World's wineries develop a nose for Chile

A barefoot beauty queen dances about in a giant vat of grapes, to the lively sounds of Chile's typical folk music, cueca, before more than a thousand spectators sipping wine from tiny plastic shot glasses. The ceremonial squish is to open a massive wine-tasting event hosted by 20 local vineyards in the town of Santa Cruz. In the heart of Colchagua, one of Chile's hottest wine-growing valleys, it's a chance for local vintners to strut their stuff, and even do a little real estate.

They’re banking on the growing trend in foreign land purchases in wine regions. Investors from France, Spain and Italy lead the pack, but the US, Australia, Switzerland and even Canada are also getting in on the race to get of piece of Chile’s coveted terroir.

“We have a lot of advantages that are very appealing to them,” says Alejandro Hartwig, president of the Colchagua Vintners’ Association. “Land is less expensive here, the cost of production is lower, and the climate is evidently better than in most parts of the world. So these advantages are attractive.”

Two hundred kilometres south of Chile’s capital, the Colchagua Valley begins at the foothills of the Andes mountain chain, and extends towards a smaller set of hills just before the Pacific Ocean. Its soil and unique microclimate have yielded prize-winning wines and attracted so much attention that the renowned wine magazine Wine Enthusiast named Colchagua the world’s top wine-growing region in 2005.

So it may come as no surprise that this valley has seen the biggest flurry of foreign investments, particularly from old world wine producers who’ve watched the demand for their own bottles dwindle in the face of new varieties.

“They want a piece of other new world countries,” says Hartwig. “A lot of the important brands in the world that have their commercial channels working for them know that it’s a globalized world and people want to drink wines from different parts of the world, so they want a piece of Chile as well.”

The Colchagua Valley has seen big French investment in the Casa Lapostolle and Los Vascos vineyards. Los Vascos was created in 1988, when France’s Domaine Baron de Rothschild teamed up with Chile’s Vina Santa Rita. It’s provided them with a huge market, says Enrique Marquez, agricultural manager for Los Vascos.

“The strength of Los Vascos’ sales is Domaine Baron de Rothschild, which manages the distribution and sales of all the wines in its group,” says Marquez. “It’s a brand, and a family name that has weight.” The French label has also bought prime wine lands in Argentina and Portugal, in an effort to diversify their product line.

The trend is becoming so widespread in Chile that almost all its main valleys have some degree of foreign ownership. The Itata valley is home to the Swiss creation, Vina Tierra y Fuego. In the Maipo Valley, Italians have bought stakes in the vineyards El Principal, and Vina Haras de Pirque. And the Cachapoal Valley has attracted French investments in Vina Altair, and Chateau Los Boldos.

In recent weeks, the small Chilean boutique vineyard Villard Fine Wines was bought by the French Laroche group, a sale made through Banmerchant – a company that provides financial consulting – and predicts a wave of mergers, strategic alliances and acquisitions in Chile’s wine industry.

And the interest hasn’t only been from Europe. In the 1990s, US capital gave birth to the Calina, Veramonte and Caliterra wineries. In 1998, Australian wine producer Mildara Blass partnered with Viña Santa Carolina to produce the Dallas Conte brand.

Even Canada has staked claims. Ontario’s Magnotta winery started buying land in Chile’s Maipo Valley in 1997. Today, it owns 140 hectares in Chile – twice the size of its Ontario vineyards. Canada is now the fourth-biggest client for Chilean wines, with more than $52 million worth imported last year – a 25 percent increase over the $41 million in 2003.

While Chile doesn’t keep stats on this kind of investment, the marketing agency Wines of Chile believes the trend is growing. And why not? When Chilean wine exports are increasing by more than 15% every year.

Still, some local vintners are wary of the flurry of foreign interest, and its impact on smaller Chilean wine-makers.

“Yes, we are interested, but somebody who will bring not only money, banks have plenty of money here, credit is available,” says the wealthy wine magnate Carlos Cardoen, who owns the biggest hotel in Santa Cruz and has turned his Santa Cruz Vineyard into a full-scale wine tourism centre. “What we need more than money, are partners who will incorporate experience, technology, and market.”

The government has been actively pursuing investors, particularly established, high-end vintners. Chile’s Business Promotion Corporation (CORFO) recently sent its vice-president on a trip to meet top French vintners. In May of 2007, Chile will host an international summit on wine investing, which will include participants from France, Italy, Spain, and the US.