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Malbec: from Cinderella in the 1980´s to Queen of the ball in 2000

April 23, 2012 by Javier Merino | in Latest news, News

When going over the wine history of the past two decades, Malbec will have an outstanding presence in any discussion or analysis of the sector. It is not for nothing that it went from being a disregarded and eradicated grape to Argentina’s signature variety in this short period.

Malbec was the “Cinderella” of the eighties due to its lean yield and very low prices in the market, as it was bought only for being used to make white wines. It hardly could compete with rustic varieties. Then, it became the “star” propelling Argentine wine exports to levels never reached before. The “prince” asked it to dance. How astonished Sarmiento and Pouget would be before so dramatic changes, only possible in Argentina and fairy tales!

From 1995, when Malbec surface reached the all-time minimum level, with somewhat less than 10 thousand hectares, after eradication, it started to grow up to exceeding the current amount of 32 thousand hectares.

Nowadays, Malbec is the leading red grape variety planted in Argentina and has the particular characteristic of adapting perfectly to almost all wine regions of the country, being this a very important appeal in the diversification of the Argentine viticulture.

The agricultural investment of over USD  500 million made in the past two decades shows signs of the interest of investors in the development of this variety, highly demanded by new world consumers.

The rise in price, turnover, and yield has noticeably impacted on the grape-producing sector. Between 2007 and 2011, the estimated turnover of Malbec production grew from somewhat more than USD 106 million to over USD 290 million. In this period, the turnover of each hectare, on average, went from USD 4,300 to USD 8,900.

The international view

In 2011, Malbec exports garnered almost USD 400 million, experiencing an annual average growth rate of over 44% in the last decade, whereas the increase of the total wine exports in the same period was 27% per year. Clearly, the boost of exports was this varietal wine.

In 2002, Malbec exports just reached 15% of the total exported value, while in 2011, only 10 years later, they almost amounted to 50%.

In 2008, the international crisis allowed Argentina to expand its wine exports while its major world competitors fell or slowed down. During this period, Malbec speeded its growth rate up considerably, doubling its export share in barely three years. Argentina took successfully advantage of the international crisis and Malbec was its trump card.

Among the reasons of the significant transformation of the Argentine viticulture, it is worthy to mention the boom of this varietal in United States. Nowadays, this destination represents almost 50% of exports and it has become an excellent source of international promotion of Malbec’s attributes. Not only consumers have highly appreciated it, but also the worldwide critics have supported it.

But, there are uncertainties

Fully understanding the reasons of Malbec success can help the wine industry to plan the future strategy. The trend seems to be strong and there is no sign of a step backwards. However, the noticeable drop in the sector’s profitability, especially within the lowest price ranges, is related to the Argentine currency appreciation and to a dramatic growth of the value of the raw material in the last seasons.

Both phenomena have explanations on the macroeconomy side. Regarding the exchange rate, there are no ways of making it return, in the medium term, to the levels achieved in the last decade. The high price of the raw material is closely linked to a slow rate of investment in vineyards to meet the demand. The cause lies in the high country risk that scares investors in spite of its great profitability.

On the other hand, if reasons of this varietal’s success in worldwide markets, especially in United States, are related to the adaptation to new styles demanded by new consumers, the Argentine viticulture has the unavoidable commitment to analyze thoroughly these trends and act accordingly to avoid negative situations stemmed from not having understood the changes.

If, on the contrary, changes are well comprehended, there will be a consolidation of this success that generated added value and job in the national viticulture, as it had not previously happened in the past 50 or 60 years of the industry.

Translation: Carolina Lucesole

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