Vision of Two Americans and an Argentine

Below is an excerpt from “In Search of Bacchus: Wanderings in the Wonderful World of Wine Tourism” (Scribner, 287 pages, $30), by George M. Taber, describing the exciting vineyard project started by the Vines of Mendoza in the Valle de Uco, Argentina in 2006. Chaiken Vineyards was one of the first investors in the private vineyard estate project and expects its first vintage in March, 2010.

Two recidivist American entrepreneurs have started the biggest and most interesting wine venture in Mendoza. Dave Garrett describes himself as an “Internet guy” who happened to land in Argentina because his girlfriend at the time had a passion for the tango. He started his first Internet business in 1993, creating an internal network for the U.S. Navy. He sold the company in 1998 and started a consulting firm. Following the crash of the tech world in 2000, he traveled around Latin America before landing in Buenos Aires because of his tango-loving girlfriend. While he was there with little to do, he took an introductory course called Wines in English, which taught him the basics about those of Argentina.

A good friend of fifteen years and business associate in the United States was Michael Evans, who long wandered amid the worlds of technology, presidential politics, and non profits. He started tech companies when not working on every Democratic presiden­tial campaign from Bill Clinton’s first in 1992 to John Kerry’s in 2004. After Al Gore’s defeat in 2000, he lived in California and became interested in wine. Following the Kerry campaign, Garrett suggested that Evans fly to Argentina and spend some time with him. He arrived speaking no Spanish and with plans for staying three weeks. Evans now speaks fluent Spanish and is still there.

While sitting around Buenos Aires, the two friends tossed around business ideas. Dave had seen an ad in a paper for an 80-acre property in Mendoza for $80,000, a price that got his attention. Land prices were then still inexpensive in dollars after the 2002 devaluation of the Argentine currency. So in early December 2004, the two friends traveled to Mendoza. The teacher of Dave’s wine course told them to look up her friend Pablo Gimenez whose family owned a winery. Garrett, Evans, and Gimenez spent two days together, visiting ten wineries that opened their doors and their wines to the two gringos in a way they would never have done without the Argentine. At the first real estate agency they visited, the Americans learned the importance of having a local partner to help them get around in Argentine business. When the realtor pulled up listings of various properties for sale, Garrett and Evans noticed that he automatically doubled the price on the screen when he gave it to them, the dumb gringos.

Falling in Love with Mendoza

Despite that experience, the two fell in love with Mendoza and its wines and went into overdrive thinking about businesses they might start. They also quickly decided to invite Pablo Gimenez to join them as a partner. Using their experience and contacts in the world of venture capital, they reached out to family and friends looking for investors and tapped out their credit cards. Without much difficulty, they raised $200,000 in seed money.

At the same time, the three quickly honed in on two business ventures. The first was an easy, immediate one that would not require much capital; the second was more complicated, required more of an investment, and would demand longer commitment and outside financial backers.

The first was primarily aimed at American wine tourists. The three decided to set up a way for visiting Americans to avoid all the problems Garrett and Evans would have had when they arrived in Mendoza if Gimenez had not been there to help them.

Mendoza at the time was not really ready for tourists. Armed guards often stood at winery gates and were less than friendly. Wineries, instead of being located near each other, as in the Napa Valley or parts of Bordeaux, were often miles apart. Making matters worse, there were almost no signs directing visitors to wineries. As a result of all this, it was impossible to enjoy a good Argentine wine experience during the few days a normal tourist has for a visit. “We wanted to solve the problems of a wine tourist in Mendoza,” says Evans. “People fly five thousand or six thousand miles to get here, and they want to taste thirty to forty of the local wines in a short time. You couldn’t do that easily.”

For nearly a year Garrett and Evans split their time between working on their Spanish and getting to know the wineries of Mendoza. Applying the techniques they mastered in other business start-ups, they were obsessive about research.

Opening the Tasting Room

In early January 2006, the three partners signed a lease on a rundown house just around the corner from the Park Hyatt Hotel with plans of turning it into a wine bar/ education center where people coming to the city could learn about local wines and taste dozens of them by the glass. After a rapid renovation of the house, they opened the tasting room called The Vines of Mendoza. The facility has a full range of services, selling some ninety wines by the glass and fifty by the bottle. It also stages regular tastings and hosts weekly presentations by local winemakers.

At the same time, the partners worked on their second, more capital-intensive venture, which was to build a high-end hotel resort modeled after the Napa Valley’s Auberge du Soleil. They visited more than seventy-six different pieces of land before locating a 20-acre property in the Uco Valley, about 70 miles south of Mendoza, that looked like the perfect location and was also the hot new wine area. It had been impossible to grow grapes in the Uco Valley until the Israelis developed technology for drip irrigation. Then the valley began attracting foreign investors. The three partners decided to follow the ancient wine maxim to buy land next to where great wine is already being made. The Vines of Mendoza gang drew up plans for a twelve-room bed-and-breakfast and began mailing their business plan to old friends. Respondents showed lots of interest; in fact, several asked if they could buy a small piece of land nearby where they might have a small vineyard. 

A lightbulb suddenly went off, and the small B-and-B was put on the back burner. Why not start a vineyard where people could own a piece of land and make their own wine? Although Garrett and Evans were unaware of Bill Harlan’s Napa Valley Reserve, their concept was similar except that in Argentina people would actually own land and could buy in for much less money. So instead of buying 20 acres, the partners bought or took options on 1,500 acres of prime Uco Valley property.

The Vines of Mendoza is now a mini wine conglomerate of three businesses, for which they have raised more than $3 million of funding. The first remains the wine bar/education center in downtown Mendoza. While not an important source of profits, it’s the company’s public face and makes both visitors and local winemakers aware of them.

Owning a Vineyard

The second business is Private Vineyard Estates. Located at 1,200 yards above sea level and less than 10 miles from the foothills of the Andes, much of the property is parched desert, more home to cactus than to grapes. They have already cleared 250 acres of land, installed an irrigation system, and planted vines. The first vintage will be in 2010. Investors can buy a minimum of 3 acres to a maximum of 10 acres, and nearly fifty people have put down money. They planted the first 23 acres in 2007, and in the next year another 27 acres. Fourteen grape varieties are in the ground, with Malbec accounting for just under half. Vineyard owners have control over what kind of grapes they grow and how much wine they produce. Given the crop yields managers are planning, owners could get about two thousand standard-sized bottles per acre. The Vines of Mendoza will manage the vineyards and sell surplus grapes if the owners don’t want the entire amount in wine. The annual vineyard maintenance fee is a 25 percent surcharge over the actual costs, and is expected to be about $1,500 per acre per year.

The original vineyard land sold out quickly, and in July 2008 The Vines of Mendoza purchased an additional 670 acres contiguous to their first property. They have also hired Napa Valley consultants to help them build a winery. Each owner has his own reason for making wine. One early vineyard buyer is a Chinese-American who is going to sell the wine in China. Some California vineyards plan to sell the wine in their tasting rooms, and restaurants want to make it their house wine. Most investors plan to keep the wine for their personal use.

The Wine Club

A third business is the Acequia Wine Club, which exports Argentine wines from mainly small producers to customers abroad. This idea came from visiting Americans who wanted to buy more wine than they could carry home on airplanes or buy hard-to-get Argentine wines in the United States. There are two levels of membership based on the number of bottles shipped quarterly. Through the club, The Vines of Mendoza staff is learning how to ship wines internationally, especially to fifty American states that all have different regulations. That will be important when owners of Private Vineyard Estates begin sending wines home.

Dave Garrett has since left active management of The Vines of Mendoza, but remains an investor in the company.

(A thank you to my friend Dave Garrett for providing this excerpt.)

(Photo courtesy of Michael Evans, Founder, Vines of Mendoza.)

Barry P. Chaiken, Propietor
Chaiken Vineyards