Monday, December 3, 2012

Is cheap Argentinian Malbec about to disappear?

Winemaker Paul Hobbs and author Ian Mount
I have a story on Wine-Searcher about how the flow of cheap, quality Argentine Malbec to the US might be about to stop because of government interference, high inflation and a small harvest.

It would be a short-sighted shame if the Argentine government succeeds in derailing what may be the country's best-known export.

It's still a country dominated by agriculture. Wine was only the 21st largest export from Argentina in 2010 by value, but more than half of the larger dollar value exported products were agricultural. Wine is the apex of agriculture, and perhaps gives a halo effect to all of a country's farm goods. Not only that, wine has easily the most potential added value of any agricultural product.

Yet short-sighted government regulations are an Argentine tradition.

Argentina was one of the world's 10 richest nations 100 years ago, according to Ian Mount's fine book "The Vineyard at the End of the World" (a good Christmas gift). But after the country was hit by the global depression of the 1930s, a military junta made things worse with laws such as a fine for farmers planting new fields or vineyards. Shantytowns outside Buenos Aires with refugees from the countryside popped up immediately.

The country closed its wine market and populist leader Juan Perón wanted to keep the masses happy with wine, so he ordered wineries to increase the supply, which most did by adding tap water. Until wine's recent fashionability in the US, Argentina, with plenty of Italian immigrants, had the only real wine-drinking culture in the Americas. Low prices led to higher and higher consumption and production. By the time consultants Paul Hobbs and Michel Rolland got there in the 1980s, Argentina was making an awful lot of wine -- it was the world's 5th largest producer -- and it might have been the worst wine in the world.

"At the time, all the wines in Argentina were oxidized," Hobbs said. "They believed that was the norm. They were big drinkers of Bordeaux but the storage in Argentina was bad. That's how they thought the wine should be."

Hobbs only visited Argentina because he was pestered by former classmate Jorge Catena while he was visiting Chile. Unlike most previous winemakers, who had flown in to Mendoza and been underwhelmed by a drab, Soviet-esque city, Hobbs drove over the Andes from Chile and saw the obvious potential in the land. He went to work with Nicolás Catena in the 1990s on creating the first Argentine wines to turn the heads of the world.

"Out of the first four years, we had only one good vintage," Hobbs says. "We were about to shut down the project. Then we got the devaluation."

The collapse of the peso in 2001 was devastating for the country's residents, but suddenly labor and supplies were cheap. Catena and others had modernized their wineries, and Malbec had been re-appreciated. High quality $10 Argentine Malbec soon took the US and UK by storm.

For the last 10 years, world respect for Argentine wines has skyrocketed. It's hard to imagine that in the 1980s many believed no quality wines could be made there. Of course, at the same time many believed nobody could successfully make Pinot Noir in California. And you thought '80s fashions were silly.

I find it hard to imagine that this current difficulty, as bleak as it seems now, is going to set Argentina back for more than a few years. I had the opportunity to visit Mendoza last year and was impressed not just by the consistent quality of the wines -- Bonarda and Torrontes are underrated, you should look for them -- but also by the food culture, which is vital. Neighboring Chile has better terroir in just about every respect except elevation, but it's not a wine-drinking country and it's not a country that exalts food. Argentines can and will argue passionately about how to marinate beef or fill empanadas; this is a country where people understand that minute changes in flavor make a huge difference.

Maybe a shortfall in $10 Malbecs will be good for Argentina in the long run. Perhaps the foreign exchange-regulation problem will prevent a Yellow Tail from springing up and ruining Argentina's image. Until recently, that was the greatest fear for Argentine wineries. Not anymore.

Read the Wine-Searcher story here.

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  1. This isn’t the only issue in Argentina these days, they have passed laws that will stop winery expansion. Only a certain portion of agricultural land in any State can be foreign owned and the area around Mendoza has reached the limit. They won’t take anything away (well not yet) but the foreign companies can’t expand, and it appears when property changes hands it has to be sold to an Argentine. So there goes a promising export opportunity, only in Argentina.

  2. While the Argentine government specializes in giving "gifts" to supporters, perhaps the indirect gift to US consumers is stemming the tide of indifferent, uncompelling, and commercial wine that has flooded in the last few years. It really hurts what people like us (Vine Connections) are trying to do, which is to show the best of a countries wines.

  3. Ed, I'd be curious to know how current conditions in Argentina are affecting your business.

  4. I'd say the biggest impact is the amount of distraction and financial pain it is causing our wineries down there. In general, prices from Argentine wineries have increased about 10% in the last two years, though even at the new prices the wines offer great value at all price points, especially from $12-$40 US retail. But both our wineries and our company are big believers in price stability to our US customers. If they love BenMarco Malbec, for example, for $19.99 and have enjoyed it for years at that price, we don't want it going to $21.99 because we think it gets confusing for everyday drinkers. I know CA and France pricing bounces up and down (mostly up), but I find that confusing and the reason why many wine drinkers (not collectors) stop drinking certain categories of wine altogether. They lose the sense of what they are paying for.