Old Ways Slowly Yield to New Technology and Marketing Skills : Argentine Wine Makers Now Focus on Exports

MENDOZA, Argentina â€”  About a century ago, immigrants from Italy and Spain pushed west across Argentina until they met the Andes. At the foothills here they savored the climate, tested the soil and water, tasted the indifferent local wine, and immediately sent home for grapevine cuttings.

Their descendants have created what amounts to a huge wine lake, and in a sense it is as vexing as it is pleasing.

With the technology and marketing skills of their California cousins as models, Argentina’s wine makers are now undergoing a painful but perhaps ultimately rewarding generational change.

The rough-hewn patriarchs who built the industry are dying off. The young wine wizards who are replacing them tend to talk about the University of California at Davis the way priests talk about the Vatican. Modernization of the wine industry here is another example of the effort--always stressful in Latin America--to transform traditional, family-controlled enterprises to meet changing times.

“My father and I argue all the time,� Carlos Pulenta, 36, who heads Mendoza’s largest winery, told a recent visitor. “He says that quantity is what counts most, that a product for mass consumption ought to be abundant and cheap. I say we must incline more toward quality and the search for new markets, particularly abroad.�

Argentina produces about 7% of the world’s wine and ranks fifth among the world’s producers. It produces nearly twice as much wine as the United States, but the Argentine abundance is in large measure self-defeating, for Argentina does not make enough of the right sort of wine for the most lucrative markets.

Ricardo Santos, 49, who heads a family-owned vineyard here that specializes in fine wines, said, “The old ways are not good enough any more. We must find out what people want to drink and make it.�

Argentines consume, on a per-capita basis, about 10 times as much wine as Americans, but overall consumption is declining. To attract new consumers, both at home and abroad, aggressive vine yards here are using imported technology and better quality grapes to produce for the so-called California taste--fine wines that include light varieties of reds and, particularly, whites that are fresher, fruitier and lower in alcoholic content than traditional Argentine wines.

That is a radical step for an industry wedded for a century to inexpensive, hearty table wines produced for domestic consumption.

According to Derek Foster, Argentina’s leading writer on wine, “In the past, if old guard producers thought about exporting wine at all, it was only as a means of getting rid of excess production. The new generation sees exports as the future of the industry.�

The growing U.S. market is the major target for Argentine producers, but their search for change is vastly complicated by national economic chaos, including a rate of inflation--almost 700% last year--that makes business planning impossible. At one point in December, the interest rate for short-term loans between companies was 52% per month.

Despite the inflation, producers complain that the Argentine peso is still overvalued, making Argentine wines less attractive in the United States than French or Italian wines.

Table Wine Emphasized

Pulenta’s winery, Penaflor, exports wine to 22 countries. Its foreign sales bring in about $4 million a year, but this represents nearly two-thirds of all Argentine wine exports--and this, according to Pulenta, in an industry that generates total annual sales of around $800 million.

Increasingly, Argentine growers are focusing on high-quality varietal grapes, but more than 90% of total production is still in traditional table wine, vino comun , as it is called here.

At Penaflor there is a huge underground tank, built in 1970, in which 5 million liters of table wine--a liter is slightly more than a quart--are blended at a time. Much less space, at Penaflor as at others among Mendoza’s 2,300 wineries, is given over to the French-made oak casks for the finer wines that are acquiring an international reputation for quality.

The best Argentine wine sells for around $10 a bottle in the restaurants of Buenos Aires. Table wine, 80% of it drunk by working-class families, costs about 40 cents a bottle.

“Americans drink wine as a special treat,� Santos said. “They open a bottle with ceremony, as though they were on an altar. Here, wine comes with every meal. We don’t eat many grapes or raisins or drink grape juice. We just drink wine.�

About 97% of all Argentine grapes are pressed for wine. Tastes are changing, though. As Americans turn increasingly, (and in the Argentine view, belatedly), toward wine, Argentines are turning from wine to more beer and soft drinks. Per-capita beer consumption has doubled of late, while wine consumption has fallen.

Consumption Down

Raul Sammartino, president of the Mendoza wineries association, notes that between 1945 and 1975 Argentina’s annual wine production quadrupled, to around 2 billion liters, while per-capita consumption rose from 45 to 87 liters.

In the past decade, though, per-capita consumption has fallen. While total sales have been more or less constant, despite population growth, Argentina’s estimated 60,000 grape growers--90% of them here in Mendoza and neighboring San Juan province--have increased production. Supply now exceeds demand and producer prices have fallen alarmingly.

“There has been a lack of vision of the future among growers,� said Luis Bobillo, Mendoza’s minister of economics. “Too much faith was placed in table wines, too many hectares planted in low-quality grapes. Too little attention was paid to good wines and other products. Now, these are tough times indeed.�

Amadeo Vilomara, president of a local association of growers, says thousands of acres of low-quality vineyards are now unworked, that many are being eradicated.

“Historically,� he said, “we producers got around 49% of what the consumer paid for his wine. Lately, that figure has been between 15% and 24%. We are bring forced to sell at far below production costs.�

Vilomara blames the low prices on the wineries that buy grapes from independent producers--growers who have no wine production facilities account for 57% of all grape production--and he calls for reimposition of government price controls.

Longer View

“The same thing happens here as on the TV show ‘Falcon Crest,’ but on a bigger scale,� he said, referring to an American television series that deals with unprincipled American wine makers. “Here we have various Falcon Crest families. I never miss an episode.�

Carlos Magni, who heads a vineyard cooperative here, takes a longer view.

“This is one of our worst crises,� he said. “We have low prices and over-production, and we need new products and new markets. It is painful, particularly to the small producers, but if history is any guide, when the industry has to confront unpleasant realities it eventually finds a way out. Our wine is Mendoza’s wealth.�