Why Chilean vineyards are soaring high

Wine Spectator is the leading wine magazine in the US. In 2008, Wine Spectator named Lapostolle Clos Apalta the Wine of the Year. Clos Apalta is priced differently depending on the year of harvest, but it starts around PS40. Wine Spectator often includes Concha y Toro Don Melchor in its top ten list of world wines. Asking about the price is not a good idea: the best harvests aren’t available.

The Land of Plenty

The success of Chile’s wine industry is due to a combination of factors. Geographic diversity is important. The fertile valleys of the center of Chile produced the first great Chilean wines. Recent research has shown that some wines are better when they are grown at higher altitudes in the Andes or close to the Pacific Ocean. There are many variables.

New wine regions have been identified. New grape varieties and technologies are developed.

Grapes in abundance. Rafael EdwardsCC BY-NC

Favorable conditions

Politics and the economy have also been favorable. The macroeconomic situation in Chile has been stable for many years. No inflation is reported, and there is little corruption. The country welcomes foreign investment. Winemakers and entrepreneurs in Spain, France, California (including Miguel Torres, who has been a pioneer of Chilean modernization since the 1970s), Italy, Portugal, and Switzerland are just a few to mention.

Some foreigners made significant contributions. For example, the rediscovery and valorization of pais. This grape variety was originally brought to Chile by the Spanish in the 16th century. These foreign connections were often essential for exports.

It would be wrong, however, to ignore the contribution of Chilean winemakers to Chilean success. Chilean wine production is not limited to foreigners or foreign-dominated. Aurelio Monto was the pioneer of exports in the 1980s. Concha y Toro is owned and staffed by Chileans. The company’s high-quality products (including Don Melchor) and entrepreneurial spirit are admired around the world. They also have a large range of products (they export to over 130 countries), a dynamic marketing strategy, a sales force that is always present (they ship to more than 130 countries), and diversified product lines.

The international distribution also offers significant scale economies. The big wineries are aggressive in their marketing and pricing and engage with supermarket chains and distribution companies.

Small producers and Knowledge Workers

The supply is characterized by heterogeneity and diversity. Some very successful, internationally respected Chilean wines are made by innovative firms that are often little more than one-man (or one-woman) operations. For instance, the group produces carignan exclusively in the Maule area and only under strict conditions. Sometimes, small producers benefit from the positive effects of large exporters.

Chile is the sixth largest wine-producing country in the world. FsanchezsCC BY-SA

In Chile, there are more than a hundred local winemakers and a critical number of knowledge workers who would not have made the Chilean wine miracle possible. They regularly share their knowledge, not only within the geographic clusters but also through a vibrant national network of conferences and tastings.

Many of them are international or have experience abroad. In 2013, Talca hosted the annual conference of the European Association of Wine Economists, which was attended by Maule academic researchers and Vigno, as well as other local producers.

What is the moral of this story?

Wine Tourism has, in some cases, offered the opportunity for long distance relationship marketing. Chilean wineries have excelled in prestigious competitions or have responded rapidly and effectively to the ever-increasing demand for Organic wines. The success of Chilean wines was not the result of government planning.

Even Chilean wines are not completely free from dangers or risks. Some traditional owners and the new knowledge workers do not always agree. Principal-agent conflict has occurred in the past. Chile is vulnerable to earthquakes as well as challenges to its current model of free-market economics. There is also the global warming which could force wineries to relocate plantations to the south, which would have uncertain results. There is no limit to the competition that may arise: there are many places in the world where excellent wine can be made, and people from all over are learning to do it.

Chilean wine can be a useful example for other developing countries. The success of Chilean wine shows that primary commodity exporting doesn’t have to be a curse.

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