Can Brazilian wine conquer foreign markets?

. Mar 17, 2019
casa valduga Brazilian wine

Take a tourist to a Brazilian bar and he’ll almost certainly order one of our worldwide famous caipirinhas. But the list of high-quality Brazilian alcoholic beverages is by no means limited to the delicious mix of Cachaça, sugar, and lime. Brazil has another treasure that is being discovered little by little: domestic wines. While the country still lags behind Argentina and Chile, the Brazilian wine industry is beefing up and aiming at international markets.

The history of the Brazilian wine industry is deeply rooted in the 19th-century European immigration process—despite some early trials during the Colonial Period. Rio Grande do Sul—the state that concentrates 62.5 percent of Brazil’s vineyards—was also one of the epicenters of Italian immigration, with the wine culture that came along with it. Now, their heirs have become the country’s most important winemakers, such as leading brands Miolo, Salton, and Casa Valduga.

</span></p> <p><span style="font-weight: 400;">But even though Brazilian winemaking has a long family-based tradition, the industry boom is somewhat recent. International brands began exploring the local market in the 1970s, but it wasn’t until the 1990s that it properly flourished. Back then, Brazil started a process of opening up its economy and Brazilians were able to buy foreign products more easily. The competition with foreign wines made local brands invest more to keep up with their rivals.</span></p> <p><span style="font-weight: 400;">As a result of this process, Brazilian wine consumption has risen sharply. An increasing global trend in countries that aren&#8217;t typically wine drinkers, such as China, is also helping to foster domestic interest. However, Brazilian consumption is still below benchmark markets such as France or Argentina.</span></p> <div id="attachment_14779" style="width: 970px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-14779" class="size-full wp-image-14779" src="" alt="casa valduga Brazilian wine" width="960" height="450" srcset=" 960w, 300w, 768w, 610w" sizes="(max-width: 960px) 100vw, 960px" /><p id="caption-attachment-14779" class="wp-caption-text">Casa Valduga vineyard</p></div> <p><span style="font-weight: 400;">According to projections seen on the </span><a href=""><span style="font-weight: 400;">2018 Statistical Report on World Vitiviniculture</span></a><span style="font-weight: 400;"> from the International Organization of Vine and Wine</span> <span style="font-weight: 400;">(OIV), Brazilians drank 3.3 million hectoliters of wine in 2017, against 8.9 million in Argentina and 27 million in France. </span></p> <p><span style="font-weight: 400;">According to Diego Bertolini, promotions manager at the </span><a href=""><span style="font-weight: 400;">Brazilian Wine Institute</span></a><span style="font-weight: 400;"> (Ibravin), the low consumption is explained by the lack of a “wine culture” in Brazil, which is only becoming widespread in the past 20 years.</span></p> <p><span style="font-weight: 400;">“In some European countries, wine is considered a staple, not only an alcoholic beverage. Argentina and Chile had strong Spanish colonization, and they cultivated the habit of drinking wine over generations. It also means a lot for their exports. On the other hand, </span><a href=""><span style="font-weight: 400;">Brazil had Portuguese colonization</span></a><span style="font-weight: 400;"> but is formed by a mix of cultures; thinking about exports is a recent phenomenon,” says Mr. Bertolini. </span></p> <h2>A work in progress</h2> <p><span style="font-weight: 400;">Building this culture requires an effort from the whole sector, from vines to branding. Brazilian winemakers have been working to improve the quality of their product with better grapes, advanced production techniques, which also reflects on how it is perceived abroad. </span></p> <p><span style="font-weight: 400;">“The sector has been looking for quality, in an effort to discover their main focus as producers and to understand what other markets want. There have been lots of investment in exchanging knowledge, from the vines to the bottling process. This effort is putting Brazil on the global wine map,” says Daniel Salvador, president of the Brazilian Association of Enology.  </span></p> <p><span style="font-weight: 400;">Branding has been an important part of the process. As one of the many initiatives, Ibravin and the Brazilian Trade and Investment Promotion Agency (Apex-Brasil), developed the </span><a href=""><span style="font-weight: 400;">Wines of Brasil</span></a><span style="font-weight: 400;"> project, which campaigns for Brazilian wine abroad. They take part in many fairs and events around the world—aiming mostly at the Chinese, American, and British markets.</span></p> <hr /> <p><img class="alignnone size-large wp-image-14812" src="" alt="vineyard casa valduga" width="1024" height="427" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></p> <hr /> <p><span style="font-weight: 400;">Mr. Salvador sees this kind of initiative as an important step toward increasing awareness about Brazilian wines: “When you talk about Brazilian wine abroad there’s a surprise, such as ‘wow, does Brazil make wine?’ But there are entities working to change this unknown image, dealing with influential journalists and bringing in international buyers to see the products. In some years of work, the evolution of Brazilian wine has been noticeable,” says Mr. Salvador.     </span></p> <p><span style="font-weight: 400;">As knowledge of Brazilian wine grows, so does its prestige. According to Wines of Brasil, the number of yearly prizes awarded to Brazilian labels </span><a href=""><span style="font-weight: 400;">jumped from 168 in 2017 to 302 in 2018</span></a><span style="font-weight: 400;">—the third best performance ever.  </span></p> <p><span style="font-weight: 400;">But while specialists have been praising the wines, local producers see a long way to go on final consumers. Miolo’s exports manager, Anderson Miolo, sees a need to keep up the branding efforts, but in a broader fashion. </span></p> <p><span style="font-weight: 400;">“Even though we follow international quality standards and have a strong brand, product origin still matters. We evolved a lot from where we started and experts already recognize the quality of Brazilian wine, but there is a long way to go to conquer final consumers. It is a broader issue, we need institutional measures to be recognized as a desired origin.”</span></p> <p><span style="font-weight: 400;">For specialists, increasing the local market would help strengthen Brazil’s position abroad. A good move in this direction are the new wine production areas, found in the states of São Paulo, southern Minas Gerais, Santa Catarina and the São Francisco river valley. </span></p> <p><span style="font-weight: 400;">“Wine culture is fostered in the places where you produce it. And each one of these areas has a specific character and, therefore, different wines. You create plurality, like in Italy,” explains Mr. Bertolini. </span></p> <h2>Flagship wines</h2> <p><span style="font-weight: 400;">In 2017, the Casa Perini Moscatel, a Brazilian muscat sparkling wine, was elected the </span><a href=""><span style="font-weight: 400;">5th-best wine in the world</span></a><span style="font-weight: 400;"> by the World Ranking of Wines &amp; Spirits. All Brazilians labels on the list are sparklings too, which is no coincidence. This variety is being considered by experts as the most recognized Brazilian wine, with unique features. </span></p> <p><span style="font-weight: 400;">“Sparkling wine is Brazil’s best bet to conquer the international market. The country has the terroir to produce extremely high-quality sparkling wine and international companies have been investing in the segment since the 1970s. And there is also room to grow because, in the southern hemisphere, Brazil is the only one focusing so much on this product,” explains Mr. Bertolini.</span></p> <p><span style="font-weight: 400;">According to Mr. Salvador, the &#8220;organoleptic properties&#8221; (those involving the use of sense organs) of Brazilian sparkling wines are creating the features that please Brazilian and international consumers. “We have sparkling wines with noble scents, good acidity, nice body, very fresh. Sparkling Muscat wines are one our differentials. They have a balanced sweetness, refreshing acidity, and intense aromas. They are very nice for people that are starting to taste wine, or to drink with desserts,” highlights Mr. Salvador, adding that grape varieties such as Chardonnay and Pinot Noir are “very well-adapted to the land.”</span></p> <h2>Matters of traceability</h2> <p><span style="font-weight: 400;">The international wine trade is a growing market that reached EUR 30 billion in value in 2017, according to the OIV. France alone saw EUR 9 billion in wine exports, while Brazil made USD 15.08 million—representing a huge growth opportunity. </span></p> <p><span style="font-weight: 400;">However, competition is not the same for everyone. The</span><a href=""><span style="font-weight: 400;"> European Union currently spends around EUR 1 billion</span></a><span style="font-weight: 400;"> on subsidies for the sector. In Brazil, high state-level taxes are seen as a roadblock for increasing internal consumption. </span><a href=""><span style="font-weight: 400;">Exports are not subject to these taxes</span></a><span style="font-weight: 400;">, but bilateral trade deals take their toll on prices.</span></p> <p><img class="size-full wp-image-14806 aligncenter" src="" alt="vineyard casa valduga" width="550" height="413" srcset=" 550w, 300w" sizes="(max-width: 550px) 100vw, 550px" /></p> <p><span style="font-weight: 400;">“China has a trade deal with Australia. When our wine gets there, it is 20 percent more expensive than Australia&#8217;s. But these negotiations are not up to the sector, it is a way more complex macroeconomic and political issue,” says Mr. Miolo.</span></p> <p><span style="font-weight: 400;">Regardless, the brand has been able to increase its presence abroad. According to Mr. Miolo, China is set to become Miolo’s largest market overseas this year. He also expects that once the Brexit situation is solved, British exports will pick up again. Currently, the country is Miolo’s largest market abroad. </span></p> <p><span style="font-weight: 400;">When it comes to wine, there’s also a mystique involved. Some of the world’s most famous brands charge thousands of dollars for a selected bottle—and have plenty of customers willing to pay it. This image still seems hard to get for Brazilian products. </span></p> <p><span style="font-weight: 400;">“I think it is hard for Brazilian wine to cost thousands of dollars. These wines have a very long history, a long aging process and come from specific regions. Brazil definitely has the potential to produce excellent wines, but at around USD 100 a bottle.”  </span></p> <h2>Opportunities</h2> <p><span style="font-weight: 400;">Not only is the wine a source of profits, but the entire productive chain is being utilized to create revenue. Ibravin recently launched the initiative </span><a href=""><span style="font-weight: 400;">100% Grape Juice of Brazil</span></a><span style="font-weight: 400;"> and plenty of Brazilian winemakers are focusing on wine tourism as an alternative source of income and branding. </span></p> <p><span style="font-weight: 400;">In the Vale dos Vinhedos (Wine Valley) in Rio Grande do Sul, plenty of winemakers open their doors to tourists keen to learn about the wine-making process and taste the local wines. Some groups, such as Casa Valduga, even have their own bed &amp; breakfasts and restaurants to host guests.  </span></p> <p><span style="font-weight: 400;">Miolo offers tour guides at four of their wineries—three in Rio Grande do Sul and one in Bahia. For them, tourism is an important source of income:  “besides increasing brand awareness, it is profitable because tourists buy our products. It is representative in terms of revenue as if it were one of our country&#8217;s regions.”

Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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