Moving Upmarket

Chilean winemakers are recasting their image to carve out new mid-level and premium markets for themselves.

For years, Chile has been a major player in the budget-friendly wine market of the United States. In fact, 47 percent of Chilean wine sold in the U.S. in 2008 was in the $3 to $7 price range and 88 percent was priced less than $10, according to an A.C. Nielsen report. In the mid-1990s, big wineries like Concha y Toro, which still accounts for 32 percent of all Chilean imports into the U.S., stormed the South American market and eventually flooded the States and Europe with consistently flavorful and bargain-priced options, successfully creating a strong reputation for quality on a budget.

Jérôme Poisson, agronomist and winemaker for Chile’s Casa Lapostolle, compares the region to that of Northern California in the late 1960s and 1970s. “Like California,” he says, “Chile’s perfect weather allows growers the potential for huge crops; this blinded the early winemakers into seeing a plenitude of wine equaling a plenitude of profits.”

Conversely, many producers like the French-owned Lapostolle, saw the country’s diverse agricultural regions and its ungrafted old vines and pre-phylloxera Bordeaux rootstock as an opportunity to make superior wines, notes Poisson. Vintners big and small began to look beyond simply making a high volume of wine and instead focused on taking advantage of Chile’s unusual microclimates, elevations and soils with more sophisticated wine-production methods.

“Researching and investing in terroir and viticulture as well as hiring national and international experts and consultants . . . has resulted in grape varieties being planted in ideally suited areas, more knowledgeable technical workers and, therefore, much better wines,” says Andrea Ilabaca, marketing and public relations director for MontGras Properties, a producer of three Chilean brands (Mont Gras, Ninquén and Amaral).

This step-up in quality is evidenced at all price points. The lower-end wines have improved, which has reinforced Chile’s reputation as a source of high-quality product for a low cost. But a new generation of more expensive and super-premium wines has also been created from this industry revitalization. As a result—though the country has no plans to move away from its established and extremely successful low-priced market—its premier wine producers are working together to overcome the view held by many U.S. and European consumers that all Chilean wines are inexpensive.

Laying the Groundwork

Addressing the task at hand, Chile has recently begun to focus its attention on exports in the $10 to $20 price range, with hopes that it will create a door through which more premium wines can enter, as is explained in a July 2009 report assembled by Wines of Chile, a nonprofit trade organization representing 78 Chilean wineries that account for about 95 percent of Chilean wine exports. The quality of the wines themselves has garnered much positive attention for the industry, explains Lori Tieszen, the U.S. director of the organization.

Speaking from a brand perspective, Marian Quinones, communications coordinator for the market leader Concha y Toro, says, “When we compare our current position with the one the company had 20 years ago, we see a more solid, broad proposal in the premium-and-above categories. We see the incorporation of new lines, new varieties and new terroirs,” which have produced excellent reviews and have led the company to create a new super-premium line called Gran Reserva Serie Riberas. Brand manager of the new line, Soledad Undurraga, says the Gran Reserva line initially will be released in three pilot markets: Chile, Brazil and South Korea.

Many other producers and the land itself are adding to Chile’s market success with similar press. In 2005 Wine Enthusiast named central Chile’s Colchagua Valley as “Best Wine Region in the World,” and Casa Lapostolle’s Clos Apalta 2005, a blend of four grape varietals all Bordeaux in origin that retails for $80, was given Wine Spectator’s “Wine of the Year” in 2008. Poisson notes that the award is both exciting for Lapostolle and the industry as a whole.

Along with creating higher quality products, winemakers in Chile have found better ways to convey the distinctive characteristics of their wine regions and varietals, says Mauricio Banchieri, CEO of Puro Chile, a privately owned New York City retail and event space opened last September that sells, promotes and markets the services and products of the country. He adds that the government has also become involved with the creation of ProChile, the country’s Export Promotion Bureau. “The ProChile agency is a result of the private sector working hand in hand with government,” Banchieri explains, “and it has added a lot of value to how we present ourselves, and presenting the country’s products properly is essential to Chile’s market success.”

Barriers to Overcome

The current approach of creating better wines, taking advantage of outside expertise and marketing strategically is helping Chile make inroads in the premium market, but there are still obstacles. George Shubie, owner of Shubie’s Marketplace, a specialty food and liquor store located in Marblehead, Mass., believes that going after the premium market in this economy is particularly challenging. Shubie says that at his store the average price per bottle is down considerably. “I’ve had some high-end Chilean wines in the store before and the wines are excellent,” he says, “but it’s a very tough sell.”

Chief Winemaker Grant Phelps of Viu Manent also believes that the Chilean wine reputation of being affordable and ready to drink upon purchase often makes it difficult for premier producers to export an expensive vintage. He explains that Viu Manent’s Single Vineyard San Carlos Malbec is ready for consumption when released to the market with a $20 suggested retail price. “It would be worth $50 in five years,” he points out, “but consumers are not ready to spend that money on a Chilean wine.”

Maggie Fox, wine buyer at Gary’s Wine & Marketplace, which has three locations in New Jersey, believes this mentality may be coming to an end. With 60 Chilean labels at Gary’s Wayne, New Jersey location, Fox says the store’s clientele has responded positively to all price brackets. While she says that bottles over $50 must have a big name to draw sales, “bottles in the $15 to $25 price range, especially the Carménères and blends, over-deliver compared to similarly priced options from other countries.” This has led some customers to venture onto more premium products, she says. For example, the store has done well with Perez Cruz Liguai, a Syrah-Cab-Carménère blend that retails in the mid-$30s, “and I’m not sure people would have picked it up a couple years ago,” Fox notes.

What’s Next?

While sales of wines over $20 are not selling in great numbers in the U.S., Tieszen is optimistic that Chile will be a major player when the States economy stabilizes. “In some ways this economic crisis has brought people back to Chile because of the great value,” she says. She also notes that the market in the $10 to $20 price range is growing nicely: “What [U.S. consumers] are finding is great quality at all price points.”

Also helping Chile distinguish itself from other producers, says Fox, is the fact that it has cornered the market for Carménère, a Boudreaux-origin grape varietal only found in the country. Although many people are not familiar with the varietal, “it could well be the next Malbec,” she says. “Right now,” she adds, “the challenge is exposing people to the country’s well-done $20 Carménère’s and Cabernets.”

Quinones of Concha y Toro agrees that the main obstacle for Chile’s premier brands is reaching the consumer with these high-end wines. For example, Concha y Toro’s Don Melchor, which retails for $70 in the U.S., was essentially Chile’s first high-end option (it celebrated its 20th anniversary in 2009) and Quinones says its success proves that “premium Chilean wines will have excellent acceptance because of their excellent quality…[and the] consistency in each vintage.”

Puro Chile is also betting on the future of the Chilean high-end market with its introduction of Puro Wine, a partner wine shop co-located with the store. “We will have around 200 labels at the wine store with prices on some bottles reaching $100,” Banchieri says. The store will also be hosting regular tastings to educate consumers on the value of the country’s premium wines. “The idea is that we’ll get them to buy a $60 bottle of wine and when they taste it they will see that it could be worth $120.”

Shubie’s Marketplace is not as willing to carry a $60 bottle in its inventory, but “if a vendor comes to me with a quality $20 bottle, I can see carrying it,” says Shubie. “Over the past year,” he adds, “we have begun to carry more [$10 to low-teen bottles] because there is so much value associated with the wines.” He also notes that in the upcoming years, there is great potential for Chile to enter the mid-to-high-end market. “The European high-end wines are so expensive now and there is a lot of market share to be carved out if Chile can position itself in the great-quality $20 price range,” Shubie says.

That said, the country’s producers do not plan on letting go of the value associated with their established export market. “Chile is quality wine for a bargain, and that’s not a bad thing,” says Ilabaca. “There is probably no other wine-producing country that can offer the quality of wines that Chile does, at every single price point. Our goal now,” she adds, “is to let the world know of the far more superior wines that we produce.” |SFM|

Dennis Marrero is associate editor of Specialty Food Magazine.

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