Wine time in Mendoza: Diageo, the world's largest drinks company, shrugged off the downturn in global wine sales and upped its long-term bet on Mendoza, with its ideal climate and hit varietal Malbec, Juan Pedro Tomas reports from the Argentine province.

 
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Bad weather and global doldrums took a toll on Argentina's wine industry over the past year, but Diageo--owner of some of the world's most famous drinks brands--still savored a $14 million investment to expand its production in the heart of Argentina's wine country.

Diageo's new state-of-the-art winery, Finca Agrelo, was inaugurated in the province of Mendoza in late 2009 and joined the company's existing holdings in Navarro Correas, the premium Argentina producer Diageo had acquired in 1996.

Finca Agrelo is part of Diageo's bid to mesh its internationally known spirits brands and global marketing clout with Argentina's growing wine success.

"Our vision with Navarro Correas is to take this Argentine gem and continue to grow it first and foremost in Argentina and then to strengthen its distribution in countries where Navarro Correas can succeed," said Ed Pilkington, Diageo's marketing and innovation director for Latin America and the Caribbean.

The new winery was Diageo's only recent investment in Latin America, underscoring the company's confidence in Mendoza wines. "Thus far, results of these investments in the Navarro Correas brand have proved quite positive," Pilkington said.

Although Argentina is the world's fifth largest producer of wine, most of its output had traditionally been consumed at home. This pattern has changed over the past 20 years, as winemakers began to emulate producers in Chile. They modernized production and began creating wines to appeal to international palates. The competition is intense, with vintners from Europe and the so-called New World--the United States, Australia, New Zealand and South Africa, as well as Chile--vying for consumers.

Fueling Argentine wine exports is Malbec, the runaway hit. In 2008, Malbec sales to the United States soared by more than 60 percent. This red accounted for one-third of all Argentina's bottled wine exports in 2009 and 45 percent of the value of exports, some $230 million, according to Caucasia Wine Thinking, a consulting firm based in Mendoza. Investors from Chile, the United States and Europe have been snapping up brands and vineyards in Argentina, home to some 400 major producers. Mendoza's Business Council estimated investments of $1.8 billion pesos between 1999 and 2005.

France's venerable Moet & Chandon has had operations in Mendoza since 1959; there it produces sparkling wines at Bodegas Chandon and other varietals at Bodega Terrazas de los Andes.

Diageo's expansion plans date back...

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