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Argentina is “hot hot hot” in the US

Source: WineSur
By: Ana Tagua

This is pointed out by The Wine Economist -based on the December issue of Wine Business Monthly-, which distinguishes between what is “big” (where the most consumer dollars are going) and what is “hot” (the categories that show the fastest growth) in the US market. Argentina and New Zealand are included among the first places in this “hot” category.

The Wine Economist starts explaining that “most of the table wines that Americans drink are American – there is a very strong home country preference. Domestic wine sales totaled USD 6,524 million for the period covered here while imports accounted for USD 2,648 million.”

Then, the blog provides readers with a list of the big import countries, which supply the most imported wine as measured by total expenditures.

According to the analysis provided by The Wine Economist, “as the table shows, Italy and Australia are #1 and #2 respectively in off-premises sales. It is interesting that France has....Read Full Article
fallen to #4 behind Chile. Argentina and New Zealand make the cut here (Spain did not) as you might expect, but bear in mind that Italy still sells more wine in the U.S. than Chile, France, Argentina and the Kiwis combined. The concentration ratio in this market is very high: Italy and Australia may be struggling at the moment, but they are in a league of their own.”

Nevertheless, the blog points out that even though Italy and Australia will not be over-taken soon, we should take a look at the big growth numbers that Argentina and New Zealand are putting up with annual growth rates of more than 20%.

In this sense, The Wine Economist makes reference to the “hot import countries” highlighting that “sales of most wine imports (including Italy and Australia) have actually fallen in the last year. The import wine segment is slumping badly, with Argentina and New Zealand the only significant exceptions.”

The old elasticity trap

The Wine Economist explains that “the rise in spending in the Super-Premium + categories is an encouraging sign, but some caution is necessary in interpreting the data. Many observers see the big increase in expenditures on USD 20+ wines and conclude that consumers are coming back to this segment strongly -that the demand curve has shifted. But we suspect that there is a lot of bargain hunting taking place and that margins are falling – bad news. Maybe we are just following discounted prices down the demand curve.”

Then, the blog keeps on explaining that “for many of today’s buyers a USD 20+ retail wine is a highly discretionary purchase and so the demand curve may be quite elastic. Economic students will remember that total expenditure increases when price falls for a product with an elastic demand.” Moreover, it adds that the large percentage expenditure increases we seen in the data could result from discounting rather than an actual increase in demand or shift in the demand curve.

As overall conclusions, The Wine Economist points out that “these data are interesting more for the questions they raise than the answers they provide. But the questions about how the U.S. wine market is changing are worth pondering.”

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