In the last issue of the year, Wine Spectator published a series of articles about the Argentina’s success attained in the international markets. Among its articles, there is a list including 700 recommended wines, among them, 375 are 100% Malbec, whereas the rest are blends. In an article entitled “Malbec’s Moment”, Nathan Wesley, in charge of tasting Argentine wines for the magazine, mentioned How a forgotten red grape has revived Argentina and taken America by storm
In this article, we make reference to some of the topics highlighted by the journalist. The full article may be read in English in the link appearing at the bottom of this piece, as well as the guide of recommended wines. Besides, it is worthy to stress that the photo of this issue’s cover is a work performed by Gustavo Sabéz, a photographer from Mendoza.
An “overnight success” usually has a long back story of early promise, hard work, lucky breaks and plenty of hurdles overcome. Argentine Malbec is no exception. Today, this full-bodied red wine is an international star, but fewer than 20 years ago it was virtually ignored even in its ancestral home of France. How Malbec beat the odds is a tale of luck, talent and persistence.
Argentine wine was a blank space on the map for most Americans until recently. In the mid-1990s, wine exports from Argentina to the United States were nearly nonexistent.
But, in 2010, Argentina exported more than 4 million cases of Malbec to the United States, or 20 times the amount it sent north in 2002, representing 60 percent of its exports to the United States. The message was clear: Americans loved Malbec.
“We had a product at the right moment, in the right market and at the right price,” says vintner Santiago Achával, who founded the top-performing Achával-Ferrer winery in 1999 along with partner Manual Ferrer and Italian winemaker Roberto Cipresso.
“Malbec delivers a lot of drinking pleasure,” says Hobbs, who today is a partner in Viña Cobos in Mendoza and consults for another 14 wineries throughout Argentina.
Performance of Argentina’s exports
As Argentina’s wine export market began to surge, the country itself was in the midst of a major financial crisis. The government was heavily in debt, and the domestic economy was plagued by high unemployment and runaway inflation. To make matters worse, local wine consumption was declining as beer and soft drinks became more popular. Wineries would need to export more wine to survive.
At the end of 2001, the government defaulted on some of its debt, and by early 2002 it had finally abandoned the peso’s long-held parity peg to the U.S. dollar. The peso quickly lost three-quarters of its value, but that move swung open the door for exports. “The devaluation meant an extremely high profit for exporters,” says Nicolás Catena, whose family has been making wine in Argentina for more than a century.
It also accounted for heavy foreign investment. Anyone with dollars or euros could buy land and labor in Argentina at a 75 percent discount. A gold rush had begun, and wineries started using their newfound profits to further promote Malbec overseas. They also invested in their facilities, creating one of the most modernized wine regions in the world.
Within a few short years, Malbec was pouring into the United States at an accelerated rate, and its star was on the rise. America’s own economic downturn propelled it even further. Exports jumped by 61 percent, to more than 2 million cases, in 2008, and then to more than 3 million cases in 2009.
American market’s sales and voices
According to Steve Faith, vice president of customer experience at Total Wine & More, the U.S.’s largest privately owned wine retailer, Malbec sales today are concentrated in the USD10 to USD15 price-range. The company has expanded its Malbec selection from 75 to roughly 250 different labels over the past few years.
“I think [Malbec] has legs that are going to last for a while,” says Faith, adding that most consumers learn about the varietal by word of mouth. “There are still a lot of people out there who haven’t tried the wine yet, so there is room for a lot of growth there.”
Faith expects the high-end category to grow over the next few years as newly planted high-altitude vineyards mature and as winemakers further explore the country’s diverse terroir.
If restaurants sales are an early indicator of consumer trends, then Faith may be right. Roger Dagorn, wine director at Porter House New York, a Wine Spectator Best of Award of Excellence winner since 2008, says he has seen the demand for Malbec increase dramatically over the past few years. The restaurant currently offers 11 different Malbecs and blends, ranging from USD12 for a glass of Bodega Tamarí Malbec Mendoza Reserva 2009 to Viña Cobos Malbec Mendoza Marchiori Vineyard 2007 for USD365 a bottle.
In fact, Malbec is the restaurant’s third most popular choice, after California Cabernet and Pinot Noir of any designation, and it is especially popular by the glass.
Argentina’s growth and economic threats
Malbec’s growth in America has been well-planned. Alberto Arizu, president of the trade organization Wines of Argentina and whose family owns the century-old Luigi Bosca winery, says that Wines of Argentina sought to progressively promote Malbec on restaurant wine lists by first targeting Argentine restaurants, then renowned steak houses and finally national chains of all types. Today the Wines of Argentina is further advancing its message by communicating directly to the consumer with events such as Malbec World Day.
The varietal’s future, however, isn’t without looming challenges. Many winemakers are worried Argentina is overinvested in Malbec, as Australia seems to be in Shiraz. During America’s recession and Malbec’s ascent, Australian Shiraz, the wine-world darling only a few years ago, got caught with a glut of wine priced either too low or too high.
For now, Malbec continues to expand in the American market. Total exports to the United States through the first half of this year remain up by 6 percent.
High inflation is also pushing up prices of Malbec and may be the biggest threat to Malbec’s continued success. According to Achával, inflation in peso terms is running at 20 percent a year, but that is valued in dollar terms at only 5 percent a year. For exports, he says, that equates to a 15 percent loss in currency conversion. For now, wines priced above USD12 are profitable because land and labor remain relatively cheaper than in most other modern wine regions. But higher prices will put downward pressure on demand and may eventually open the $10-to-$15 niche to a foreign competitor.”