The Legality of Wine Trade within Latin America

After thinking about the legal obstacles that NVL faced in the United States, I was curious whether NVL might have luck abroad, specifically in Latin America.

In 2012, Euromonitor released a report that showed that the trade in illegal alcohol in six Latin American countries accounted for 25.5% of the region's total market by volume and 14.1% by value. These six countries include Colombia, Ecuador, El Salvador, Honduras, Panama, and Peru. These numbers represent a loss to the legal trade of US $736M.

While consumer awareness of this issue has been improving, the issue has been difficult to combat. On average, retail prices of illegal products are 30.3% lower. In addition, counterfeit products are often priced similarly and sold side-by-side with legal, authentic products making them hard to detect. Governments in these countries have done little to improve industry regulations or even enforce existing laws, despite the millions of annual tax revenues they are losing as a result of the illegal trade.

Given that consumers in the region do seem to have the desire to purchase responsibly and legally, there may be an opportunity for NVL to improve the process and facilitate the ease of legal alcohol purchases. Governments should theoretically welcome NVL with open arms since it will increase their revenues from taxes and reduce illegal activity in their countries with little investment or action on their part.

That said, a drawback would be that the LatAm consumer may end up capturing more of the value than the U.S. consumer. This would depend on how far consumer responsibility and desire for product authenticity could drive consumer behavior. If consumers are willing to pay 30% more for an authentic, legal product, value capture in the value chain may not need to change much. If consumers aren't willing to pay the higher price, then some or many parts of the value chain would need to sacrifice a piece of their value captured in order to drive consumer purchases at lower prices.

Sources:
https://www.thedrinksbusiness.com/2014/05/illicit-alcohol-trade-in-latin-america-worth-2bn/
https://blog.euromonitor.com/2015/10/the-illegal-alcoholic-beverages-market-in-six-latin-american-countries-2014.html