Chilean Wine at the Crossroads


When Oz Clarke spoke at the Wines of Chile Awards seminar earlier this year, his theme was simple and clear: Chilean wine is at a crossroads and it was up to the people in that room to decide which direction to go. Would they make the same mistakes as winemakers in Australia, for example, or choose another path? Oz, who was a stage and film actor in a previous life, is a dramatic speaker, but if you watch the video I think you will agree with me that his message is even more powerful than the delivery.

Preaching to the Choir

Oz Clarke is not alone in this view and to a certain extent I’m sure he was “preaching to the choir.” Wines of Chile released its ambitious  Strategic Plan 2020  about a year ago (you can download a pdf of the full report here). The plans calls for Chile to become the #1 New World producer of “sustainable and diverse” premium wines by 2020.

The carefully devised Plan projects an average annual growth rate of 9.2% and is based on strengthening the recognition and appreciation of  “Wines of Chile” as a world-class appellation, which will in turn increase the average price, sales, and added value for all Chilean wine industry stakeholders, including small and large growers, suppliers, wineries, and exporters.

The plan focuses on four messages to drive the transformation:

  • Diversity and Quality. Chile has much to offer with respect to quality, diversity, and wines that over-deliver at every price point.
  • Sustainability. Sustainable Chile: Clean, efficient, and responsible.
  • Country Image. Chile is good for you.
  • Innovation. Chile: Moving above and beyond.

The plan’s ten year time horizon speaks to the sense of “Chile at the Crossroads” immediacy while the four “strategic pillars” indicate how much needs to be done in terms of recasting Chile’s image. Chile’s reputation as a producer of bargain Cabernet Sauvignon, Chardonnay and Sauvignon Blanc needs to be reshaped in terms of both wine types and price points. And the image of Chile itself must be updated or redefined, according to the plan’s analysis, so that the country sells the wine  (as Italy’s image obvious does for Italian wine) and not the other way around. (Whether a campaign built around the slogan “Chile is Good For You” can accomplish this is debatable.)

Audacious Goals?

Exports are key for Chile since domestic consumers drink up only about 30% of total production.  The idea that revenues might grow by 9.2% in the next decade is not as ridiculous as it might sound, given the current economic climate, although it is certainly an audacious goal.

Chile’s wine exports grew by a yearly average of 33% in the 1990s (according to data in the Wines of Chile report) and by 11% per year between 2000-2009. But whereas growth came through both increased price (7%) and quantity (25%) in the 1990s, the 11% revenue growth in the 2000s was due to volume growth (12%) offsetting 0.1% average price declines. The new strategic plan calls for a radical change, with rising price not higher production driving revenue growth.  Good idea, but easier said than done.

So (and this is the “crossroads” theme again), Chile needs to turn things around in a fundamental sense and this may be difficult in today’s market environment as an excellent interview with  with Rabobank’s Stephen Rannekleiv in a special September 2011 Chile Report  issue of The Drinks Business makes clear. Rannekleiv is an optimist about Chile’s wines, but very cautious about its wine industry’s ability to meet the 2020 goal.

 Something Completely Different

Rannekleiv suggests that Chile seek out new markets to supplement but not replace the UK, its largest export market today, where margins currently are thin or even  negative and where upward price adjustment is extremely difficult. Focus must be on price and quality, Rannekleiv notes, so major supply surges must be avoided.

It is very difficult to raise price (without dramatic loss of market share) for existing product lines in today’s market, so  “Chile needs to find something different, such as marketing around new varieties that are exceptional; it also needs to continually work on improving quality.”

There is no silver bullet, Rannekleiv suggests. It will take a combination of controlled output growth, continuing quality improvements, image development and new products and markets to turn the Chilean wine industry onto the right path.

Getting the Message Out

One element of the Wines of Chile strategy is a series of blogger wine tastings that are designed to educate, inform and persuade social media representatives and their audiences of Chile’s new direction. I took part in one of these programs last year that featured Chilean Syrah and Pinot Noir, stressing the diversity of Chilean wine.

This certainly is part of the 2020 strategy’s message (and the wines told that story pretty well), but Syrah is a problematic market these days and while Pinot is popular, it is hard to break in except at the bulk level. (Although both Chile and Argentina produce Pinot Noir, for example, neither country made the cut for inclusion in Benjamin Lewin’s recent book In Search of Pinot Noir.)

Is Carmenere The Key?

Which brings us to Carmenere, the focus of the most recent blogger tasting program.  Is Carmenere the key (or one of them) to Chile’s crossroads dilemma? Carmenere is (like Malbec) a Bordeaux variety that is now better known in the New World than the Old. Can Carmenere be to Chile what Malbec has become for Argentina, a signature variety that creates a new market and that serves as a brand ambassador for the entire country?

A Carmenere boom would tick a lot of the Wines of Chile 2020 plan boxes. Is Carmenere the key? Come back next week for my answer.

Sideways meets Bridget Jones

It is easy for wine enthusiasts to get carried away sometimes and to over-think the whole idea of wine. Sure cure for thinking too much: go to a movie.

The Sideways Effect

Most readers will already be familiar with the Sideways effect, named for the 2004 motion picture of the same name. In this film one of the protagonists, Miles, expresses a deep love for Pinot Noir and a complete disdain for Merlot. He loves Pinot because it is so fragile …

“It’s a hard grape to grow. As you know. Right? It’s, uh, it’s thin-skinned, temperamental, ripens early. It’s, you know, it’s not a survivor like cabernet, which can just grow anywhere and thrive even when it’s neglected. No, pinot needs constant care and attention. You know? And, in fact, it can only grow in these really specific, little tucked-away corners of the world. And only the most patient and nurturing of growers can do it, really. Only somebody who really takes the time to understand pinot’s potential can then coax it into its fullest expression.”

Merlot, by contrast, must be simple, sturdy, unsophisticated, easy. Anyone can make Merlot. Who wants to drink that — loser wine. (Wine geeks will remember that Miles’s most treasured wine — the one that he desperately drinks out of a styrofoam cup in a moment of self-pity — is ironically a mainly Merlot Cheval Blanc from Bordeaux.)

You may love the film or hate it, but its effect on the wine market is well known: it took an emerging Pinot Noir trend and magnified it, making Pinot the hottest grape in the vineyard. And it contributed to the decline in Merlot sales, too. It’s interesting that a movie could so shape the image of these wines as to produce significant market effects.

But that’s here in America. This could never happen in Britain, where wine consumers are more sophisticated.

The Bridget Jones Effect

But wait. It has, according to an article in The Telegraph. Chardonnay sales are slumping in Great Britain and British wine critic Oz Clarke blames it on Bridget Jones, the movie character who drowns her troubles in glass after golden glass of cheap Australian Chard. “Until Bridget Jones, Chardonnay was really sexy. After, people said, ‘God, not in my bar.” according to Clarke. Now, I guess, it’s loser wine like Merlot.

“Bridget Jones goes out on the pull [WineEconomist translation: singles bar scene], fails, goes back to her miserable bedsit, sits down, pours herself an enormous glass of Chardonnay, sits there with mascara running down her cheeks saying, ‘Dear diary, I’ve failed again, I’ve poured an enormous glass of Chardonnay and I’m going to put my head in the oven.’” Clarke writes, “Great marketing aid.”

A retail market analyst estimates that 7.5 million fewer shoppers picked Chardonnary this year in Great Britain. Sales of other white wines such as Sauvignon Blanc and Pinot Grigio have risen.

The biggest direct effect is in Australia, the source of much of Britain’s popularly priced Chardonnary. Foster’s has reportedly announced that it will not pay more than about $300 per ton for bulk-wine Chardonnay grapes next year, a low price and bad news for growers there. That will put the squeeze on them and they must wonder at the strange logic of the wine world where they suffer because Bridget Jones can’t seem to meet the right guy.

Wine and Identity

I haven’t seen the Bridget Jones films but I’ve watched Sideways and it is pretty clear to me that wine is a powerful image in the film because it is so obviously a metaphor for the main characters. Miles is just like the Pinot Noir that he describes — fragile, tragic and perhaps (and only perhaps) worth the effort that it takes to reach him. Jack, his gregarious, promiscuous buddy, really is Merlot. Easy, simple, stupid at times, and very very popular.

The larger lesson to be learned from all this is the power of identity in consumer behavior. Affluent consumers don’t purchase products so much as they construct personal identities. Goods and services are not ends but means. This is true in many product areas (homes, fashion, autos), so why shouldn’t it be true for wine, too.

Although we may like to think that it is the wine that is the focus of our passion, the Sideways and Brenda Jones effects suggest that identity — how wine makes us think and feel about ourselves — may sometimes be more important than the wine itself in shaping the decisions that wine drinkers make.

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