Impact International / January 1, 1996
By Larry Luxner
BENTO GONÇALVES, Brazil -- Mention South American wines, and most consumers invariably think of brands like Argentina's Trapiche or Chile's Concha y Toro. Few people know, however, that the largest winery in the Southern Hemisphere is in Brazil, or that Marcus James -- a product of Cooperativa Vitinicola Aurora Ltda. -- is the second-biggest imported Latin wine in the United States.
Brazil, in fact, boasts more than 400 wineries, virtually all of them in the southern state of Rio Grande do Sul, near the Uruguayan border. Yet until very recently, the nation's fine wines were unknown in the exterior because, as Valter A. Neis says, "nobody thought to develop the wine image outside Brazil."
Neis, a former banking and hotel executive, is general manager of Aurora. He and Mark Rudolph, president of the company's U.S. affiliate, Vintage Associates Inc. in Toccoa, Ga., spoke with Impact International during a recent visit to Aurora headquarters in Bento Gonçalves, a picturesque city in the mountains 75 miles north of Porto Alegre.
According to Neis, the Brazilian wine industry took root in 1875, the year large-scale Italian immigration to southern Brazil began. On Feb. 14, 1931, sixteen families -- finding the soil and climate conditions similar to northern Italy -- joined to form the Aurora wine cooperative. In fact, a company-produced video proudly says "the positive spirit of the Italian colony is the heart and soul of Aurora."
Today, some 1,534 area families sell their entire production -- around 65 million kilograms of grapes a year -- to Aurora for processing into table wines, fine wines for export, grape juice and frozen concentrate. The winery has 13 separate units covering 110,000 square meters, with an annual production capacity of 85 million liters. White wines are fermented in temperature-controlled, stainless-steel tanks, while reds are aged in oak barrels imported from Kentucky, Tennessee and France. In addition to the winery itself, Aurora maintains three vineyards: Bento Gonçalves and Bom Principio in Rio Grande do Sul, and the San Francisco Valley region near Fortaleza, in northeastern Brazil.
The company began exporting to the United States in 1973 with 20,000 cases of Sangue de Boi jug wine a year, mainly for the Portuguese ethnic community in New Bedford, Mass. In 1985, Marcus James -- a decidedly un-Brazilian brand name -- was born through the combination of Marcus (the given name on Rudolph's birth certificate) and James (one of the sons of joint-venture partner Michael Tye, president of United Liquors of Boston).
"If they had given it a Brazilian name, the wine would have sat in a corner," joked Neis, who joined the company a year later. Since 1988, the brand has been marketed in the United States by Canandaigua Wine Co. of Canandaigua, N.Y.
To upgrade the quality of its wine, Rudolph and Tye have imported quality seedlings from California, upstate New York, Western Europe and South Africa. Aurora's farmers planted vineyards on 15,000 hectares throughout the Aurora Valley, which is located 600 to 900 feet above sea level and has all the right ingredients for producing ideal grapes: sunny days, cool nights and long dormancies. According to the company, "even the danger of hailstorms is minimized by the use of silver nitrate dispersing rockets placed at strategic sites throughout the valley."
"We had a window of opportunity because we had a great marketing team," says Rudolph, who has lived in Bento Gonçalves for nearly 20 years. "Our competition in the beginning was not Chile, but Yugoslavia, Bulgaria and Romania."
During most of the early 1980s, both Chile and Brazil were under military dictatorships. Yet Chile began actively promoting its wine sector, mostly through the auspices of ProChile, the government trade bureau, and the Food & Wine Council of Chile. Argentina later followed suit, introducing its Wines of Argentina promotion through the ministry of External Relations and International Trade. Today, Chilean brands dominate the South American wine category, with 1993 depletions of 1,375,000 nine-liter cases -- up from only 885,000 cases in 1991.
"Unlike Chile and Argentina, there is no government support in Brazil for the wine industry," says Rudolph. "The Chilean government is streamlined, and is a lot more focused on the wine sector. The Brazilian government, on the other hand, is a morass of bureaucracy and technocrats." Since the reahe company is at a
Nevertheless, Marcus James exports to the United States now outweigh the entire Argentine wine sector -- about 550,000 nine-liter cases in 1993 -- a 29.4% jump over the year before. In 1992, Marcus James received the "Wine of the Year" award in the United States, and for three years in a row has been named Impact's "Hot Brand." Marcus James currently retails in the U.S. at $4.00 for the 750-ml bottle and $6.50 for the 1.5-liter bottle, and accounts for virtually 100% of Brazil's total wine exports. Marcus James is also being exported to 30 other countries including Nigeria, Angola and Australia.
Howard Jacobson, senior vice-president of sales and marketing at Canandaigua, in an interview last year with Market Watch, attributed the brand's success to "an aggressive wine-by-the-glass promotion, combined with ongoing confidence by off-premise retailers" in major markets throughout the United States.
Rudolph says Aurora's 1996 sales should come to $80 million, of which wine exports will represent $18 million -- up from $10 million in 1995. Domestic wine sales, grape juice and concentrates make up the remaining $58 million.
In Brazil itself, Aurora is the dominant brand, with 18% of the 350-million-liter domestic market, according to Rudolph. In second place is Seagram's (Mesón Forestier and Almaden), and in third place is Cooperativa Garibaldi. Unlike Argentina, where the average person guzzles 40 liters a year, the 160 million inhabitants of Brazil are not big wine drinkers. Per-capita consumption here is only 1.9 liters -- far less than that for either beer or cachaça, the national drink made from sugar cane.
For this reason, Rudolph says his company will focus on boosting sales of Marcus James in the United States and other growing markets.
"We will soon start focusing on vineyard management and trying to develop some better wines, but we want to maintain our price base," he said, adding that Marcus James has tremendous growth potential. "We want to get better prices, but we can't just mark them up without improving quality."