The domestic market is subject to the fall in demand for Latin American wine
The bitter pill that the pandemic has meant for the Latin American economy is now being borne by the region's wine producers, most of whose exports have been reduced by the border closures, thanks to the increase in domestic sales to consumers who, in the midst of the quarantine, have rediscovered the pleasure of local flavors.
Although the International Organisation of Vine and Wine (OIV) predicted last October that global consumption will fall between 15% and 20% in 2020, regional statistics show that confinement made Latin Americans choose to drink a little more.
A clear example is Argentina, the most important wine producer in South America, which between January and September sold 707 million liters in the domestic market, with a year-on-year increase of 8.3%, according to the National Institute of Viticulture (INV). For the president of the INV, Martín Hinojosa, these figures are more than encouraging, considering that 75% of the Argentine product is sold domestically.
"The pandemic has helped to consume more wine, driven mainly by new moments such as having lunch at home, buying in nearby places, and introducing new consumers such as young people," he said. Even so, between January and October last year the country, which ranks 10th among world exporters of non-sparkling wines and musts, exported 3,374,618 hectoliters, with a year-on-year increase of 35.7%, making it the only South American country to record an increase in this volume this year.
Chilean industry recovers
Chile, considered the second largest wine producer in South America and the fourth largest exporter in the world, has seen its wine industry activity decline during the pandemic, with a 13.4% drop in production between January and August compared to the previous year, according to the Ministry of Agriculture. The decline also affected exports due to the closure of its two main markets: the United States and China. In fact, in the first eight months of 2020, 591.7 million liters were shipped abroad, a drop of 1.9% year-on-year.
But, the market improved between August and October with the economic reopening after the confinement, which allowed recovery of the total volume exported and equaled that of the same period in 2019. "This is very good news given that we were forecasting a 30% drop. We expect a positive trend between now and the end of the year and further growth for next year," Angélica Valenzuela, commercial director of Wines of Chile, explained to Efeagro.
Pandemic: An opportunity to grow
Chilean winemaker Juan José Ledesma, general manager of Viñas Inéditas and considered a "rock star" of viticulture research and development in the Biobio region, is also hopeful that better times will come. His winery, which exports 97% of its production to the United States, Brazil and the United Kingdom, had its purchase orders for this year postponed to 2021 when the sanitary crisis began.
Then, he told Efeagro, "we basically found ourselves without demand for 2020". Fortunately, and as a way of coping with the difficult situation, "the domestic market appeared and we were able to get closer to Chilean consumers through the Internet, which completely changed our commercial proposal," he said.
Before the pandemic, the wine trade within Chile was, in his words, "so competitive and aggressive" that it prevented small wineries like his from having a significant space in the market. Now, "the expectation is that the online direct sales market will consolidate in the coming years and not let go of the national consumer who has become quite loyal and close and that is good for the culture of wine and gastronomy", he analyzed.
Uruguay is on the same path, which, according to the National Institute of Viticulture, in 2020 harvested 93,492,254 million kilos of grapes, 10.75% more than in 2019. In terms of consumption, it is estimated that up to October this year it was 50,493,811 liters, which represents 13 % more than in the same period of 2019.
In the Uruguayan case, one of the main challenges brought by the pandemic occurred at harvest time, in March. Therefore, it became urgent to take the necessary measures to end this activity, considered key for the wine industry, a line of the economy that directly and indirectly employs 30,000 people.
Also, according to a document from the Mexican Wine Council sent to Efeagro, the Mexican industry suffered losses of 60% in the first half of the year. In this regard, the general director of the Council, Paz Austin, explained that, although she understands that "the priority of the authorities has been to respond to the sanitary emergency", she trusts "in having the opportunity to work together with the different levels of government to establish mechanisms to boost both wine production and distribution and wine tourism".
The outlook is more encouraging in Colombia, where the category has grown in recent years through events such as Expovinos.
In the coffee-growing nation, the consulting firm Nielsen reported that the category had a variation in sales of 16.8% so far in 2020 compared to the same period in 2019, and for the months of April, June and July, during the worst of the pandemic in the country, growth of 20.3% was reported in the overall market.
"This increase is explained by new consumption patterns as it goes from being a drink for socializing in meetings to being an accompaniment to meals during the quarantine", said Carlos Mario Giraldo, president of Grupo Éxito, organizer of Expovinos, which in its 2020 edition brought together virtually experts from nine countries and had 400,000 buyers in 200 stores.
In Brazil, wine is the best way to get over the pain
The uncertainty generated by the coronavirus caused consumption to rebound in Brazil by 26% between January and September compared to 2019, which is a historic rise, according to the Brazilian Association of Sommeliers of Rio Grande do Sul, the largest producing state of the South American giant.
The sector employs about 200,000 people and only in that state, bordering Uruguay and Argentina and which accounts for almost 90% of the total Brazilian production and 92.4% of exports, more than 16,000 families depend exclusively on this activity to ensure their livelihood.
For this reason, the Government launched lines of credit with lower interest rates and longer terms, but "there were no specific incentives" but "everyone had to find a way to remodel their business" to overcome the bitterness that the pandemic brought to this traditional industry and move forward, pointed out the president of the Association, Orestes de Andrade Junior.