Summit News

Costs soar for Argentine winemaker

BUENOS AIRES (Reuters) - Soaring labor and equipment costs and fierce price competition from Spain and Australia are challenging Argentine winemakers, but one of the country’s biggest producers, Casa Bianchi, sees revenue up this year after a major expansion.

Argentina is the world’s fifth-largest wine producer and family-owned Bianchi is Argentina’s sixth-largest winemaker in terms of local market share. The country exported $770 million worth of wine last year.

With Argentina’s peso currency maintained relatively strong by the government, currently at 3.89 to the $1, wine exporters are finding rising prices for everything from boxes to grapes hurts their ability to compete.

“Exports are going to be hit hard because distributors won’t let us raise prices and the worst thing is that in dollar terms, everything rose in price in our country ... fuel, salaries, transportation, energy,” Casa Bianchi Chief Executive Raul Bianchi, a third generation winemaker, told the Reuters Latin American Investment Summit late on Wednesday.

Bianchi exports 30 percent of its production every year, mostly to the United States, Canada, Norway and Brazil, and is best known for its wines priced at about $10 a bottle.

Even so, he said he has trouble competing as Spain, France, Australia and New Zealand are all slashing prices while his costs rise.

“You’re in San Francisco, New York, Chicago, Vancouver, in all those places in the wine stores you see country discounts: Australia 20 percent off, New Zealand 10 percent,” said Bianchi, who just returned from a trip to the United States and Canada.

But he projects Bianchi’s revenue will rise this year to 140 million pesos ($36 million) from 129 million pesos last year, due to an increase in volume to 3 million liters from 2.5 million liters last year, after a $5 million expansion in production, especially of top-end wines.

Other Argentine wineries have deep-pocket foreign investors that can spend to boost their brands, he said.

“For the record: I never gave away a bottle of wine. Every bottle you see was bought and paid for. That’s different from a lot of wineries that... spend a million dollars to flood the market,” he said.

It would be nice to have a rich backer, he said, but he is not selling the company: “I get calls every day, proposals all the time.”

Bianchi grows grapes on 350,000 hectares (860,000 acres) and buys 60 percent of his grapes from other growers.

The grape of the moment for Argentina is Torrontes, which produces a crisp, white wine that many view as the country’s answer to Pinot Grigio.

“There’s a lot of thirst for white wine again, and Torrontes is in fashion,” he said.

Casa Bianchi’s main bodega in the wine-producing province of Mendoza is the most visited winery in Argentina, with 90,000 visitors annually, he said.

If the company invests in any further expansion, he said it would be in turning the winery into a full-day tourist destination with wine courses, shopping and family activities.

Reporting by Fiona Ortiz and Walter Bianchi, editing by Leslie Gevirtz