This month we talk to Eneas Riquelme from Fecovita, Argentina’s biggest exporter of bulk wine, who shares the key trends influencing the Argentine wine market and the outlook for the 2022 harvest.
We're one of the largest viticultural groups worldwide, with over 25,000 hectares under vine across our partners. Our mission is to optimise the quality of the products produced with our partners, and maximise their returns by giving them the best possible route to market worldwide.
In 1896 our most successful brand, Bodega Toro was founded. Toro is currently the number one brand in Argentina by volume, and the second largest in the world.
Our grower partner base extends beyond 5,000 who supply grapes to our 29 member cooperatives. Together, the vineyards are located in all the premium viticultural areas of Mendoza.
Fecovita in numbers:
- Producing 270 million litres of wine a year
- Operating 54 wineries
- The No. 1 bulk wine exporter from Argentina
- Customers across 40 countries
Overall the last five years has seen us producing a similar amount of wine, but the major difference for us is the shift in our focus from the domestic market to exports.
Today, our business is made up of three main business units:
- Bottled wines (national and international markets)
- Bulk wines (international market)
- Grape Juice concentrate (national and international markets)
In Argentina, the cooperative approach is integral to our DNA. We are committed to the sustainability of our value chain, and we are also generating a sustainable future for thousands of families who depend on our business. All is supported by a solid investment strategy, a commitment to technological advancement, continual improvement of product quality and the worldwide visibility of our portfolio of products and emblematic brands.
Our production represents 20% of Argentina’s total grape juice production, and so we are one of the main producers. GJC provides an important and profitable alternative to wine our production allowing us to smooth out some of the peaks and troughs across the business. We're fortunate that demand for high quality GJC is strong, particularly in the US and Japan.
Our main markets, being Japan, the US, Saudi Arabia and Canada are the most important for GJC, and in world terms Argentina is the second largest producer, behind Spain.
Obviously GJC is a commodity market and therefore can be volatile. Its success or failure is linked to many factors, but mostly harvest conditions (producing a surplus or deficit supply of grapes) and world demand for table wine. These factors are also influenced by the market situation for supply from Spain. Currently prices are increasing and will remain high until the 2022 southern hemisphere harvest yields are known, and only then there may be a correction. We'll see.
Despite this market situation, Fecovita has established itself as a benchmark juice producer in terms of quality and customer service and so far we have maintained our exported volume and customers during 2022. In mentioning our customers, we recently attended the WBWE as we owed it to our customers to maintain a market presence, and of course there are things that you can't transmit and feel just continuing to make conference calls.
On bulk wine, we export 15% of our total production in bulk, and the rest is packed in Argentina in bottles, tetra, cans or BIB. Of all our bulk exports, China forms 80% followed by the UK, and Canada as our most important markets. For bottled wines our key markets are Brazil, Paraguay, the US and Russia.
These markets have not really changed for us. In more recent times the main difference has been our strategy. In 2019, after an exceptional harvest and a huge volume of wine, we focused on reducing our stock levels by selling quality generic wines which fortunately was in demand then. But, since then we have focused more on our varietals and the more premium sectors of bulk wine. And now, we are seeing a significant increase in demand for white wines of all varietals, mainly because of the smaller harvests in Europe, the US and New Zealand and minimal stock availability from Chile.
The 2021 harvest in Argentina can be summed up as an unusual combination of notable rainfall and mild temperatures. This, along with a mild summer, allowed the vines to ripen, developing gradually and continuously until the fruit achieved a good balance between fresh red fruit flavours (among the reds) and juicy tannins elevated by precise acidity and moderate alcohol. Overall, production finished 10% higher than in 2020 (approx. 2.2 millions of tonnes).
On pricing, the reduction of wine stocks across Argentina in 2020 and the April frosts in France and Italy has caused most prices to rise, especially for generics (red and white), but also for Malbec.
The international demand for Argentinian reds particularly Malbec, but also Cabernet and Merlot, has remained strong during the year, but slightly down on 2020. Demand for generics has also reduced due to lower availability, and lack of competitiveness with Spain and other countries. For example prices have increased from US$0.30/litre in August 2020 to around US$0.55/litre now.
The outlook for the 2022 harvest is a tentative, early confidence of a standard-sized crop across Argentina, somewhere between the average of 2.4-2.5 million tonnes, and so higher than 2021. Two of the four weeks of December brought welcome spring rainfall to Mendoza after what has been a dry year and also an important hail storm in the east. We are still waiting for the final reports, but we hope to have more volume than last year.
Thank you for this opportunity to share our story. Fecovita has made good progress across international markets over the last five years, from being a principally domestic focused winery to an important supplier on the world stage. We will be building on this growth through strategic customer partnerships, to also grow our branded portfolio. We have vineyards in some of the most privileged terroirs in Argentina and are working hard on a number of ultra-premium projects which we look forward to presenting to the market soon.
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