Rise of Argentine Wine

I read an interesting article in USA Today a couple weeks ago while traveling. USA Today actually is pretty fun reading. Anyhow, the article was about the Argentine wine industry and how it has grown over the last 30 years or so. Sue and I have been trying out Malbec's from Argentina lately (including the Norton winery they mention in the article), so I thought it was interesting to read the background on the whole industry.

Apparently the wine industry was already pretty big in Argentina, but they generally only sold their wines locally. But a part-time UC Berkeley economics professor put the lesson from Napa Valley into action. Napa was able to elevate their wines to be competitive with those from Europe. He figured, why not do that in Argentina? So he did. And he made an interesting decision in pricing the wine that demanded people respect Argentina's product. Here's an excerpt:

By 1990, Catena had returned to Argentina and begun producing wines for sale abroad. As he tiptoed into the American market, however, he made a crucial decision. At the time, most wines from neighboring Chile were selling in the USA for less than $10. But Catena eschewed the low end of the market and offered his cabernet sauvignon for $15 and priced his chardonnay at $13. It was an audacious move for a winery in a country with no global profile.

"They distinguished themselves by not coming in at the rock bottom end of the market. They did not rely on cheap wine," says distributor Jim Faber, vice president of the San Francisco Wine Exchange.

Then there was an interesting excerpt about the Malbec grape.

Argentina's fortunes are tied to the unheralded malbec, a grape that originated in southwest France, where it was used for blending. The word may have originated with the French mal bouche, or bad mouth, an indication of the disdain with which Old World winemakers regarded the lowly grape, says Steindl.

Transplanted to Argentina, however, malbec thrived. In the mid-1990s, it began receiving its first notices as an alternative to traditional reds such as cabernet sauvignon. But sales to the USA remained tiny. It took a financial crisis that plunged much of Argentina into poverty to give the industry its big chance.

There are actually multiple reasons after that point why the industry was really able to take-off. Here are some of the top reasons:

• Argentine economic crisis: Because the currency plunged in value, sales abroad (in the U.S. for example) were worth multiples locally while the wineries were able to continue paying their workers in pesos. They had huge jumps in profit margins up to 70%.
• Rising shipping costs: Because of higher oil prices and scarce cargo ships due to demand from India and China, the U.S. looked closer to source their wine.
• Cheap land in Argentina: Because of the economic crisis, land prices also plunged. That meant a lot of investment by established wine producers like Kendall Jackson.

It's pretty interesting to see how a whole industry can be born like that.