RS: The wine sector has modernized, but still faces challenges.

Felipe Prestes, from the portal On the 21

Photos: Celito Guerra and Silvia Tonon

The grape production chain in Rio Grande do Sul has evolved technologically, moving towards producing fine wines, not just table wines, and expanding to other regions of the state, beyond the Serra Gaúcha. However, the challenges are still significant: there is external competition from Chile and Argentina; a large portion of producers have not yet managed to adapt to technological advancements, and the sector is still in its infancy outside the Serra Gaúcha region.

Today, the wine industry accounts for 1% of the GDP of Rio Grande do Sul, according to a study by economist Carlos Paiva from the Foundation for Economics and Statistics (FEE). "This is quite significant," he states. The study, based on 2008 data, also shows that the sector's importance to Rio Grande do Sul stems from the fact that all links in the chain are located within the state. "It's a completely integrated chain, with all the links in Rio Grande do Sul. All the money stays in the hands of the people of Rio Grande do Sul," says the economist.

Carlos Paiva highlights that a positive characteristic of the grape supply chain is its democratic nature. "There is a very equitable distribution of income among all links in the chain. And a large part of the processes is carried out primarily by cooperatives."

The Sectoral Panorama conducted by Embrapa in 2010 shows data from the Rio Grande do Sul Viticultural Registry (2005/2007) indicating that the state has 38.505 hectares of vineyards, distributed across 15.384 properties. The Serra Gaúcha region registers a total area of ​​31.363 hectares of vineyards distributed across 12.037 properties. The average size of properties in this region is approximately 14 hectares, a structure of smallholdings, with family labor.

The economist from FEE also highlights the sector's evolution in the state. "It went from producing fifth-rate wine to products of excellent quality," he explains. One of the milestones in this, according to the 2010 Sectoral Panorama by Embrapa Uva e Vinho, occurred in November 2002, when the Association of Fine Wine Producers of Vale dos Vinhedos (Aprovale) won the first Geographical Indication in Brazil – IP Vale dos Vinhedos. "In addition to promoting the qualitative and image improvement of Brazilian fine wine, it assumed a benchmark role, radiating a movement in the same direction in other wine-producing centers in the Serra Gaúcha region."

However, according to the Embrapa study, authored by José Fernando da Silva Protas and Umberto Almeida Camargo, this modernization "was limited to a restricted number of companies interested almost exclusively in the production of fine wines and an even smaller number in the production of grape juice."

José Fernando Protas explains to Sul21 that the wine industry in Rio Grande do Sul is segmented. One segment focuses on American or hybrid grapes, which serve as raw material for grape juices and traditional wines, a segment that was the basis of the entire sector. "The other segment is much more recent, emerging in the 1970s, and is based on the production of European grapes, such as Merlot and Cabernet."

American grapes are less susceptible to fungi than European grapes, which is why small family farms are better suited to producing the former. "This traditional segment continues to absorb little technology, there is a lag, and it produces low-quality grapes," explains the Embrapa researcher.

Program to develop the sector enters the "Brazil Maior" initiative.

Last week, a program to modernize viticulture, coordinated by Embrapa and the Brazilian Wine Institute (Ibravin), was included in the Brasil Maior plan, the Federal Government's industrial policy. There will be specific lines of credit for the sector within the Pronaf program, for grape producers, and from the BNDES for the modernization of wineries. In addition, there will be technical assistance and improvements in management.

"Often the relationship between producers and wineries was conflictual. Now, to join the program they must maintain a contract. The producer will have a guarantee that they will sell their raw material, but will also have commitments to plant what is agreed upon with the winery. Intelligent management will be established while addressing shortcomings on the part of both producers and wineries," says Protas.

Approximately 80% of the production in Rio Grande do Sul is still from hybrid or American grapes. The idea is that small farms will continue producing this raw material. Due to its topographical characteristics, small farms, and established tradition, the Serra region is not the most suitable for fine wines. "But with this modernization, it will produce traditional wines and higher quality grape juices," says the Embrapa researcher.

One of the modernization trends has been the production of grape juice at the expense of table wine. According to Sérgio Feltraco, who coordinated the state government's industrial policy for the sector, in the last harvest, 51% of the grapes harvested in Rio Grande do Sul were destined for grape juice production. One of the emblematic cases of this change was the emergence of the Nova Aliança Cooperative, which united five cooperatives in the Serra region that produced bulk wines and were experiencing difficulties. With financing of R$ 83 million (55 million from BRDE), the new cooperative built a plant that increased its grape juice production capacity and transitioned from bulk wines to bottled wines.

Despite leading in volume, grape juices still don't lead in wealth generation, since wines have a much higher added value, explains Carlos Paiva. "Grape juice is growing a lot, taking space from wine that hasn't managed to qualify. But since wines have a higher added value, they still generate more resources, especially fine wines."

According to economist, the southern half of the state still lacks a wine-producing industry.

The National Wine Registry recorded the activity of 531 companies in the 2010 harvest that processed 526 million kg of grapes and produced wine, grape juice, and other grape and wine derivatives in Rio Grande do Sul. Of these, 475 are located in the Serra Gaúcha region, which processed 519,3 million kg of grapes. Therefore, grape production still overwhelmingly occurs in the Serra Gaúcha region.

Due to its topography and abundance of land, the Southern Half of the state has been known for the production of fine wines. In the Serra region, this production is very localized in areas such as the Vale dos Vinhedos (Valley of the Vineyards) and often focused on wine tourism and gastronomy. The profile of the producer in the Southern Half differs from that of the Serra region: they are large companies like Miolo and Almadén, or farmers and independent professionals who are beginning to invest in the sector.

Despite its growing presence not only in the Campanha region, but also in the Serra do Sudeste (a region encompassing cities like Candiota and Encruzilhada do Sul), there is still no wine-producing chain in the region, according to Carlos Paiva. "Some wineries are expanding in the southern half of the state, but it doesn't yet constitute a new hub. The sector isn't growing enough to generate a hub. In the Serra, all the inputs are produced, from barrels to the additives necessary for production. In the southern half, this isn't the case," he explains. "The issue of the southern half won't be resolved by the wine sector. It may be important, but it will always be peripheral in that entire territory, which is very large," he states. For Paiva, the modernization of meat production remains the main key for the region.

José Fernando Protas states that the growth of the wine sector in the Southern Half of the state is "complex" because the pressure from Argentinian and Chilean wines is felt in the fine wine segment. However, he believes that with large-scale production, large companies or cooperatives can offer competitive prices and a wide range of products. "Smaller wineries that cannot compete on price have to enter the alternative market of boutique wines."

According to Protas, the sector that can generate the most jobs and income for the Southern Half of the state is tourism. "It is necessary to stimulate wine tourism in the region. This way you generate a chain of services, restaurants, transportation, and attract events," he says, giving the city of Bento Gonçalves as an example.

Products need more promotion.

Carlos Paiva emphasizes that the growth of the sector in Rio Grande do Sul, compared to other regions, is small. Fine wines, for example, have difficulty competing with Chile and Argentina due to currency appreciation. The economist from FEE believes that the Federal Government needs to create conditions to reverse this. "I always argue that measures must be taken by the private sector. But in this case, the wine industry is already innovative, competitive, and democratic. Therefore, the Government needs to act."

Paiva believes that, among other measures, affirmative action regarding Brazilian products is necessary. "At events held by Brazilian public bodies, such as embassies, it is unacceptable to have sparkling wines from other countries and not ours," he exemplifies.

Regarding grape juice, he argues that it's necessary to promote the product, which is still consumed much less than, for example, orange juice in the country. "We have one of the best grape juices in the world. We need campaigns, like the ones for 'Chocolate,' sung by Tim Maia. Grape juice needs to be consumed as much as orange juice."

Regarding taxation, the state's industrial policy has defined a change that could benefit the wine sector. "The Fundopem program has been extended to the Serra region. This stimulates investment in the sector. We need modernization," says Sérgio Feltraco. Furthermore, other changes may occur. The Finance Secretariat is working with a group formed for each of the 22 sectors defined as priorities by the government's industrial policy. The groups' mission is to find specific tax solutions to stimulate each sector.