Soaring grape prices and an overvalued peso have raised concerns about the ability of Argentina to compete at the lower end of the bottled wine market.
According to a new report by Rabobank, some wineries are reporting an increase in production costs of more than 100% during the last four years, with raised labour costs primarily responsible for a 115% increase in average wine grape prices.
With the average export price of bottled wine going up by only 60%, the report highlighted the likelihood of a “rapid deterioration in profitability.”
Commenting on the current situation, Rabobank analyst Valeria Mutis remarked: “The competitiveness of Argentine wine exports is being undermined.”
Pointing to the squeeze on margins, she outlined the problems posed by the country’s wider economic problems. “Whilst official figures set the inflation rate at approximately 11% per year, private estimates put the yearly inflation rate at 25%,” reported Mutis.