top six In 1998, ten years earlier, Old World countries had 71.8% producing countries. versus New World countries’ 14.1%. Widening Consumption Frontiers. The global wine Ranking of Wine Producing Countries consumption was 242.9 hectoliters in 2008, similar to Market Share (2008) 2007 levels, despite the economic downturn affecting Italy 18.1% major consumer countries. World consumption has France 15.4% expanded 6.3% between 2002 and 2008. Demand is Spain 12.9% not only growing, but changing. The decrease in the U.S. 7. 1 % Argentina 5.4% consumption of wine due to the fall in the demand from Australia 4.6% European and other traditional consumer countries Germany 3.9% has been offset by increased demand from emerging South Africa 3.8% consumers with high potential, in markets like the U.S. Chile 3.2% and China. The overall growth trend indicates that world Portugal 2.1% wine consumption will increase by 6% over the fi ve-year Other 23.6% Source: International Organization of Vine and Wine (OIV). 4 ARGENTINA IN THE GLOBAL MARKET INVESTOR’S PERSPECTIVE: Michael Rolland (France) Great Numbers. With 225,846 ha (558,077 acres) Winemaker & International Consultant, of production surface and 14.8 million hectoliters Director of Clos de los 7 produced in 2008, Argentina is the world’s fi fth largest Investors are arriving to Argentina and that is a wine-producing country, just below the U.S. and good thing for everyone. Argentina has everything. above Australia, China and Chile. The country is also It’s a country both rich and large with lots of space a signifi cant wine consumer—the seventh largest wine and no overcrowding. There are great opportunities market in the world—and a rising exporter. Exports throughout the country. In every region diverse economic activities are under development, and registered a compound annual growth rate of 30.1% in wine is one of them. value in 2002-2008, positioning Argentina as the seventh largest exporter in the world. Exports continue to grow Winemakers fi nd great freedom working in as consumers from all over the world discover the unique Argentina. You can choose to grow Cabernet—it may or may not work—but no agency will tell quality-value advantage of wines made in the country. you what you should or should not grow. You can choose to use 60% Malbec or 20%; there are no Wines with Reputation. Argentine wines have regulations that will tell you what to do, allowing received the highest accolades from the wine industry. winemakers to adjust to market needs much better than in other countries. This is one of the The International Wine Challenge, the world’s biggest great benefi ts to producing wines in Argentina: wine competition, has awarded Argentine wines ten unimaginable freedom. gold medals (Pascual Toso Malbec (2008), Waxed Bats However, there is more. Argentina has relatively Shiraz (2008) and Santa Julia Tempranillo (2008), among low operating costs; a fantastic geography, others), 50 silver medals and 70 bronze medals. Hundreds including the Andes and an optimal climate. Other of Decanter World Wine Awards have been bestowed attributes include its amicable people, great food, upon Argentine wines, including two gold medals: Finca including excellent meat; and its world renowned Tango music. Another key factor is its human Sophenia Synthesis The Blend (2006) and Pascual Toso resources. There are people with lots of experience Malbec Reserva, Las Barrancas Vineyard (2006). In the and knowledge in the wine industry as well as a 2009 Concours Mondial de Bruxelles, six Argentine wines new generation of highly trained agronomists, received the best possible rate of approval, including 25/5 winemakers and professionals from other related fi elds that are hard workers and eager to learn. (2006) from Bodega del Desierto, Alegoría Gran Reserva Cabernet Sauvignon (2006) from Bodega Navarro Correas Industry opportunities, the local people, climate— and Catalpa Chardonnay (2007) from Bodega Atamisque. even the food—are all factors drawing investors to the country but the public sector also knows that Glass in Hand a safe fi nancial environment is a top priority for . Each grape variety has a unique investors. And Argentina is making great strides to expression in Argentina.

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