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CHILE OVERVIEW: Down to earth
Geographically diverse, Chile’s natural environment is ideal for producing a vast array of high quality varietals. It now needs to communicate this message, writes Ben Grant
In a relatively stagnant global market, Chile is one of the few categories that can be truly satisfied with its current performance. Both volume and – more importantly – value are steadily increasing in a growing rostrum of export markets, as the world begins to recognise that, in terms of quality, the little-known South American country can deliver exceptional wines at very reasonable prices. The UK is a case in point: this summer the category leapfrogged Spain into sixth place in the sales charts and, says Wines of Chile UK managing director Michael Cox, it now has fifth-placed South Africa “firmly in its sights”. There is, however, one area where Chile continues to struggle: presenting a clear, recognisable identity. Just ask the drinks business design team. When they’re asked to illustrate articles about any other wine producing country, they are always able to come up with a wealth of easily identifiable images. But when it comes to stories about Chile, it’s rather harder to come up with a picture that visually represents the country.
High quality
The lack of a coherent image is undoubtedly Chile’s greatest weakness. But this is pretty much the only black mark in an otherwise spotless copy book – so it would seem more appropriate to concentrate on some of the many positives that are currently defining the category. And first things first, there’s the wine itself. There can be absolutely no doubt that the modernisation of the industry over the last decade has resulted in eminently superior output. The combination of heavy investment and the increase in knowledge that has been brought about by the cross-pollination of Chilean and international winemakers has upped the ante, and across the board suppliers have risen to the challenge of producing better wine.
| Face of fair The UK consumer has only gradually begun to accept the concept of Fairtrade when it comes to selecting wines. But the pioneering partnership between Los Robles winery and Ehrmanns is doing a sterling job increasing the availability of equitably produced wines to socially conscious consumers. Ravanal is the son of a Los Robles co-op worker, so it would have been questionable whether his family could have afforded the high cost of secondary – let along tertiary – education. His studies are being financed by those extra pound coins that a growing number of UK consumers are willing to part with. And once his education is complete, it doesn’t take a genius to realise the enormous knock-on benefit to the wider community. The Fairtrade wine sector desperately needs a poster pin-up for its cause: in César Ravanal it may just have found its man. |
Anakena managing director Jorge Gutiérrez argues that “the currency issue has been instrumental in improving quality” by creating a leaner, more focused industry. (Before you glaze over and stop reading, fear not, that’s the last we’ll hear about the rather over-scrutinised currency situation in this article.) In terms of quality, Jorge Goles, CEO of Corpora, points out that the oversupply issue has also played its part, forcing poorer quality wineries to improve their output – or face the consequences.
While some players have been making high quality wines for generations, their ranks have swelled considerably in recent years. “Many other wineries have joined the premium club, which is great news,” says Viña Carmen export director Hector Torres, while the growing number of international awards in Chile’s growing trophy cabinet is surely unquestionable evidence of improvements.
Cristóbal Ossa, Viña la Rosa export manager, sums up the mood of the nation when he says: “Wineries have a more long-term perspective [resulting in higher quality wine]. When consumers try Chilean wine they know that it offers good quality at a reasonable price. The perception is changing. Chile isn’t just about cheap wine, people are happy to pay more.” Luis Felipe Edwards, owner and president of the eponymous winery, agrees: “Consumers around the world have more confidence in Chilean wine”. And the point is borne out by the growing thirst for icon wines – company president Eduardo Chadwick is not alone when he points out that every icon released by Errázuriz now sells out in double quick time.
The evolution of the category has been massive in the last decade. Patricio Middleton, managing director at MontGras, argues that the Chilean category in now in the third era of its development. First came the technological advances of the early 90s; by the turn of the century came the geographic era as suppliers began to diversify and explore new valleys; and now, he argues: “We are in the soil era. Companies are studying the land, understanding the terroir and understanding what grapes work best.” He’s correct. The diversity of varietals emerging from Chile is at an unprecedented level as winemakers learn how to maximise the potential of Chile’s incredibly diverse landscape. Chadwick argues that the future success of the category depends on its “ability to have a multiple palette of different varietals”. From a broad selection of grapes, Pinot Noir appears to be grabbing the most headlines currently.
Viticultural paradise
Miguel Torres was the first foreign company to invest in the country back in the 1970s. The company’s current president was sent by his father to the Americas in search of potential winelands. After three visits, he explains, Chile stood out as the best choice because “the soil was incredibly good” and in a document penned in 1984, he describes the land as “a viticultural paradise”. The thin strip of land squeezed between the mighty Andes and even mightier Pacific is one of the most geographically diverse nations on Earth. From the northern deserts to the Antarctic south it offers, in the words of Santa Rita’s export commercial director Patricio Fernandez, “the most diverse terroir in the world”. This inspired a “change of mentality” a decade ago, according to Casa Silva managing director Mario Silva, as companies turned their attention to “exploring the land and discovering rich new valleys”.
The diversity of wine growing regions has been one of the driving forces behind the category’s rising stock in the global wine stakes. A regular stream of interesting new terroirs has been one of the factors that has led the trade to regard Chile with the seriousness it deserves. The exploration will continue, but the focus now seems to be on maximising the full potential of these new territories. It’s such a vast land that “we’ll always see new valleys coming in,” says San Pedro CEO Pablo Turner, “but now we’re seeing a consolidation of the valleys,” as oenologists gradually discover which grapes are most appropriate for which plots of land. There’s plenty of room for improvement, but regionality has been a major driver of success, and many would agree with Valdivieso’s export manager Nicolas Vergara when he argues “selling the valleys is key” to Chile’s continued success.
New World orders
Brand building has been instrumental to the success of the New World, but aside from a handful of market leaders the vast majority of Chile’s vinous output has historically not been marketed under coherent brand umbrellas. This is gradually changing, however, as a growing number of suppliers show signs that they are applying the lessons so expertly devised by the Australians. “There’s no doubt that Chile is moving in the right direction with brands,” says Miguel Torres, “it’s going the New World way.” Santa Carolina is a perfect example; Wylie explains that a few years ago the company was attempting to market over a thousand SKUs under more than 25 different labels. This unwieldy range has now been cut back to five well-defined and identifiable brands, each with a distinct position in the market.
Luis Felipe Edwards is another player that has made the shift towards a more concise brand identity. “We have looked at the market and worked closely with our importers, so now we understand marketing much better,” Edwards explains, while Viña Carmen’s recent decision to roll out a consistent global identity is another case in point.
| Natural selection With its relatively unspoilt natural environment, green issues are undoubtedly an area where Chile can carve itself a strong niche. And following the recent opening of a pioneering new facility by Corpora, the government seems to be lending its support to those, who are serious about getting back to nature. In June, the company began production at Chile’s first solar-powered winery. When db stopped by to have a snoop around, CEO Jorge Goles was a little delayed. But he had a good excuse – he was busy meeting civil servants to prepare for the official unveiling of the winery. The ribbon will be cut by President Michelle Bachelet, a clear indication of the government’s backing of such schemes. “The president has pledged to push for a law giving tax incentives to businesses using sustainable energy,” Goles explains. Even without such tax breaks, he still calculates that the $400,000 (£199,00m) investment will be recouped within three years. The natural environment “is Chile’s biggest competitive advantage, so we must communicate it”. Perhaps economic incentives will convince more Chilean wineries to shift in this direction – and it could be the unified message that the category so desperately craves. |
While more and more strong brands are on an upward curve, equally encouraging is the fact that many in the industry are gradually weaning themselves off reliance on own-label products. Most wineries will, of course, continue to produce wine to be packaged by the retailers, but there is a growing focus on branded product. As San Pedro’s Turner explains, “We’ll only produce own label as a service to the retailers who sell the main brand.” This can only help to reinforce the quality message that underscores so much of the category’s recent work.
The combination of this New World style of business, together with the inevitable impact of currency issues, has resulted in a gradual consolidation of the market. And the indicators suggest that this trend will continue in future, with the big fish and the small, niche players thriving, while the mid-sized wineries struggle to compete. Vergara believes it’s inevitable that “the bigger companies will eat the smaller wineries… the focus will be more and more on the big 20 companies”. Gutiérrez agrees that “at the moment, consolidation is inevitable”, and with increasing numbers of wineries coming up for sale, Anakena, which is “actively looking” at potential acquisitions, is by no means alone.
Back to nature
Chile’s pristine natural environment is one of its greatest assets, and for the majority in the industry this is the obvious hook on which the category should hang its hat. But on the subject of organics there is rather less consensus. The country’s isolation makes it virtually disease free in comparison to most other wine producing nations, while the reliably dry ripening and harvest period is another major competitive advantage, reducing the need to rely on chemicals. Growing organic grapes is undoubtedly a less troublesome task in Chile than elsewhere, but does this necessarily mean that it should be a focus for the category? And if so, should it play a role in the generic communication?
| Generic appreciation
A singular, unified approach is always more likely to succeed than a plurality of messages. So the emergence of Vinos de Chile AG in July may well prove to be a key milestone in projecting Brand Chile to the wider world. Previously the trade was represented by two generic bodies: Viñas de Chile, representing the big players; and ChileVid, supporting the smaller, niche companies, who felt that their interests were overlooked by the former organisation. A number of suppliers point covetously towards the critical importance of the generic message in the Australian success story. Now that the entire category is united under the new body, they will be hoping to replicate the success that the Wines of Chile UK team has engineered in the last two years. |
While there is certainly room for some Chilean wineries to dominate the organic sector and simultaneously compete in the wider market, Corpora’s Goles is probably correct when he points out that “the natural environment is the competitive advantage that we must communicate”, not the ability to grow organically. Bio-dynamic is another area where the category’s natural environment is a major benefit – however the limited consumer understanding of the concept makes it rather shaky ground on which to build a category message.
Message on a bottle
In terms of the developments on the ground, Chile has much to be proud of. But in order to take the step up to the next level, Mario Silva hits the nail on the head when he says “half the battle is telling people what we’re doing”.
© db September 2007
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