(Bloomberg) -- Argentine grape growers for low quality, bulk wines must improve standards, create new products or switch to other fruits and vegetables to return to profitability, Mendoza Governor Francisco Perez said.

A drop in consumption of box wine and over production of the grapes has kept the price paid to producers unchanged for the past three to four years amid inflation above 20 percent, the governor said in an interview in his office in Mendoza after hosting the annual harvest festival. Stockpiles in the providence of Mendoza alone have reached 200 million liters, he said.

“In a competitive beverage industry, no one is drinking this low quality wine,” Perez, of the ruling party alliance, said. “It’s a structural problem that they’re making wine that no one wants.”

Argentina’s most successful exports from bold Malbec reds to sparkling wines are doing well, while cheaper wines are competing with flavored water and sodas leading to a drop in consumption, Perez said. Of 1 billion liters of wine produced in Argentina last year, 70 percent was of low quality which is hard to export and is building up in stockpiles. The province of Mendoza is the fourth-biggest individual owner of wine stocks in the country, Perez said.

“The state can’t keep subsidizing,” he said. “As a province, we shouldn’t be buying and selling wines and even less so, wines that are of poor quality.”

Wine, tourism, trade and gastronomy combined have a similar weighting in Mendoza’s economy to the oil and gas industry, which represents about 28 percent of regional GDP, Perez said.

‘Bankrupt Producer’

During an event in Mendoza on Saturday that Perez attended, Hilda Wilhelm de Vairetti, head of the Viticulture Association of Argentina, said inflation and an overvalued peso have been the main culprits of the crisis.

A man in the crowd at the Hyatt hotel in downtown Mendoza held a sign that said “bankrupt producer.”

The province has worked with some grape producers to plant saffron, cherries and even almond trees instead of grapes. Many don’t have the financial support to produce high quality grapes for export like those grown in the Uco Valley.

Sparkling wines are also an opportunity as consumption has risen 40 percent in the past year with exports increasing 30 percent in that period, Perez said.