Martin Cortese, regional manager of Trapiche, one of Argentina’s largest producers, explains from a big-business perspective how the economic policies impact: “The government isn’t devaluing the currency and the toughest part of the deal is that the cost is higher in pesos for production. We are taking the hit and trying not to pass this on to the distributor or the final consumer.”
So will it be the big companies – those that can afford sustained squeezed margins – that will be the last men standing? “[To put it] in a very mean, capitalist way, that is what we are doing,” says Cortese. “Small companies have dropped out of the market. We are able to stay and increase our share of the market.”
Magdalena Pesce, marketing and communications manager of Wines of Argentina, says it doesn’t necessarily follow that increased costs and therefore reduced margins will create a consolidated market.
“The industry is prepared to survive in this environment and find this situation as transitory. Across the industry, wineries are adjusting their costs and spending their resources more efficiently. In the short term, some medium and small wineries are redirecting their efforts to Latin American markets in order to be more cost effective and reduce the transport fees.”
“Consolidation is not a consequence of inflation – it’s the increasing cost of logistics,” says Bodega Vistalba’s Pulenta. “When logistics costs go up you have to have the consolidation to absorb this. Consolidation happens more in stable countries. The idea is to consolidate distribution but not the identity of the wines. The key point in the wine business is to be as authentic as possible but consolidate distribution costs.”
Lack of confidence
For years, the Argentinian people have lacked confidence in the peso. “People do not think in pesos, they think in dollars culturally,” says Carina Valicati, co-ordinator of Wine & Gourmet Tourism for the National Institute of Tourism Promotion (INPROTUR). The government has tried to prise its people away from the dollar, but for things that really matter, such as property, only the American currency is used in transactions.
Dollars are not just in demand by the people. “The government tries to keep dollars here in Argentina because it needs the foreign currency,” says Reich “A new policy that requires payment from international buyers within two to three months has been introduced. Compare this with other producing countries that might only require payment within six months.”
Pulenta agrees: “The government spends all its dollars on energy – gas, oil from Venezuela – and does not have enough money for other things.” Other things might include materials crucial to wine production, barrels and corks – products that are not made in Argentina.
Without being able to plan inventories of such imports, running a business is a challenge. “It’s not that buying cork and barrels is any more expensive, it’s just that when I need to buy them I have to send a special document to the government – it’s not flexible,” says Dona Paula’s Bonomi.
