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Argentina's bulk wine production has a 'structural problem', says governor of Mendoza

Published:  13 March, 2015

Argentina's bulk wine producers are facing "structural problems" that are causing unwanted low quality wine to stockpile, the governor of Mendoza has claimed.

Argentina's bulk wine producers are facing "structural problem" that is causing unwanted low quality wine to stockpile, the governor of Mendoza has claimed.

Governor Francisco Perez said hyperinflation and the overproduction of grapes has led to a challenging situation for bulk wine producers, as consumers in a competitive market were not drinking low quality wines. 

"It's a structural problem that they're making wine that no one wants," he told Bloomberg press in an interview this week. According to Perez over 200 million litres of wine is currently being stockpiled in Mendoza.

The bumper crop of 2013 is partially to blame as producers try and move the residual excess juice through the supply chain. Inventories are up 13% according to Observatorio Vitivinicola de Argentina.

Hyperinflation, which hit nearly 40% towards the end of last year, has also been crippling for wine producers. Although Malbec has been incredibly successful, inflation has resulted in producers actually receiving less money in real terms, even though the price they are selling wine for at has not changed. Wines at the lower end of the price scale have been hit particularly hard as consumers are trending toward higher-end Argentine exports.

The government has demanded 35% of grapes will need to be made into grape juice in an effort to remove the 200 million litres of generic white wines from Argentina, according to the most recent Ciatti report. The report also indicated that across the board, prices are trending downward for all varieties, at all price points.  

However, higher quality wines from Argentina continue to do well in the UK market. Recent data from the Wine On-Premise report from Wine Business Solutions shows Argentina is performing well in the UK on-trade. The 2014 report found that Argentina is the second fastest growing wine region in the UK on-trade, behind Spain and it had increased 12% and was now on 5% of all UK listings.

Rabobank also found that in the UK volume and values had increased towards the end of last year. Volume grew by 5.5% in November and value had increased by 9.3% during the same period.