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Chile Goes Upmarket (April 16, 2010)

On my first visit to the vineyards of Chile I was caught in an earthquake.

The Spanish word for earthquake is terrremoto, and this one was big. On the Richter scale, it measured 8 – nearly as powerful as the tragic quake that struck Chile on February 27th.

The date was Sunday, March 3rd, 1985. The seismic shock occurred at 7:47 pm. The epicentre was off the coast of Valparaiso, near Santiago. I was in the town of Curico at the time, a two-hour drive south of Santiago, in the house of Miguel Torres's vineyard manager.

The wine Miguel Torres and I were drinking as the whole room began to shake was his Santa Digna Bella Terra Sauvignon Blanc 1984. Bella Terra indeed.

As we rushed out of the house we covered our glasses with our hand so nothing should fall into the wine. Outside, it was like standing on a waterbed. The ground heaved under our feet and the asphalt had separated from the road and was waving like a black ribbon a foot above it.  I had never had such a need for a glass of wine in my life.

In those days, twenty-five years ago, Torres's white wines were a revelation. They were unlike any wines that were being made by the major Chilean wineries and served in the country's hotels and restaurants. Unlike his competitors, who vinted their wines in the local rauli beechwood barrels, Torres's wines were fermented in stainless steel to keep their freshness and fruitiness; they were made in a style that North Americans could appreciate. What the locals drank were wines that had rested in huge rauli tanks for years and tasted more like dry sherry than wine.

When you visited a Chilean winery back then, the first thing you saw was a huge Heath Robinson–like contraption that was used to wash bottles so that they could be returned and refilled – a very early form of environmental friendliness, although it had nothing to do with carbon footprints but everything to do with saving money. And the vineyards, virtually all located on the flat valley floors, were irrigated by run-off water from the snow-capped Andes directed onto the vineyards by a series of narrow canals and sluice gates.

In 1985 Chile had just begun to export bottled wine, and their winemakers were learning to produce wines for the international palate. Over the next twenty years they were so successful at providing the world with well-made wines at bargain prices that they captured huge shares of the overseas market.

Chile became known as the place to shop for inexpensive red and white wine. This was the image that Chile created and fostered – a country that produces bargain-priced wines that are fruit-forward and accessible and are much less costly than comparative wines from California and Australia.

Chile held this enviable position in our market until 2007. That's when an Argentinean Shiraz Malbec hit our shores and the Fuzion Frenzy started. This blend of Shiraz with Argentina's signature grape Malbec that sold for $7.45 in Ontario was first launched in Canada in March 2006 through the SAQ stores in Quebec. In the first 12 months it sold 280,000 cases in la belle province. In August 2007 Fuzion was launched in Ontario, Canada's largest market. In its first five weeks the total allocation of 5,000 cases was sold out. The LCBO bought a further 40,000 cases before December with an additional 10,000 cases destined for the Christmas market.

At one point when the Fuzion phenomenon was at its height the LCBO sold four containers in two days – that's 5,488 cases. This was unprecedented in a market where a new wine brand might be considered a success if it sold between 1,000 and 2,000 cases in its first year.

There are three reasons why Fuzion Shiraz Malbec was such a success:

  1. Price point - the quality of the wine for the price was first rate.
  2. The economy – Canadians, like the rest of the world were suffering – and are still – from the economic downturn. We did not have the disposable income to spend on wine but we wanted to keep on drinking it.
  3. Novelty – North American wine drinkers tend to be fickle. There is no brand loyalty when it comes to saving twenty cents on as bottle. Fuzion virtually single-handedly created a demand for the Malbec grape in our market.

We tend to get bored with the same old wines. We crave something new and Malbec was a grape we hadn't experienced as a varietal. But, such is the capricious nature of the consumers' palate that today it's Argentina; next week it might be Brazil, or Uruguay or the Douro Valley or Stellenbosch. Yet Argentina succeeded in holding its market because they are not a one-grape wonder. They offer great value at different price points with varieties other than Malbec.

Just as Chile had overtaken California and Australia by commandeering the under-$10 price category, now Argentina has done the same to Chile. At the LCBO, the year ended December 5th 2009, Argentinean red wines sold for a dollar value of just under $51.5 million – up 175% over the previous year. Chilean reds, by comparison, sold for $45.5 million, down 2.1% over last year.

The picture in white wines was more upbeat for Chile: Argentinean whites sold $10.3 million, up a staggering 203%, while Chile's whites sold nearly $18.5 million, up 15% over the previous year.

Recently I went back to Chile to see how the industry will deal with the new competition from its neighbour on the other side of the Andes. Good mountains make good neighbours, to paraphrase Robert Frost. What I found was a determination to produce quality wines at prices above the entry level ($8–$10 bracket) that has now been co-opted by Argentina.

By concentrating on higher price tiers I'm not referring to Chile's icon wines that sell for $70 to $100 in our market – wines like Vinedo Chadwick, Almaviva, Concha y Toro, Carmin de Peumo, Casa Lapostolle Clos Apalta, Seña, Concha y Toro Don Melchor, Casa Silva Altura, to name but a few. These are wonderful wines that can stand beside the best that France and California have to offer without a blush.

I recall a tasting in New York many years ago when Michael Mondavi compared blind three First Growth Bordeaux, Robert Mondavi Reserve Cabernet Sauvignon and Sena. Seña showed very well. And more recently in Toronto there was a tasting in which Viñedo Chadwick 2000 and Seña 2000 were ranked above Château Margaux, Château Lafite and Château Latour and Italian Super Tuscans Sassicaia and Tignanello vintages 2000 and 2001. There is no question that Chile can make world-class wines.

The trick is to convince North American consumers that they are not the bargain basement of the world. They are now doing this by adding extra value to their wines. They are making wines from vineyards planted on slopes that punch well above their weight, particularly with Sauvignon Blanc and Syrah from new, cooler growing regions such as Leyda, Limari and the Elqui Valley.

Chile is also beginning to play the organic and sustainable agriculture card, recognizing that North American consumers these days are more concerned about what winemakers are doing to the planet than what they're doing in the cellar. Chile, given its warm, dry climate, could become the leading country in the world in sustainable agriculture. That is their best story.

I have been following the Chilean wine industry for 25 years and in the global scheme of things I can think of no other country that has come so far in such a short time in terms of producing quality wine.

 

 

 

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