This is not a drill! The numbers are in and Argentine wine producers are feeling the squeeze. Argentina wineries saw the worst fall in both domestic wine consumption as well as exports in 22 years.
So what’s going on? The number of grapes used to make wine has gone down due to climatic factors and this has driven up prices for wine producers. Combining this with high rates of inflation and the local consumers losing a chunk of their purchasing power, the wine industry is hurting.
April was the worst month of the year in terms of domestic consumption, which went down 16.9 percent in comparison to April of 2016. With respect to the first quarter of 2017, there was a consumption decline of 13.1 percent, the highest drop since at least 1995. 2004 is the only year that comes close to this, when domestic consumption fell 8.7 percent, according to the Argentine Wine Observatory and Coviar data, based on the National Institute of Viticulture (INV).
Consumption isn’t the only area seeing a decrease in numbers. Wine exports fell 13.5 percent in April. A lower stock of wine appears to be logically leading to more limited supply and higher prices; in the case of bulk wine, there was a decrease of 59.2 percent.
In the year leading up to this past April, wine exports and bulk were only down 9.1% and 43.2 percent, respectively.
The only thing that the wineries can do is hope to lower the cost of wine for consumers. “We are very worried and are working on competitive plans to be able to lower costs,” said Sergio Villanueva, manager of the Unión Vitivinícola Argentina (UVA).
Historically, there have not been any sharp falls in such a short period of time. “The macroeconomics are not good, the mass consumption is very complicated, the consumers do not have money, it’s a very difficult [situation]” explains Carlos Fiochetta, general manager of the Coviar. “It is easy to fall but difficult to recover markets.”
Exports have been slowing down since 2012 due to the exchange rate lag, inflation, and loss of competitiveness, according to Villanueva. The domestic market however, was much more stable than it is today. “The most serious thing is that there are no expectations of improvement in the short term,” notes Villanueva.