How it all began
Meininger’s: What has it been like working in a country with an economy as volatile as Argentina’s?
Balbo: Last year was the worst in my 42 years career because we were unable to pay our suppliers or wire money for salaries to our employees in the United States and China. I had to sell $4 worth of wine to make $1. For the first time, my company had to borrow money, despite never having had debt before. But if we hadn’t used all the credit available, we would have faced bankruptcy. We need the country to be stable. At the moment, with the new government, I’m hopeful.
Meininger’s: How did your business develop?
Balbo: I built my business with my first husband. We had a winery, but we fell victim of a scam. After he passed away, I decided to sell the winery and placed the money in a United States trust for my kids’ education. I later married [winemaker] Pedro Marchevsky, but our relationship soured when I was appointed president of Wines of Argentina leading to our divorce
At that point, I had $1.3 million in United States, enough to start a small winery. However, after the 9/11 attacks, I was left with only around $435,000 to start over. I decided to take a loan guaranteed by my own money, but did not need it in the end as I was able to pay everything out of cashflow.
Throughout my career, I was blessed with help from the people I had supported, bringing knowledge and new techniques from other countries. And, when I built my own winery, these people extended credit for two or three years, allowing me the time to pay them back.
Meininger’s: Setting aside enterprises like Catena, where Laura Catena took over from her father, how much change have you seen over the last 30 years for women in the Argentine wine industry?
Balbo: None. There are two female winemakers producing maybe 2,000 or 3,000 bottles. Not real businesses of the kind I have built. You need entrepreneurial experience and a supportive family when you are absent for 20 days a month, traveling and working 12 to 14 hours a day. Without family support, it's impossible. However, I started my own company at 42 years old and my kids were older, so I had much more freedom to build a business.
A winery in today’s Argentina
Meininger’s: And how about raising finances?
Balbo: Today, with the Argentine economy, it’s difficult for anyone. In the United States, businesses are able to get credit. In Europe, there is substantial support from the European Union for entrepreneurship.
I bought my first bottling line with credit from the Italian government because I have Italian roots and an Italian passport.
Meininger’s: How many cases do you make now?
Balbo: 200,000 to 250,000 cases, sometimes up to 300,000 cases, depending on the year and the harvest size. Last year, our production was very short because of hail and frost. This year we have managed to fill the gap.
Meininger’s: How much do you export?
Balbo:90%. It used to be 100%. United States, UK and Brazil are my three main markets. Additionally, I'm in 31 more countries. We sell 35,000 cases in Brazil, which is a very good market. In Peru, we sell 4,000 to 5,000 cases. In Bolivia and Chile, we sell smaller quantities.
Meininger’s: What is the average price per bottle?
Balbo: It’s one of the highest in the country: $71 per case, compared to a national average of $33.
Meininger’s: Do you sell any wine in bulk?
Balbo: I have been asked to do it, but you lose quality and control when you ship in bulk.
Meininger’s: But bulk is still important to Argentina?
Balbo: Exports are around 47m litres with a value of $48-$50m, which is around $1 per litre. 80% of these exports go to the UK.
Meininger’s: How has the economy affected the way Argentina prices its wine?
Balbo: You know, because we live in a constant state of crisis, we have been unable to sell very cheap wines and survive as a company. So, we established our quality level at higher price points.
1998 was the worst harvest ever. All our UK buyers came during one week, saw the mildew, the botrytis and everything – and delisted Argentina.
We had to start over, and Argentina realized that focusing on high quality wines and higher prices was the only way to survive as exporters. Because if you have a bad harvest, you can still produce a certain amount of very good wine to export. So, we always exported the best quality at a higher price. Even today Argentina only exports 25% of its production. The rest is consumed in the country.
Consumer trends
Meininger’s: What is domestic consumption now?
Balbo: 21 litres per capita. It used to be 97 litres, during a time when Italy was at 100 litres and France at 105; Spain had the highest consumption at 120 litres.
We dropped to 18 litres, but have since climbed back to 21 litres. Maybe because people have started losing interest in beer. This trend is seen everywhere. The generation that grew up with very sweet flavours - even McDonald’s burgers and sauces have a lot of sugar - finds dry wine shocking.
The new generation prefers sweet cocktails. But they are going to come back to wine. . For first time this year, the market is steady. It's not dropping but growing slowly.
Meininger’s: Many companies are reacting by making reds with residual sugar. Shouldn’t Argentina make off-dry Yellow Tail-style wine to attract younger consumers?
Balbo: That is a very good idea. The only problem is that Yellow Tail’s prices are too low for us, because we have inflation in dollars. But big companies are looking to produce low alcohol wines – five, six, or seven degrees – with sweetness, using natural juice and flavours.
Inflation and climate change
Meininger’s: Let's imagine that with a complete change in economics, Argentina conquers its addiction to inflation. Even then, it would still need to uproot some of its vineyards. Currently, there are around 200,000 to 220,000ha. How much would need to be pulled up?
Balbo: The non-profitable areas could be 40,000ha of native Criolla Chica grapes from the east of Mendoza. Don't forget Argentina is a very good exporter of concentrated must. Every year we export 100,000 tons. But vineyards that produce less than 20,000 kilos per hectare are not profitable for concentrate. They need to reach 20,000 or even 40,000 kilos per hectare.
We could be in a good position to produce concentrate for the existing market, and focus on premium and super-premium wines - not entry-level wines. There will be cheap wine, but that will be for domestic consumption. Don't forget, that most of our consumption is in Argentina. Cheap wine has to cost more than the concentrate. Otherwise, for producers, it's better business to make concentrate.
Meininger’s: If the new government succeeds in beating inflation, what are the advantages and disadvantages of Argentina as a winemaking nation?
Balbo: In terms of sustainability and disease, we are fortunate because we are in a desert climate. We have water, but it's limited. However, I was talking to an engineer the other day, we are pouring a lot of fresh water into the sea because we have big rivers like the Rio Colorado and Rio. We need the infrastructure and the investment to harness this water.
There was a project to run channels to bring water, for instance, to Santiago del Estero, which could then produce soy and other agricultural products, and generate electricity for the towns along the channel. It was a very interesting project, but the necessary investment wasn't raised.
Meininger’s: How do you see climate change affecting your vineyards?
Balbo: Less than in Europe’s continental climate. I've spent three months in the summer in Europe, in Spain, Italy, France, it was above 45 degrees. And they never saw the vineyards as stressed as last year. We don't have this kind of stress. We experience high temperatures for one week, ten days at most. Then it subsides. Why? Because our country is very narrow, like Chile, and we are bordered by the Atlantic Ocean and the Pacific Ocean – the largest and the coldest oceans beside the North Sea. Sooner or later, when we have this heating, an anticyclonic or cyclonic centre brings in rain or cold air because of our glaciers and proximity to Antarctica.
Meininger’s: If we look at Chile, over the last 35 years we have seen an expansion of new regions. Sometimes in Argentina, there is the impression that Mendoza has a something of a monopoly on winegrowing?
Balbo: People are planting in Patagonia, Entre Rios and Buenos Aires. But Mendoza remains the focus, because what people are doing in Patagonia is very borderline. I truly believe this climate change is a cycle that is going to finish one day or other as geologists suggest, it has happened throughout the history of earth. When that happens, Southern Patagonia is going to have snow for 70% of the year.
Grape varieties and styles
Meininger’s: There is an argument that Argentina is seen as very focused on Malbec. Is that fair?
Balbo: It's not unreasonable. When people think of Argentina, they think of Malbec, for sure. That is why my advice to new players or people already in the market is to put the Cabernet Sauvignon in the Cabernet section rather than the Argentina section. It is great value for money and outstanding quality. But if you put it in the Argentina section, people are going to pick the Malbec.
Meininger’s: What other varieties do you think Argentina is making progress with?
Balbo: Bonarda is good quality but difficult. Maybe we need to adopt the real name, which is Cuervo. We have very good Tempranillo as well, but not many people are producing it.
And we can produce better wine higher in the mountains. More Pinot Noir sparkling. We can do beautiful sparkling with Chardonnay and Pinot Noir. And Cabernet Franc.
Meininger’s: It’s a variety you particularly like?
Balbo: I have 25ha, but I work with growers, which brings it up to about 40ha. It’s a beautiful variety that’s easy to grow. But of course, you need to manage the yield; although you can have 40,000kg, we don't produce more than 12,000kg. Many more people are now barrel-fermenting it. I was the first, but I joke that even Catena is copying me. They planted in Gualtallary, where I have my vineyard as well.
I’m also making a white blend of Sauvignon Blanc, Semillon and Torrontes. Four years ago, I bought some land in San Pablo, at 1,600 metres above sea level. I'm only planting white varieties to make interesting blends: Semillon, Chardonnay, Sauvignon Blanc, Viognier, and Fiano.
Meininger’s: It’s a niche style though.
Balbo: Yes, it's a niche. I am one of the few producers doing the style, but more and more people are seeing my success and copying me. It's like the story in the 90s, when a few wineries were doing the right style for Malbec. And then, suddenly 10 years later, everybody was doing it in different styles, but from the bottom to the top, they’re all good quality. And I think it's going to happen with the Torontés.
It's about how we manage the viticulture and water management as well. In the early 90s, we used flood irrigation, had very large canopies, and high yield with no concentration. Nowadays, it's the opposite. We have a very well controlled canopy, with beautiful, medium, and lower production yields. You can produce 15 tons per hectare and have a high quality in Uco Valley for premium wine.
And the neighbouring countries…
Meininger’s: The Mercosur union between South American countries makes it easy for producers in one country to invest in another. Do you see that happening in the future, if Argentina’s economy is stabilized?
Balbo: Well, the main Chilean company has a winery in Argentina, but no Argentine or Chilean company has a vineyard in Uruguay, because the climate is pretty tough. But I don't discount the possibility of Uruguayans investing in Argentina.
Meininger’s: The big country in your region is obviously Brazil. Can you see Argentine businesses investing there?
Balbo: The weather doesn't help. I’ve been advising in Brazil for four years. Do you know, how many sprays you need to produce decent grapes to make wine? 52! They have Mediterranean flies and every disease you can name. And the humidity is very high – 1,600mm per year. That's a lot.
Meininger’s: And what about your family? Your son and daughter are now in the business. Would they consider investing elsewhere?
Balbo: They are 37 and 39 and they don't want to leave Argentina. I was talking to them about doing something in Chile and in Uruguay, and they said no. Because my daughter has three kids and is close to her in-laws’ family. My son has one kid and he's divorced. They don't want to leave their kids or their lifestyle because, despite its challenges, Argentina is a good place to live. In other countries, you need to be a billionaire to enjoy a similar quality of life.
