The second most important destination for Argentina’s bottled wine exports represents an opportunity but is also unknown territory: experts in this market offer clues on consumption trends and advice on how to handle monopolistic buyers.
The wineries that attended the Second Seminar for New Exporters, organized by the Argentinian Wine Corporation (COVIAR) and Wines of Argentina and operated by Área del Vino, gained valuable insights into the Canadian market. The Seminar was held in Kilka (Salentein) last week and was attended by a large number of small- and medium-sized wineries.
Price segments and the Canadian market
The average price per liter of bottled wine exported to Canada in 2008 has scaled from 2.6 to 3.6 dollars now.
The segments including the Ultra Premium lines (40-360 dollars per case) and Super Premium lines (27-40 dollars per case) account for 51% of the Argentinian exports to Canada.
In 2010 this tendency has become stronger, as exports of iconic wines show substantial growth, though volumes are still small. It is worth noting that the Ultra Premium segment increased from 5 to 12 million dollars over the first four months of 2010 as compared to the same period in 2009, while the Premium segment increased from 3.6 to 5 million dollars. However, the Popular Premium (USD 13-20) and Basic (USD 13 down) segments fell by 64% and 82% respectively in the same period.
It is no accident that the Premium segments show an upward tendency since we know from experience that this market directs its attention to the UK and the US and to the award-winning wines. “Monopoly buyers rely on scores and medals to evaluate wines. They are very well acquainted with the score lists of Robert Parker and the most popular wine magazines in Canada, namely, Wine Enthusiast, Wine Spectator, Decanter and Wine Access. Wine Access works with a panel of journalists from every province in Canada. And the journalist leading this project is Anthony Gismondi,” remarked Ricardo Valero, Ruca Malén’s Export Manager. It is worth noting that Gismondi was one of the judges who participated in the 2009 edition of the Argentina Wine Awards organized by Wines of Argentina in Mendoza.
How to approach the Canadian market
Ricardo Valero offered thorough information on the procedure required to sell wine in the Canadian provinces. With the exception of Alberta, 9 out of 10 provinces are mostly monopoly-governed.
As Valero pointed out, over 80% of the Canadian population lives less than 200 km away from the US border, so wineries that are successful in the US stand better chances in Canada.
Although wineries will have to operate under monopoly conditions, what they should do first is find an agent who is interested in their volume and price range. It would be best to find a nation-wide agent, but another option is to find a regional agent, or one covering an area or province.
An agent usually charges a 10-15% commission and may even charge an additional 5% fee for merchandising services.
In the province of Alberta, however, negotiations are conducted privately, but there is a common, government-owned warehouse for the goods.
Valero recommended starting to sell in the western area and then expanding to the east, because that is where the private buyers are and where the “neighbors” strategy begins to work. “If our brand has a good performance in an open market such as Alberta’s, the ‘neighbors’ learn about it via publications or on the Internet very quickly, and by the time we contact them, they know something about our product already. And if the product is accepted by consumers and the monopoly next door buys it, then the monopoly of the next province will want it too. Monopolies do listen to consumers after all.”
How the monopoly operates
Each province has its own purchase monopoly. The two main monopolies are LCBO from Ontario, the world’s largest wine buyer if taken as a private company, and the Societé Des Alcohols du Quebec (SAQ).
Entering a monopoly market is hard because there is only one buyer for Argentina in each monopoly, and if there is something the buyer does not like about a wine, the winery is not awarded the tender and they will have to wait until the following year to submit a new tender.
Monopoly calls for tenders are based on monopoly needs: if they see that the Argentinian category of up to USD 15.99 (the Argentinian wine price category under greatest demand in Canada) grows 30% and that prices migrate from 9.99 to 11.99, then they will buy wines at that price.
Once the tender is awarded, the wine is positioned in a warehouse cluster, according to its category – as there are different categories of stores in Canada – and if that wine is successful, it is promoted to a higher category.
We should bear in mind that prices are standardized under monopoly systems. If the case price in Canada is 46 dollars FCA, the retail price is 12 dollars per bottle, as the pricing system is common to everybody and the monopoly negotiates standard yearly freight charges with the shipping companies. Valero highlighted that “this is positive because wineries do not need to deal with intermediaries such as distributors or importers.”
“Consumers are calling for something new”
Ariel Menitti is Wines of Argentina’s Area Manager for Canada. During his talk at the seminar, he explained how consumers respond to promotion activities under a monopoly system.
“The Canadian consumer profile is similar to that of Americans, though consumers in monopoly markets have the impression that monopolies pursue their own economic interests, regardless of what consumers think and need. When you make individual contact with consumers for promotion purposes, you can see that consumers are calling for something new.”
When Menitti visited the different provinces in Canada, he noticed that there was at most one – if any – Argentinian wine on restaurant wine lists, which means there is huge potential for our wines. Therefore, he pointed out, “if a small winery wants to enter the market by lowering its prices, it will have to deal with tough players, since the main importer will already have the lowest-priced top-quality wines of Italy, Argentina and other countries.”
In terms of turnover and volume, the Fuzión line (by Familia Zuccardi) has gained the strongest foothold in the Canadian market, selling at 2.67 FOB per liter per exported case. In 2009 Fuzión sold one million cases (leading its category with a 43% share in value and a 70% share in volume), followed by Flichman’s Misterio with half the volume in the same price category.
Among the promotion activities that may be beneficial for wineries, he mentioned the wine fairs where Wines of Argentina participates. “Some of the fairs are targeted to the wine trade, such as the Vancouver Playhouse Festival (April), and although the Ottawa Wine Food and Show and Gourmet Food and Wine Show are more focused on consumers, they are also attended by buyers in search of wines that are not traded by the monopoly. They may start by buying some cases, thus giving rise to business opportunities.
What you should know:
Canada is a market with good purchasing power. GDP per capita: USD 39,400
The US is its main commercial partner.
Argentina provides 6.3% of the total bottled wine imported by Canada.
In 7 years consumption increased from 2.2 to 13 liters per capita.
Trends: According to a study by Euromonitor, the following trends have become more pronounced in Canada: higher consumption of alcoholic drinks at home, use of new bottles and different sizes, search of new purchasing alternatives triggered by recession, interest in healthier options (lower alcohol content and fewer calories), ‘back-to-basics’ sale offers, clearer messages and greater environmental awareness.
In the category of still bottled wines, Argentina showed a 50.68% growth in the 2008-2009 period, while imports of Argentinian wines rose by 32% over the first four months of 2010.
Argentina outperformed Australia, which fell from 22% to 16% in 3 years.
Italy outdid France, as its exports were up 43%.
Argentinian sparkling wines kept their growth rate of 7%, unlike their competition, which showed a downward trend.
Written by Gabriela Malizia for Winesur.com
Translation: Inglés del Vino
source: http://www.winesur.com/top-news/making-a-grand-entrance-to-canada
