Financing of the production of sustainable wines
Financing of the production of sustainable wines
Business Model Description
Investment in the sustainable productive transformation of quality wines. It is possible to channel direct investments in production units or the wine industry, as well as use financial investment vehicles such as trusts.
Expected Impact
Development of certified sustainable production in the wine sector increases the value of the product, generating direct impact on local development.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uruguay: Countrywide
Sector Classification
Food and Beverage
Uruguay's primary production must be developed in a sustainable manner. Uruguay currently produces food for 30 million people and has the capacity to do so for 20 million more. Meat chain is an example of integration between the agricultural, industrial and service phases in which producers interrelate with the supply of agricultural machinery and technological inputs.
Policy priority
The food sector, and especially agricultural production, plays a relevant role in the design of public policies through the MGAP and the MA (Ministry of the Environment). Especially regarding sustainable production, the Climate Change Office, the Agricultural Plan Office and the Livestock and Climate and Climate-Smart Livestock programs stand out.
Gender inequalities and marginalization issues
The gender gap in employment in rural areas reaches 27.4%, employment rate of rural women is lower than the national female average. For their part, the unemployment levels of women in rural areas are significantly higher than those of their male peers. The participation of women in jobs reaches 20.4% in the primary phase and 30.4% in agribusiness.
Investment opportunities introduction
Markets for CO2-neutral or certified sustainable foods are in increasing demand as consumer preferences change globally. Remaining isolated from this change in the market implies being associated with unsustainable producers and practices in food production.
Key bottlenecks introduction
Sustainable food production is an important driver of development in the sector, however, there are still important conservative features at the level of companies and unions in the sector that offer strong resistance to incorporating innovations or changes in business models and production techniques experimental.
Beverages
Investment needs
The wine sector in Uruguay needs to implement diversification strategies and increase its value for its long-term financial sustainability. Producers affiliated with the National Wine Institute (INAVI) have decided to begin a certification process for sustainable wines.
Policy priority
The National Wine Institute (INAVI) has implemented sustainable production through the Integrated Viticultural Production system as part of the FPTA 353 project. This process has an integrated certification audited by LSQA that allows the implementation of a sustainable seal.
Gender inequalities and marginalization issues
There is a possibility of expanding the employability of women in the wine industry from production, industry such as oenology or from areas linked to someliers. Currently 28% of workers are women, there are antecedents such as the Uruguayan Wine Women's Association, which brings together a group of women from the sector.
Investment opportunities
There is a global trend to produce quality wines under sustainable standards in response to changes in consumer preferences.
Bottlenecks
The main obstacle is associated with the fact that 99% of the vineyards are families with strong roots in traditional production.
Agricultural Products
Pipeline Opportunity
Financing of the production of sustainable wines
Investment in the sustainable productive transformation of quality wines. It is possible to channel direct investments in production units or the wine industry, as well as use financial investment vehicles such as trusts.
Business Case
Market Size and Environment
< USD 50 million
5% - 10%
In the 2020 harvest (of a total of 1,213 Processed Declarations, with an Area of 5,991 hectares and 20,895,633 Plants) a total National Production of 96,825,777 kilograms was registered. Of this total, 20% have started the integral production process. The export invoice of quality wines was USD 17 million during 2021, evidencing a market volume for Uruguayan wines of superior quality.
Indicative Return
5% - 10%
Estimated profitability based on interviews with producers. High volatility is associated with the investment associated with the small size of the vineyards and climatic factors.
Investment Timeframe
Medium Term (5–10 years)
Times of the grape production processes are assumed. The harvest is annual for mature vines such as those currently in production in the areas with the highest concentration of producers. Wine production presents important volatility that can be weighed in medium to long-term investments that cover several vintages and sales cycles. At least 5 years of average investment term is suggested.
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Business - Business Model Unproven
Impact Case
Sustainable Development Need
The Uruguayan wine sector requires increases in the production scale, which implies as a strategy, taking steps towards an improvement in quality attributes in order to increase export output, the main destination of quality wines.
The development of wine production will have the ability to improve local development in suburban areas of the territory. 72.5% of the Total Vineyards (879) are 5 hectares or less, while 24.6% are developed in an area of 5 to 20 hectares.
The sector requires strengthening the conditions of profitability and financial stability, so as to enable improvements in the level of occupation of productive and industrial establishments.
Gender & Marginalisation
Only 28% of employment in the sector is for women, but nevertheless there is significant interest on the part of women linked to wine production to associate. An example of the above is the Women's Wine Association.
Expected Development Outcome
Achieve that the majority of producers are certified in sustainable production and report sustainability.
Increase in export bill volumes and production of quality wines with sustainable certification.
Improvement in the levels of profitability and financial sustainability of establishments.
Gender & Marginalisation
Development of associativism of groups of women linked to wine production.
Recognition in the market of wines made in companies owned or led by women.
Primary SDGs addressed
12.6.1 Number of companies publishing sustainability reports
There are currently no certified producers, as certification is in process. There are currently 70 producers in the certification process, which is equivalent to 40% of the national grape production.
Achieve that 40% of grape production is certified as sustainable.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
Increase in costs associated with the implementation of certifications. Many times the costs of the certifications are only financed by the producers, while the benefits are distributed among all the links.
Disincentives that affect the number of certified producers.
Introduction of imported wines at very low prices.
Gender inequality and/or marginalization risk: Weakening of organizations such as women of wine.
Impact Risks
That the certification does not have a direct effect on the consumption of sustainable wines.
Sustainable practices affect quality in a cost efficient relationship that does not close.
Gender inequality and/or marginalization risk: the cost of certification can lead to a concentration of certified establishments and how to counteract a weakening of smaller-scale organizations such as the case of Mujeres del Vino.
Impact Classification
What
Transform wine production into sustainable in order to generate environmental added value
Who
Grape growers, wine industry and marketing
Risk
Family producers must assume risks in the transition from traditional to sustainable production. Lack of incentives
Impact Thesis
Development of certified sustainable production in the wine sector increases the value of the product, generating direct impact on local development.
Enabling Environment
Policy Environment
With the challenge of contributing to the development of more sustainable production systems, the project is based on updating, disseminating and applying the Integrated Production (IP) standard for wine grapes, in line with the demands of international markets.
Financial Environment
Financial incentives: Sustainable wines will receive credits from impact investors.
Fiscal incentives: The production of sustainable wine applies to the set of exemptions for investments exempted under the COMAP regime.
Other incentives: Access differential prices and favorable conditions for export. In addition to having the support of INAVI.
Regulatory Environment
Decree declaring Uruguayan wine as a national drink in all its ranges and characteristics.
Marketplace Participants
Private Sector
Producers, certifying, exporters union.
Government
InstituteNational Wine, MGAP, MA.
Multilaterals
IDB, CAF.
Non-Profit
INAVI, associations and associations.
Public-Private Partnership
INAVI, Chamber of Industries of Uruguay.
Target Locations
Uruguay: Countrywide
References
- (1) INAVI documents
- (2) Wine Intelligence research found that between 56% and 67% of wine consumers in major wine markets (US, Canada, UK, Sweden and Australia) had a strong connection to sustainability in general.
- (3) Brochure: https://marcapaisuruguay.gub.uy/download/uruguay-wines/
- (4) Video family wineries: https://www.youtube.com/watch?v=7ohVFrb4JX4
- (5) https://www.elpais.com.uy/businesses/news/suba-venta-vino-pandemia-volvio-valores-reales.html
- (6) https://es.iwcawine.org/membersCase of Spain: http://www.fev.es/sostenibilidad-medioambiental-vino/wineries-for-climate-protection/que-es-wfcp_295_1_ap.html