Foreign business

Behind an expat's wine startup success

January 25, 2012: 9:31 AM ET

Vines of Mendoza managed to overcome the pangs of the global financial crisis and Argentina's inflation woes by keeping a close eye on costs and cutting deals whenever possible.

By Ian Mount, contributormendoza_vineyard

FORTUNE -- Language and cultural differences make it hard to be an expat entrepreneur under any circumstances. It's doubly hard if the main market for your product plunges into a wrenching economic crisis. And it's even more difficult if your costs are in a country that suffers incredibly high inflation.

That's the position in which Michael Evans has found himself during the last few years. The Mendoza, Argentina-company he co-founded, Vines of Mendoza, was selling turn-key "vineyard estates" largely to Americans, whose disposable income evaporated following the 2008 collapse of Lehman Brothers and financial crisis. Even worse, as Evans' buyers were disappearing, his costs were rising; Argentina's already high inflation shot past 20% in 2010 and stayed there. Evans knew something would have to be done fast.

"I've been through something like this before in 2000, when I was at a dot-com. When something like that happens, you don't know exactly what's going to pass, but you know things will get worse before they get better," says Evans, 46. Faced with tumbling income and soaring inflation, as 2008 moved into 2009, the company cuts costs by 40% by laying off 30% of its staff ("By far, the worst day of my life," says Evans).

Breeding armchair Mondavis in Mendoza

Vines of Mendoza was born in 2005. At the end of 2004, after a stint on John Kerry's presidential campaign came to naught, Evans visited Argentina with his friend David Garrett, and they ended up touring Mendoza with Pablo Giménez Riili, a member of an old wine family.

At the time, Argentina's economy was recovering from its 2001-2002 collapse and peso devaluation. While it had been disastrous for most Argentines, the collapse was great news for the local wine industry, because it lowered production costs and made the wine regions attractive to tourists and investors.

Seeing that tourism was set to soar, Evans, Garrett, and Giménez Riili banged out a business plan for a company that would have a tasting room, a hotel, a mail order wine club and, most importantly, a vineyard estate business. More

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