The Low-Down on Producing High Altitude Wine
All we know is that gold has gone over $1,500…and America’s ability to repay its debts has been put in doubt by the credit agencies. That’s all the news that worked its way up to us in Salta province. But, after a week on the high plains, that’s all we need to know…
…the show goes on, in other words…
…with the feds desperately pumping up the money supply…and investors desperately trying to protect themselves by buying gold.
Nothing has changed since we’ve been away. And our guess is that nothing much will change…except that the markets and the economy will continue bouncing up and down, generally downwards, all the way to Hell.
That’s where you end up when you try to fight a surplus of debt by adding more debt and dollars to the system. You get ups and downs. You get plot twists and surprises. But as long as the feds continue to add to the world’s supply of debt and dollars, the last infernal act is inescapable.
So, let’s get back to our report on life in the Andes.
We told you about the cattle business yesterday. It’s a terrible business up in the high Andes. Too cold. Too dry. Too far away. Every cow is a four-legged cost center.
Today, we’ll tell you about the other business we don’t want to be in – wine. But let us pick up where we left off.
Our little crowd had gathered in the main casa as the replacement padre was just about to bless our new statue of San Miguel. It is a statue carved from a single tree trunk, ordered from sculptors in Ecuador and shipped down the ranch. About 6’ tall…in a light, yellowish wood…a bit like blond mahogany. It turned out very well…with a beatific St. Michael, handsome in a feminine way, with a curly hair and fine features. It is about as nice as any statue of San Miguel we’ve ever seen. So we put it in the living room.
When the backhoe arrived last year, the priest had come over and blessed it. That seemed to work out fairly well; we figured we had nothing to lose by letting his replacement do his magic on the new statue. San Miguel is supposed to protect you from evil. And with all the powers not just of a saint but of an archangel, he ought to be able to do a fair job of it.
He is seen in the wooden version with his foot on the devil’s head.
The padre admired him. Then, he took out some holy water…and small card with notes, underlined and ragged from years of wear and tear. He sprinkled water on the statue and then said,
“Let San Miguel take all the people of this house and this ranch under his protective wing. Let him cast out evil. Let him bring the devil under his control and crush him beneath his foot. You can see him doing that in this statue. Let San Miguel help this ranch and help all those associated with it prosper and flourish in the love of Jesus Christ. Amen.”
We were beginning to doubt that even an archangel could bring prosperity to this outpost.
The wine business came to us like a head cold. There was a vineyard on the property when we bought it, unbeknownst to us. It was less than 2 acres…and hidden away in a remote valley, about a two-hour ride on horseback from the main house. The place is beautiful, but not at all efficient nor especially productive.
But when we actually made some wine, we found that it was very good. High altitude malbec, they call it.
“Ecological,” Jorge adds, since we don’t know anything about using chemicals and can’t get them up there anyway.
So, we decided to plant more vines – mostly to give the gauchos something to do and to make the valley look better. Now, we’ve got almost 5 hectares planted. Like it or not, we’re in the wine business. Of sorts.
What an awful business for a dilettante! We hired a consultant to explain it to us. Giving us a look of pity, mixed with disapproval, a look normally reserved for alcoholics or syphilitics, he began:
“Well, when I started playing golf a few years ago, I practiced and practiced. I spent a lot of time and money on it. I was thinking maybe of doing it professionally. And then, when I played with a real pro, I asked him what he thought I should do.
“He said – ‘take two weeks to think it over…and then throw away your clubs and never play again.’ That was good advice. That’s what you should do with your grape business.
“Look, there are three parts to the business. There’s growing the grapes. There’s making wine. And then, there’s selling it. Anyone can grow grapes, if you’re in the right place. And anyone can make wine. This country is flooded with the stuff. But it takes a real genius to sell it. And that’s the problem. If you can’t sell it, you might as well not plant the vines or crush the grapes or make the wine. And I tell you frankly it is not easy to sell wine.
“Look at the numbers. No matter where you are, it costs a minimum of about $5 to produce a bottle of wine. That’s just the cost of labor…materials…bottle…cork and so forth. It’s hard to get the cost much lower – unless you’re operating in huge quantities…and very efficiently.
“Where you are, on the other hand, everything will be much more expensive. Because it takes three hours to get to your place from Cafayate, which is where all the wine expertise and supplies are.
“Each bottle will probably cost you $6 or $7…or maybe even $10…before it is shipped somewhere for sale. And then the distributor will want a big cut…and then the importer (if you’re selling outside of Argentina) will need a cut…and then the retailer or restaurant will also want a large part of the retail price. And you’ll have no bargaining power whatsoever. Because you are tiny. And because you are new to the business. There’s no way you’re going to make any money selling at mid-range prices. But unless Parker or someone will give you a rating over 90…you won’t be able to go much beyond mid-range pricing.
“It’s like anything else. You can compete on price…or you can compete on quality. If you go low price, you will be competing with huge vineyards producing millions of liters of wine. They make pennies on each one – if they’re lucky.
“There’s no way you can do that – not with your production and your costs.
“But if you compete on quality, you need a good story to tell…and then you need a way to tell it. And that won’t be easy, either. Everybody’s trying to tell a story. And they’ve all got much better contacts…and much more experience than you do.
“Some of these families around here have been in the wine business for three or four generations. Believe me, they know how to sell wine a lot better than you do.
“The ‘story’ up here is what they call ‘high altitude wine.’ Or ‘high altitude malbec.’ Apparently, it’s a story that sells wine. The wine is supposed to be more intense, like the sun up here. And the cold nights seem to fix more sugar onto the skin. The wine is stronger than wine grown at lower altitudes. Many people like it better. After they drink it for a while, the regular French wines seem weak and lifeless by comparison.
“So, you’ve got a good story point at your ranch. A tiny, protected valley. And it’s about the highest wine around. But even if you could tell your story, you wouldn’t be able to sell your wine, because you don’t produce enough to interest a real distributor. There’s not enough money in it for them. And it’s not worth spending the money to do the PR and the marketing – you just don’t have enough scale. The only way you could get scale would be to get seriously in the wine business…and produce much, much more wine…hire real professionals to produce it…and real professionals to market it.
“You’d have to spend millions. Let’s say that now, you might have the money. But the real pros have the know-how. And if you want to get into the business seriously, you’ll have to transfer a lot of your money to the people who know more than you do. And – if you keep doing it long enough – when you are finished, you’ll be as broke as they are.
“Seriously, I’ll tell you what to do. Produce a little bit…ship it up to the US…and give it away to your friends. You’ll be happy. And you won’t lose too much money.”
That seemed like good advice.
But what to do? If we get out of the cattle business and the wine business…what business is left? What will the gauchos do? Why does the farm even exist?
“Don Bill,” Jorge, the ranch manager approached us just before we left.
“Thanks for getting the backhoe. It has been a big help to us. And thanks for investing in the farm. You know, the previous owner didn’t put any money into the place. We didn’t have any machinery. It just felt like we were going downhill. But now, we all feel like we’re making progress. The grapes look good this year. The valley is green, thanks to all the rain. Our new reservoirs will be in operation soon. The place is finally becoming what it ought to be. It’s very beautiful…and we’re very happy to have you here.”