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Worldcrunch

Chilean Wines Struggle To Shed Their Budget Image

Article illustrative image Partner logo Chilean women picking their finest grapes

SANTIAGO – Some time ago, Derek Mossman went to a New York restaurant and asked if they served any Chilean wines. The waiter answered: “No sir, this is a nice restaurant and we only serve good wines.”

Mossman is the owners of Garage Wine Co, a Chilean winery. He was in the United States promoting high-end Chilean wines.

This anecdote is a good example of the uphill battle facing Chilean wine producers; particularly those who want to compete in the premium wine market. The main problem facing Chilean wines is stiff competition from Argentina, South Africa and Australia.

The Chilean wine industry has been hoping to increase the value of its exports, above all by increasing its presence in the luxury wine market. But in the past six months, Chilean bulk-wine (wine that is bottled at destination) exports increased by more than 101%, while bottled wine exports have essentially stagnated. For years, Chilean wines have been marketed as being a good value - good quality at a low price. But now producers are finding it very difficult to entice buyers to pay what they would pay for wine from other regions.

Some Chilean wineries have even seen their foreign affiliates in other countries successfully raise prices while they seem unable to. For example, the average price of exports for Concha y Toro, the largest wine producer in the country, fell 1.2% in the second trimester compared with last year, while its subsidiary in Argentina was able to raise its prices by 6.6%, and its American subsidiary by 6.8%.

Image is everything

In a global industry like wine that is highly competitive, the brand or image commanded by a country is an important ingredient. “When consumers think of Chile they think about wine and the Andes and maybe something else. Chile lacks material in the global imagination,” explained Juan Park, research director of wine market adviser Wine Intelligence in London.

Park and other experts say that Chilean wine producers need to do a better job communicating what the country has to offer, in addition to its wine. They explain that it’s a matter of positioning, and the wine industry has yet to do the legwork.

Santiago Achurra, manager of the Chilean winery Viña Requingua, says that the problem will disappear as soon as producers start spending money to tackle it. The problem is that global brand building is expensive, and the Chilean wine industry doesn’t have the resources to adequately market itself.

Other experts say that Chile’s problem has to do with the fact that when it first entered the wine market, it did so at very low prices as a way to break into the market. The problem is that by charging so little Chilean producers were devaluing their own product in the eyes of global consumers.

The other problem is the quality of the wines. In 1997, Chile had nine wines classified as excellent by the prestigious Wine Spectator magazine. The number rose to 40 by 2005. But in the same period, South Africa went from two to 86 excellent wines, Argentina went from three to 57 and Australia was in a completely different league, going from 70 excellent wines to 246.

Bye Bye Gringo

The U.S. market is the one most affected by the Chilean strategy, since it is the principle export market for Chilean wine, both cheap and expensive. But while high-priced wine exports have dropped in both volume and value, the amount of Chilean bulk wine bought in the U.S. has increased more than 400% in volume since 2011.

Some say this is just a temporary blip, but others see a deeper crisis. Michael Schachner, editor of the Wine Enthusiast magazine, says that Chilean wines had their golden years in the 1990s and will not likely be able to return to the growth rates seen 10 years ago.

Chilean wine has a long, difficult way to go. Otherwise it will simply be a dream that disappeared as quickly as it came.

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About this article source Website: http://www.americaeconomia.com/

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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