Argentina Malbec Exports to U.S. Rise 61 percent in 2008 Gains registered across price points by large producers and small wineries Ken Koppel Ken Koppel is a director and publishing consultant for WBM’s parent corporation, Wine Business Communications. He began as a daily newspaper reporter, switched to the business side and became president of the Ziff Davis Publishing Co. He is grateful when WBM allows him to write about wine but needs no permission to drink the stuff. LIKE THE ALTITUDES at which its vines While starting from a small base, this Though increases occurred at mul- “on par with many of the best in the are planted, sales of Argentine Malbec extraordinary growth testifies to the tiple price points, the fastest growing world.” And National Geographic in the U.S. are sky-high. market’s growing realization of the segments by volume were clustered Traveler’s November issue cited In 2008, the F.O.B. value of Argentine varietal’s price-value advantages across around $10 and $20 retail. Gains were Mendoza’s wineries and vineyards as Malbec exported to the U.S. increased a range of price points, particularly in also substantial in the super-premium the 10th best rated of 109 destinations 61 percent, according to data compiled an economy that has many wine categories where limited production, worldwide and gave it the top rating in from customs filings by Argentine drinkers focused on costs. single vineyard and Malbec-dominated Latin America, bolstering the region’s research firm Caucasia Wine Thinking. The U.S. imported approximately 2.1 blends now compete successfully with fast-growing wine tourism industry. Over the past two years, Malbec exports million 9-liter cases of Malbec in 2008, the best U.S. and international vintages. Not bad for a 20-year-old industry to the U.S. increased by an annual up from 1.3 million in 2007 and 900,000 Adding to the buzz, Wine Enthusiast that, after more than 300 years making average of 54 percent, while the vari- in 2006. During the same period, the Magazine named Mendoza, Argentina large quantities of low quality wine for etal’s share of wine exports grew from average F.O.B price per case, in U.S. dol- “Wine Region of the Year” in its 2008 a thirsty domestic market, retooled 44 to 55 percent, and the average price lars, rose from $29 to $33 per case. Wine Star Awards, calling the region itself as a player in highly competitive per case increased almost 14 percent. international export markets. Echoing these findings, The Nielsen The results are a product of several Company reports that dollar sales of Malbec Drives Growth of Argentine Exports to U.S. factors that have been years in the Argentine Malbec in the U.S. were up Bottled Wine Exports to U.S. 2006 2007 2008 making: the realization of Malbec’s 61.7 percent over the past 12 months TOTAL CASES 2,586,767 3,261,679 4,392,476 ability to thrive in Mendoza’s high-alti- TOTAL FOB VALUE (US$) 75,702,961 101,856,387 146,038,977 (leading all others) and “absolutely on tude vineyards, if grown for low yield AVG FOB PRICE (US$/CASE) 29.27 31.23 33.25 fire.” Led by Malbec, imports from and high quality; the favorable eco- MALBEC (CASES) 902,354 1,312,336 2,113,327 Argentina overall were up 39.5 percent nomics of Argentina’s land and labor MALBEC (VALUE IN US$) 33,150,448 49,680,101 80,019,170 year to year, in contrast to recent SHARE MALBEC (CASES) 35% 40% 48% costs and exchange rate versus the U.S. declines from France, Italy, Australia SHARE MALBEC (VALUE) 44% 49% 55% dollar; and an influx of international and most other exporters, according to winemaking talent and patient big- SOURCE: Causasia Wine Thinking ([email protected].) Based on data provided by DGA. Nielsen. money investment. 56 Wine Business Monthly These factors combined with the pas- sion of a generation of Argentine wine- makers—all of whom engaged in a constant program of experimentation to determine the clones and microclimates that would produce the best wine. Within the industry, impressive sales gains are being registered by both the largest winery groups and an under 10- year-old generation of boutique players. The larger producers, Catena and Trapiche, for example, compete across a variety of price points, including taking on the small volume, highly focused boutiques at the high end of the market. While the focus is clearly on Malbec, which comprises approximately 55 per- cent of bottled wine exports to the U.S. and is somewhat proprietary to Argentina, many winemakers are pro- ducing multiple varietals, including Cabernet Sauvignon (which also bene- fits from the high altitude terroir), Chardonnay and Torrontés, the Argentine white varietal. The main Malbec-producing area is clearly the province of Mendoza, which accounts for over 90 percent of the country’s wine exports by value; but other high altitude regions both north BY PRICE SEGMENT Exports of Malbec in the $35 to $50 and south along the country’s Andean By far the fastest growing large Malbec F.O.B. bracket were the second fastest western border are also making quality segment has been in the $28 to $35 growing high-volume category, LONGHORNDAVE wines. F.O.B. per case category, which is also increasing at a 66 percent clip and tied the highest volume segment overall. in second place for overall volume. Argentina Peso/U.S. Dollar Exports to the U.S. at this price point Wines in this bracket include Trapiche have doubled in each of the past two Oak Cask, Terrazas Alto and Séptima, Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 years. These include such brands (with all retail priced approximately in the 0.38 spot-checked U.S. retail prices) as Don $11 to $13 range. 0.36 Miguel Gascón ($10), Alamos ($10), Wines in these two categories, where 0.34 Pascual Toso ($9), Terrazas Alto ($9), retail pricing variations often cause the Los Cardos ($7) and Altos Las borders to blur, topped a recent Wall St. 0.32 Hormigas ($9). Ratings of recent vin- Journal Malbec tasting feature story, 0.30 tages of these wines from Wine which included Malbec entries costing 0.28 Spectator and Wine Enthusiast have typ- up to twice the price. 0.26 ically ranged from the high 80s to sev- Wines in the $51 to $85 F.O.B. per eral 90s, indicative of their price-value case category grew at a 32 percent rate SOURCE: 2009 Yahoo! inc. appeal. in 2008. Brands in this category (and Argentine Malbec Exports to the U.S. by Price Category PRICE CATEGORIES US$ FOB FOB AVERAGE PRICE 9 LITER CASES N° Price per case (PX) 2006 2007 2008 CAGR 2006 2007 2008 2006 2007 2008 CAGR 1 PX < US$ 28 7,629,169 7,316,137 10,211,363 15.7% 21.86 20.94 20.71 348,936 349,318 493,144 18.9% 2 US$ 28 = PX < US$ 35 5,579,676 11,728,536 22,852,963 102.4% 30.42 30.46 30.84 183,398 385,000 741,023 101.0% 3 US$ 35 = PX < US$ 50 7,184,219 12,025,846 19,961,860 66.7% 39.60 39.44 39.79 181,438 304,904 501,633 66.3% 4 US$ 50 = PX < US$ 85 10,335,657 15,573,206 20,552,363 41.0% 59.24 61.71 62.24 174,476 252,355 330,200 37.6% 5 PX = US$ 85 2,421,727 3,036,376 6,440,622 63.1% 171.68 146.27 136.09 14,106 20,759 47,327 83.2% TOTAL BOTTLED WINE 33,150,448 49,680,101 80,019,170 55.4% 36.74 37.86 37.86 902,354 1,312,336 2,113,327 53.0% SOURCE: Causasia Wine Thinking ([email protected].) Based on data provided by DGA. May 2009 57 Malbec Exports to U.S. representative U.S. retail prices) include Brand Leaders, Argentine Malbec Exports to the U.S. Catena ($18), Doña Paula Estate ($14), (Categories by case price, FOB Winery) Terrazas Reserva ($19), Trapiche RANK BY FOB VALUE - 2008 Broquel ($15) and Luigi Bosca DOC N° PRICE CATEGORIES 1º 2º 3º 4º Reserve ($19). These wines typically 1 PX < US$ 28 CONQUISTA TRAPICHE LA BOCA CRIOS earned ratings of 89 to 91 in recent 2 US$ 28 = PX < US$ 35 DON MIGUEL GASCON NORTON PASCUAL TOSO ALAMOS magazine tastings. 3 US$ 35 = PX < US$ 50 ALAMOS TRAPICHE ROBLE TERRAZAS ALTO SEPTIMA Several of the brands in this category 4 US$ 50 = PX < US$ 85 CATENA TERRAZAS RESERVA NORTON RESERVE DOÑA PAULA ESTATE had hyper growth in the U.S. market in 5 PX = US$ 85 CATENA ALTA COLOME ESTATE ACHAVAL FERRER MENDOZA TIKAL AMORIO 2008. The brand growth leader, Doña TOTAL BOTTLED WINE ALAMOS DON MIGUEL GASCON CATENA TERRAZAS RESERVA Paula Estate Malbec, second in volume SOURCE: Causasia Wine Thinking ([email protected].) Based on data provided by DGA. to market-leading Catena Zapata, grew by 180 percent. The Luigi Bosca D.O.C. at a 5,500- to 8,500-foot altitude in (8.7 hectares) per vineyard, according per grower in the U.S. and is more Reserve grew by 170 percent, according what are believed to be the highest to Rabobank. That compares to an akin to the European norm of small to industry sources.