THE BLOG

Challenges on the Horizon for Argentine Wine

09/30/2013 03:03 pm ET | Updated Nov 30, 2013

Argentine wine's surge into the American market in the past few years has been one of the most remarkable stories in the industry. But production in Argentina is not as quick to change. Will Argentine wineries be able to react quickly enough to claim new niches in the market?

In the past two decades, Argentina has shifted steadily to greater production of red wines. Believe it or not, the country produced more white and more rose grapes in 1990 than red grapes. Hardy varieties like bonarda, Pedro Gimenez, muscat of Alexandria, and cereza and criolla (two muscat crosses) were the leading varieties, all used to make cheap table wines. Since then, Argentina has moved steadily towards premium wine production. Planting of red grapes has more than doubled, white grapes have slipped only a little bit, and rose grapes have fallen by half. The charts below cover the leading varieties produced for export, with missing data from 2010 imputed:

By the late 1990s, Argentina was exporting moderate quantities of red wines and relatively little in the way of whites. Reds became Argentina's calling card, but plantings flattened around 2009 with the global economic crisis, which stifled demand and made new investment more difficult.

Malbec was always the biggest part of this story, with production rising rapidly since 1990. Even in the midst of the American love affair with malbec (which has spread to Brazil, the United Kingdom, and other countries), the upward trend for malbec plantings has stayed pretty much the same, as the next chart shows:

This is somewhat troubling; if the new demand is adding to existing sources of growth, rather than replacing them, then we could see undersupply in the near future. It's clear why Argentine wineries want to push bonarda and red blends, which usually mix malbec and cabernet sauvignon; these varieties have been flat or falling since about 2006. Pinot noir is making progress, but it's still a tiny share of the total.

Argentina's whites tell quite a different story. Plantings of Pedro Gimenez (not the same as Spain's famed Pedro Ximenez) have fallen by more than a third since 1990, but it's still the country's top white grape. A few wineries, including Martino, are now trying to export it to the United States. There are also plantings of semillon and other grapes that rarely make it from Argentina to American store shelves. Chardonnay and sauvignon blanc have been the biggest gainers, even though torrontes has grabbed the headlines:

In fact, production of torrontes has barely budged for years. Once again, a sharp uptick in demand - something many wineries are trying to promote - could lead to a shortage.

In the short run, two things happen when demand outpaces supply: prices rise, and the temptation grows for producers to dilute their wines. Neither of these is particularly good for American consumers, but spare a thought for Argentine consumers, too. In a couple of years, a new president will lead Argentina, with a chance to reform the country's difficult export regulations. With easier exports and higher prices, a greater share of Argentina's wine will probably flow overseas.

We hope Argentine wineries will take note of these potential challenges. Fortunately, some of our favorite producers are already planting new vineyards - take a look at our Twitter feed for some photos! Within a few years, the new vines will improve the industry's capacity to serve consumers at home and abroad. And we'll drink to that. Salud!