CHILE INVESTMENT: Hot stuff

Chile is now a major player on the international wine scene, with Concha y Toro burning brightly at the top. Patricia Langton charts its success, both at home and overseas, and looks at the progress of the country’s other leading companies

Concha y Toro has established itself as a formidable force on the Chilean wine scene. At home it is admired, quite possibly envied and imitated by its peers, while overseas Concha y Toro is respected for the quality of its wines and the ability to penetrate markets – a rare combination.

In 2006 Concha y Toro, including its subsidiaries, had a market share of around 33% of the Chilean wine business by volume and 28% by value amounting to a considerable slice of the cake. The main subsidiaries – Cono Sur, Viñedos Emiliana and Trivento in Argentina – now contribute significantly to the overall business. Cono Sur ranks in third place in the Chilean winery export league, while Viñedos Emiliana enters at position 17. Meanwhile, Trivento now ranks as the second largest exporter by volume, third largest by value from Argentina.

CEO Eduardo Guilisasti is widely acknowledged to be the business brains behind the company. A member of the family which owns 26% of the company, he became chairman in 1971 and, despite the adversities prevailing for business at the time in Chile, set about a programme of expansion which has resulted in the creation of autonomously run businesses, each with distinctive positioning.

Cono Sur, established in 1993, is positioned as an innovative, modern Chilean winery championing Pinot Noir as part of an increasingly diverse range drawn from all the key wine regions including Bío Bío in the south. Following the recent acquisition of a 160-hectare estate in San Antonio, Cono Sur now has 360ha of vineyards in “top areas” according to Adolfo Hurtado, who leads the winemaking team at Cono Sur and is also the company’s general manger.

Meanwhile Viñedos Emiliana (formerly Santa Emiliana), which produces the Andes Peak range has gained from a restructure in the late 1990s and new impetus which has seen the business evolve into two parts: Viñedos Emiliana and Emiliana Organico.

Instigated by managing director José Giulisasti, Emiliana Organico is an increasingly important spin-off winery, which produces organic and biodynamic wines including the Novas and Adobe ranges from a base at Los Robles in the Colchagua Valley. Alvaro Espinoza, one of Chile’s top-flight winemakers, was appointed as chief winemaker in 2005 and has encouraged the biodynamic dimension at the winery. By this year Viñedos Emiliana had handed over 595ha of its 1,550ha to its younger sibling for organic cultivation in the Casablanca, Maipo and Colchagua valleys.

International brand status
For the Concha y Toro portfolio, including mainstream brands Casillero del Diablo and Frontera, the UK and the US are by far the most important markets. In 2006 these markets were worth US$52.3 million (£25.8m) and $46m respectively with other key markets including Canada ($14.1m), Mexico ($10.5m) and Sweden ($10m). Developing markets and a comprehensive global distribution is described as “central to company strategy”. Key markets and regions in development stage include Asia, with a keen eye on China and Russia.

For all international markets, Casillero del Diablo is positioned as the “core, mainstream premium brand” (£5.99-£6.49) and it’s fair to say that the brand, which offers both familiar grapes and slightly more offbeat offerings, such as Riesling and Gewürztraminer, is one of the most respected in the UK market at the present time for its consistency, value for money and innovative style. The wines are sourced from the company’s extensive vineyard holdings which cover every key region and total around 5,700ha.

Casillero del Diablo is flanked by a broad range of offerings covering the different market segments and requirements. They include Viña Maipo (£4.99), which targets the UK multiples; Frontera (£4.49-£4.99), with broad off-trade distribution; and more innovative, specialist wines such as Trio and Terrunyo, the Winemaker’s Lot range (exclusive to Oddbins) and higher premium offerings such as Palo Alto and top offering Don Melchor Cabernet.

Winemakers Marcelo Papa and Ignacio Recabarren, two more highly talented winemaking names in Chile, have pivotal roles in winemaking for both the mainstream brands and more exclusive offerings.

When it comes to pioneering new areas, Concha y Toro is quick off the mark, helped by its large size and acquisitive muscle. In 2005 it gained a strong foothold in the Limarí region, 470 kilometres north of Santiago with the acquisition of the Francisco de Aguirre winery. A new range from the Limarí, Maycas de Limarí (£8.99-£9.99), overseen by Marcelo Papa, is due to arrive in key export markets including the UK this autumn. Watch this space.

Changes at the top
The last year has seen some dynamic changes and restructuring in a number of Chile’s major groups and leading wineries. Key developments, where they are happening and the strategies behind them are detailed as follows:

Southern Sun Wine Group
Southern Sun Wine Group, owned by Compañía Chilena de Fosforos, includes Tarapacá (Maipo Valley), the first acquisition in 1992; Misiones de Rengo (Rapel Valley); Viña Mar (Casablanca Valley) and Casa Rivas (Maipo), acquired in 2005. The group has also invested in Argentina “in a discreet way” – Bodega Tamarí was established in Mendoza in 2002 focusing on Malbec.

Winemakers include Sebastian Ruiz for Misiones de Rengo and Tamarí and Ed Flaherty, who has just done his first vintage at Tarapacá Winery. Another Californian winemaker, Paul Hobbs, has consulted on the development of a new winery which is located in Casablanca. It will be used for the top-end wines for all four brands.

Export director Miguel Amunátegui says: “We have embarked on a US$60 million (£29.6m) investment programme for the next four years. Investment will go to finance new winery equipment plus possible acquisitions. We are also looking to invest via acquisition or joint venture into key distribution companies in our main markets to consolidate our distribution network worldwide.”

Amunátegui also confirmed that there are plans to float the company on the Chilean stock exchange in the near future. He concludes: “We are investing to grow and maintain our ranking as number four in the wine industry.”

VSP Wine Group
VSP Wine Group is a significant force on both the Chilean domestic market with the Gato Negro brand, while its 35Ëš South and Castillo de Molina brands front the export action. Following the appointment of CEO Pablo Turner in 2005, there have been moves to restructure the business resulting in changes on both the winemaking and distribution fronts. Winemakers Marco Puyo and José Morandé have been appointed with responsibility for the Castillo de Molina and 35Ëš South ranges respectively with the aim of giving more focus to each brand. Improved blends, range extensions and the first wines with screwcap closures have been introduced as well as updated label designs.

Meanwhile VSP switched from Buckingham Vintners to Les Grands Chais de France in the UK for its two key brands and the wines from Finca La Celia, its Argentinian winery. The move enabled San Pedro to take advantage of LGCF’s bottling facilities in France. New distribution agreements were also struck in other countries including Hungary, Slovakia and Slovenia and markets in Africa and the Middle East. The group has also acquired two wineries in up-and-coming regions as part of its strategy to “refocus and be positioned as a pioneering winery in emerging wine zones and be producers of fine quality wines”. Viña Tabalí in the northern region of Limarí was acquired in 2003 in the form of a joint venture with Guillermo Luksic and in February Viña Leyda in the coastal region of the same name, neighbouring Casablanca, was snapped up.

VSP intends to strengthen its distribution network significantly in the next five years and build and maintain strong and innovative brands, both at home and overseas, backed by solid marketing support.

Corpora Group
The wine interests of the Corpora Group, owned by the Ibañez family, include Gracia de Chile, Porta, Agustinos and Veranda. The group has plantings of 1,400ha (880 in production in six key regions: Aconcagua, Casablanca, Maipo, Rapel, Curicó and the southern Bío Bío region. Corpora’s mission is to be “the largest winery making wines from its own vineyards” and the business is developing and positioning its wines in the “premium wine sector”.

Corpora is particularly keen to pioneer the Bío Bío region, Chile’s most southern wine region, as brand manager Isabel Ayala explains: “We plan to put Bío Bío on the world wine map for its premium whites and Pinot Noir – our focus is on Pinot Noir from the Bío Bío and red wines from the Aconcagua and the Apalta valleys.”

Recent developments include the acquisition of Viña Canata (high-tech winery and 840ha of vineyards) in November 2006 in the coastal area of Bío Bío. The move brings Corpora’s total holdings to 1,480ha (630 in production) and consolidates its position as the key player in Bío Bío.

In January Corpora acquired 40ha in the Apalta Valley and more recently a winery was acquired in the Argentinian Patagonia in Neuquén, which lies at a similar latitude to Bío Bío. Key export markets for Corpora are England, Japan and Poland.

Ventisquero
Ventisquero, part of the large food group Agrosuper, released its first wines in 2001 and continues to expand rapidly. Its brands include Ventisquero, Yali, Ramirana, Chileno (developed in collaboration with the UK’s PLB) and Yelcho; and joint-partnership brands – Chileno, in collaboration with the UK’s PLB and Root:1, in collaboration with US importer Click.

Continuing its policy of being self-sufficient in grape supply, Ventisquero is expanding its vineyards by planting 150ha in Lolol in the Colchagua. It already has 1,500 throughout the Casablanca, Colchagua and Maipo valleys.

Recent developments are aimed at enhancing Ventisquero’s quality profile. Australian winemaker John Duval has been recruited to develop top level wines. To date these are the Syrah wine Pangea (£29) and Vertice (Carmenère, Syrah and Cabernet, priced £19), which are destined for fine wine shops and high-end restaurants.

Ventisquero exports around 700,000 cases and is growing its sales well above the industry average (7%) with an emphasis on reserve and premium wines. Leading markets include the UK, USA and Brazil. Looking ahead, export director Americo Hernandez concludes: “By 2010 we hope to have worldwide recognition for our global brands – Ventisquero, Yali and Ramirana – and we intend to grow alongside our partners building strong (joint-venture) brands. We aim to position Ventisquero as a modern, high quality winery.”

Undurraga
One of Chile’s historic producers, Undurraga ceased to be a family owned winery in 2006. It is now headed up by a Chilean businessman new to the wine industry,  José Yuraszeck, who is managing director and owner of 46% of the shares. A new team, including export director Cristobal Duke, marketing director Danilo Buvinic, brand manager Hugo Salvestrini and winemaker Rafael Urrejola (who has made his mark at Viña Leyda), are moving quickly to reverse Undurraga’s fortunes. New brand Aliwen, launched last year, was rolled out at this year’s Vinexpo with new labels and restyled blends. It is positioned at the core of the business and at the same level as Concha y Toro’s Casillero del Diablo (£5.99 in the UK).

Duke describes the overall aim: “To transform Undurraga into an innovative and contemporary winery that produces unique quality wines from specific origins.”

 With this in mind, Undurraga recently acquired premium vineyards in Leyda (200ha) and Alto Maipo (20ha) for “higher quality ranges”, bringing total vineyard ownership to 1,000ha. Undurraga has also enlisted the expertise of Alvaro Espinoza as consultant winemaker for top wine Altazor. It is hoped that around 70% of Undurraga’s sales will be at the £5.99-plus level by 2011. Key export markets include Holland, Denmark and the UK.

© db September 2007