Kendall-Jackson Pulls Out of Argentina
After spending more than seven years in Argentina, California-based Kendall-Jackson Wine Estates has sold its Tapiz operation and left the country. Completed on Oct. 30, the $2.5 million deal passes the Tapiz label, production facility and 2,100 acres of vineyard land to Fincas Patagonicas, an Argentinean buyer.
Launched in 1996, Tapiz was the largest operation by an American winery in Argentina. According to local sources, Kendall-Jackson invested an estimated $8 million in land and facilities, at a time when the Argentinean peso was valued equally to the dollar, meaning the company took a substantial loss in the sale.
With the success of its Calina winery in Chile, Kendall-Jackson had seen Tapiz as a strategic foothold on the eastern side of the Andes. The company purchased three properties in the Mendoza region, from which it produced Malbec, Cabernet Sauvignon, Chardonnay and Merlot, and built a winery for Tapiz in 2000. The first wines, starting with the 1996 vintage, were released under the Mariposa name, with Tapiz being the reserve bottling, but the label was later changed.
The brand has struggled to find success. Most of the wines, which sell for about $8 a bottle in the United States, received good ratings from Wine Spectator, scoring 80 to 84 points on the 100-point scale, with only a handful earning very good ratings or 85 to 89 points.
Representatives from Kendall-Jackson declined to comment on the sale of Tapiz until Fincas Patgonicas takes over the distribution contract at the start of 2004. The new owner is getting the profits from the 2002 wines currently being sold in the U.S. market and will be responsible for the distribution of the 2003 bottlings.
Fincas Patagonicas, which owns a vineyard in Tupungato, but no other wine brands, is privately held by the Ortiz family, headed by Patricia and her husband, Jorge, a prominent Buenos Aires lawyer. "We are very pleased with the facilities of Tapiz, and the properties are spectacular," Jorge Ortiz said.
The company has hired Fabian Valenzuela, who formerly worked at Bodega Catena-Zapata, as its chief enologist. The Ortiz family's plans for Tapiz include a possible relabeling of the brand, the purchase of other vineyards, the construction of a luxury hotel and restaurant on one of the properties, and the production of a premium wine oak-aged for 18 months. Ortiz hopes to increase sales of Tapiz in the United States over the current level of 30,000 cases a year. Annual production is at 50,000 cases.
According to people in the Argentine wine industry, Kendall-Jackson faced problems from the start with Tapiz. "It was a combination of the heavens and a clash of cultures," said Daniel López Roca, a wine-industry consultant.
Rather than hire enologists and viticulturists from Mendoza, Kendall-Jackson imported staff from California and Chile. This deprived the winery of a local perspective, and led to trouble when natural obstacles arose. In one instance, a virus on the Malbec vines caused the company to import Malbec from California, which failed to grow in the high altitude of the Andean plains.
In addition, bad hail (which is common in Argentina) hit Tapiz's vineyards two years in a row, destroying a significant portion of the crop. Other problems, such as insufficient water at one property, drained time and resources. And in December 2001, Argentina's economy collapsed, cutting the peso's value by 75 percent.
Argentine sommelier and wine journalist Andrés Rosberg said Kendall-Jackson's problems with the brand were "…a mix between bad decisions, bad luck [and] bad packaging…." However, he said, if Kendall-Jackson had chosen to weather the storm, it could have capitalized on Argentina's booming export market.
