In the past year, namely 2015, China topped the list of the export markets for Chilean wines for the first time (in terms of volume). The total volume of Chilean wine exports amounted to 881,438 tons. The country’s wine exports to China had a volume of 154,813 tons, accounting for around 17.56% of the total. China ranked No.2 in terms of the value of Chilean wine exports. The total value of Chilean wine exports stood at USD1,842,696,000. The country’s wine exports to China had a value of around USD222,504,000, accounting for around 12.07% of the total.
As Chile is China’s biggest country of origin in terms of bulk wines, which have relatively low unit prices, let’s review the data regarding Chilean original wine exports to China: 48,801.159 tons in terms of volume, accounting for 31.5% of the total volume of Chilean wine exports to China; USD170,269,000 in terms of value, accounting for 76.524% of the total value of Chilean wine exports to China. It is obvious that despite the small portion in terms of volume, wines in bottles have contributed a big portion in terms of sales amount.
It is clearly observed from Figure1 and 2 that China has registered the fastest growth rate in the four largest target markets of Chilean wine exports, and is the most promising market of Chilean wines in terms of trends.
An overview of Chilean wine-producing regions
Chile occupies a long, narrow strip of land between the stretching and towering Andes to the east and the vast Pacific Ocean with the endless coastline to the west. It borders the Atacama Desert to the north and the Antarctic ice sheets in the far south. Chile extends over 4,000 kilometers from north to south, has an average width of just more than 100 kilometers and is located in the earthquake-prone zone, resulting in extremely complex and varied land features, soil types and microclimates. All these factors make the country’s wines exceedingly diverse.
Due to political reasons, Chile’s wine industry saw slow growth before the 1970s. The country’s modern wine industry didn’t take off until the late 1970s. Therefore the past forty years or so witnessed the evolution of its modern wine-producing regions.
In 1979, Miguel Torres, a famous Spanish winemaker, arrived in Chile and began making wines in the Curicó Valley. His arrival marks the opening of a new chapter for Chile’s wine industry, which is generally deemed as the beginning of the country’s modern wine industry. Miguel Torres pioneered in introducing the advanced stainless steel temperature control fermentation tank, the French oak barrel as well as some cloned varieties, promoting the revolutionary development of viticulture and vinification techniques for Chilean wines.
Since the 1980s, new top wine-producing regions have been gradually developed across the country: including the Casablanca Valley, the Limari Valley, the Bio Bio Valley, the Malleco Valley, the Elqui Valley, the San Antonio Valley, etc.
As for the development of wine-producing regions and technical development over the past decades, although quite a few wine-producing regions with unique terroir have been developed in the country, e.g. the Copiapó Valley and the Huasco Valley in Atacama in the north, and the Cautín Valley and the Osorno Valley in the south, there is still great potential in this regard. There is vast room for the future development of Chile’s wine industry. Currently, nearly 70% of Chilean wines are exported, and the country’s wine industry is typically export-oriented. Wines are Chile’s most important exports next to copper, seafood and fresh fruits. Chilean government authorities and business capital attach importance to the wine industry.
Let’s take a look at Figure 3 to review the development of Chilean wines in the Chinese market. Before 2004, Chilean wines had a relatively high proportion, with low-end bulk wines and wine bases getting the lion’s share. Due to higher tax and exaggerated negative information on imported wines, the Chinese market was sluggish with small demand. After China’s entry into the WTO, the overall tariff on imported wines was reduced to 14% (plus 10% consumption tax and 17% value-added tax). Meanwhile, the subsequent years saw frequent external exchanges. All those factors have led to a spending spree in wines in that period. There is another boon for Chile’s wine industry. In 2005, China and Chile signed the Free Trade Agreement (FTA), which is the first FTA signed between a non-Asian country and China. According to the agreement, the tariff on Chilean wines exported to the Chinese mainland was lowered by 1.5% per annum, and cut to zero by 2015 after 10-year reduction (plus 10% consumption tax and 17% value-added tax). Chile has become the second country of origin enjoying zero tariffs on wine exports to China after New Zealand.
Chilean wines emerged in the thriving wine market in the Chinese mainland after 2005-2006. Nevertheless, without many resources for marketing and promotion, Chilean wines’ performance was barely satisfactory. Since 2012, the spending on official overseas visits, official vehicles, and official hospitality has been effectively controlled, the global economy has been depressed, and the Chinese government has tightened economic policies for several times. In the meantime, hotspots of wine markets have changed and the consumption concept of the public has been becoming mature bit by bit. The major part of the market has shifted from group consumption and government consumption to booming individual consumption. During 2012-2014, the wine market as a whole choked on transition. However, Chilean wines boasting of very high price-performance ratio were not affected too much. The exports to China even witnessed steady growth. Chilean wines have become the preferred choice of more and more importers and consumers.
The success is also attributed to the efforts made by Chilean wine promotional bodies and vintners. In particular, the Wines of Chile has been organizing promotional events ever since it entered the Chinese mainland market. It played a significant role in promoting Chilean wines. Additionally, some Chilean wine companies and Chinese importers also organized many promotional events, some of which were supported by the official institution ProChile.
Figure 4 shows that the average price of wines imported from Chile is quite low. It is true that cheap bulk wines are a factor in this regard. However, Chile’s bottled wines exported to China are also sold at a low price. As a result, consumers consider Chilean wines as low-end and inexpensive products with high price-performance and monotonous styles. In view of this, the Wines of Chile has organized a host of events for tasting fine Chilean wines, master classes, wine exhibitions, study tours in wine-producing regions, etc., enabling influential professionals and opinion leaders from media and consumers to experience the strength and diversity of fine Chilean wines. Furthermore, the promotional body has also participated in local professional wine exhibitions which have a far-reaching influence, e.g. ProWine China. In 2016, the Wines of Chile will continuously organize pavilions to participate in the exhibition. Thanks to effective promotion, the area of the pavilion has increased by 50% over last year.
Efforts made in the past years have finally paid off. It is not easy to change the concept of most consumers. The completion of such a long-term task needs the promotion and organization of Chile’s wine industry and the joint efforts and input of Chile’s wine producers and China’s wine importers.
In 2016, Chile introduced the visa-free entry policy for Chinese citizens who have obtained a U.S. visa. The policy will motivate more consumers and professionals to visit the country’s wine-producing regions and experience the diverse styles and high price-performance of fine Chilean wines, thus fostering the wine market.
In 2016 and beyond, the Wines of Chile (WOC) will make use of more resources to organize promotional programs. The following activities are noteworthy for industry insiders:
1. To found a Chilean wine academy, offer courses for consumers and professionals, and present Chilean wines to those attending the courses.
2. To launch the special promotional event “Love Wine, Love Chile” at the beginning of 2017, mainly targeting social media outlets and e-businesses.
3. To organize road shows of Chilean wines in 2017 and encourage Chile’s wine companies to participate in the events targeting Asia and other regions.
4. “Billionaires to Chile”: To invite influential VIPs in the luxury field and billionaires to visit Chile and learn about and taste local wines.
5. To carry out winemaker exchange programs by organizing Chilean winemakers to make wines in China and vice versa, thus promoting cultural exchange and enabling Chile to have an opportunity to take a part in fostering the wine culture and developing the wine industry in China.
We will keep a close eye on the promotion of Chilean wines in the Chinese market. We hope that more consumers can enjoy fine Chilean wines with rich diversity and high price-performance.