After the rollercoaster ride of 2020 and early 2021, Chilean wine is looking ahead with greater confidence. Some Chilean brands thrived during the upheaval caused by Covid-19, while others languished. But as the on-premise starts to recover and consumers resume pre-pandemic spending habits, there is cautious optimism. Mark Giordano, president of Pacific Highway Wines, which markets the Santa Ema Winery brand, believes the pandemic reintroduced the idea that Chile produces world-class wines at affordable prices. That, coupled with younger consumers becoming intrigued to learn more about Chile and its offerings—makes for a positive selling proposition. “I see vibrancy,” he says. “I think the challenge is cutting through the messaging because there are so many products available.” 

Julio Alonso, executive director of Wines of Chile USA, predicts 2021 will unfold in two parts. “We’ll have half of the year under the Covid-19 rules, but then the other half, hopefully, under the pre-Covid rules,” he says. “So we’ll have a combination of huge growth in e-commerce and retail, then we’ll see a renaissance in the on-premise. So hopefully this will be a good year for all.” 

That said, few believe it will be easy. Chilean wines aren’t the only ones looking for a reset, and competition is fierce. “We’re bullish because the restaurants are reopening, and so we expect to grow this year,” says Ed Lehrman, co-founder and owner of Vine Connections in Sausalito, California. But in his view, Chilean wines haven’t yet broken down the boundaries that limit their potential. “We’ve yet to reach a tipping point where it’s obvious that stores should be carrying these wines and resetting shelves to incorporate significant Chile sections,” Lehrman says. “And in restaurants, it still tends to be one account at a time. It’s a work in progress.”

Mixed Fortunes

It was a year of mixed fortunes for many Chilean wines in 2020 as the pandemic wreaked havoc on the usual selling channels. The country’s wines are heavily weighted to the off-premise and many brands fared well as at-home consumption gained prominence last year. But those brands with a heavy on-premise presence, as well as smaller, lesser-known Chilean brands sold mainly in specialty retail shops, faced significant headwinds. “As the U.S. market began to shut down in March 2020, the devastation in the on-premise was unimaginable, and restaurant wine sales pretty much ground to a halt, including sales for Errázuriz,” recalls Michael Quinttus, CEO of wine importer Vintus. “However, on the bright side, consumption shifted strongly to the off-premise.” Quinttus adds that the MAX line from Errázuriz performed particularly well, growing double-digits at retail. “Similarly, we saw a surge in growth with these wines via e-commerce channels, as consumers embraced home delivery like never before,” he says.

But with sales skewed so heavily in the off-premise, particularly in grocery and big-box retail as consumers limited their shopping early in the pandemic, many lesser-known brands struggled to gain attention from consumers. “Brands that did well were brands with strong pedigree and category prominence,” says Ian Downey, executive vice president of Winebow Imports. “These were led by Cabernet Sauvignon sales, with Carménère holding its own. Brands that fared less well are specialty market players or ones with less category prominence.”

Larry Challacombe, president of Global Vineyard Importers, agrees. “If you’re a big brand that’s sold in chains—a name that people know—I think in most cases your last year was pretty good,” he says. “The beneficiaries were brands that were sold in a supermarket environment.” Challacombe also notes the multiple pivots taken by Chilean wineries in recent years. “Before Covid-19 hit, a lot of Chilean wineries and importers were making an effort to get more of a presence on-premise,” he says. “That was an important part of our strategy, because the vast majority of Chilean wine, historically, has been sold at retail. There was a real, well-intentioned effort to get onto more restaurant wine lists and more by-the-glass listings. It turned out that negative was a positive last year, because we did have, as a whole, a lot of retail and that turned out to be a pretty good place to be.”

Leading Chilean brands had mixed performances. The big winners among volume leaders were two brands from Precept Wine: House Wine boxed wine and Provisions Wine Co., neither of which is marketed specifically as a Chilean wine. Hal Landvoigt, director of winemaking at Precept Wine, says Chilean wines really deliver on quality. “The days of Chilean wines being seen as the cheap bottom-shelf drink have gone away,” he says. The growers whom Precept works with “put their best foot forward in making the best quality wine,” noting that the consumer response is indicative of their success. Both House Wine boxed wine and Provisions grew at double digits in 2020, according to Impact Databank. 

Viña Concha y Toro continues to lead the field at more than five-times the size of its nearest competitor. Brand volume came in at 2.11 million cases, a 0.5% decline. Santa Rita, from Delicato Vineyards, advanced 2.5% to 415,000 cases, and Gato Negro held steady at 340,000 cases. 

Retail was the primary channel for depletions in 2020, and higher-end wines that typically would have found traction in the on-premise struggled to make inroads in stores. Wines priced at $15-$20 slumped 27.6% in retail channels, according to IRI data, while the $20-$25 price band declined 53%. A few iconic Chilean super-luxury brands successfully gained retail acceptance with the on-premise largely shut down, driving the price band to a 3% gain. At the lower end of the spectrum, wines priced between $4 and $14 generally fared well. 

Pivoting To Digital

Pacific Highway Wine & Spirits was one of many importers forced to shift its strategy in light of market conditions. “It’s kind of ironic because we spent some time focusing on the reserve and ultra-premium tiers—wines that retail for around $30—and our strategy was very on-premise focused,” says Giordano. “Well, we all know where that went. So we basically pivoted to a digital and online focus for those wines. We recognized getting new distribution in retail was a pretty tough fight, especially for wines of relatively small production.”

The move online was successful, Giordano notes. “Now we have the challenge of retaining and maintaining that online business, but also as the on-premise opens up, making sure that we’re doing the best we can to show those offerings to the broader on-premise trade and get back to what we were setting out to accomplish a year and change ago,” he says. Quintessential Wines, which markets the Matetic Vineyards and TerraPura brands, successfully transitioned a good portion of its volume to the off-premise during the pandemic, according to its co-founder, Dennis Kreps. “We probably lost over half of our on-premise business for Matetic, so we just had to make it up with retail,” he says. “We shifted pretty quickly with our whole portfolio. It ended up having a really strong 2020, but it took a lot of work to do it.” 

For some others, the unusual year represented a stall in development plans. For example, Global Vineyard Brands’ pre-pandemic quest to gain significant traction for its six Chilean brands in the on-premise hadn’t yet yielded fruit, which, in a year when the on-premise dining was severely curtailed, can be seen as a positive. But on the other hand, the six brands are more boutique in style and have limited distribution in the big-box channels that dominated in the early stages of the pandemic, when customers were shopping sparingly and limited themselves to a single destination. “That part hurt us, but it helped that we had a lot of retail in general,” Challacombe says. The lack of on-premise occupancy turned out to be a good thing in 2020, but Challacombe is confident in the long-term viability of the channel. “Now that we’re coming out of it and restaurants are opening, I can’t speak for the whole category but I know that we will continue our quest to deal with the on-premise a bit more,” he says. 

Making inroads in the on-premise will likely be challenging for most importers. Quintessential’s Kreps says the playing field has shifted and opportunities have slimmed. “As restaurants are opening up, they’re opening with smaller lists and fewer wines being featured,” he says. “They’re playing much more conservatively with their inventories, and the bulk of that is probably going more towards California wines. We’re seeing some increases but it’s not a night and day change.” 

But Giordano sees new opportunities for the on-premise channel. “If you consider what restaurants have dealt with in the last year, the ones that survive are going to continue to look for the best bang for the buck and I think Chile offers that,” he says. “I think it’s going to be a big opportunity for restaurants to continue to latch on to Chilean wines, bringing delightful wines to consumers at a nice price point.”

Pricing Challenges

Chile’s reputation for a strong quality-value relationship could serve it well in the coming months as uncertainty from the pandemic continues. But thus far, the emergence from the pandemic hasn’t been as economically devastating as predicted. The massive stimulus bills have helped ensure consumer spending even as unemployment numbers fluctuate. 

That said, Chile is still trying to break free from its “cheap and cheerful” reputation, and the past 12 months didn’t help. “While Chilean sales experienced a 16% volume increase, this was driven by the strong growth in the value-box category, and in the $4-$11 retail segment,” says Winebow’s Downey, citing IRI data. “However, Chilean wines above $11 retail experienced a 2.4% decline. The primary ranges, $11-15 retail which was up 3.1%, and $15-20 which was down 18.4%, were both well below the global Import wine sales performances for these crucial price ranges. There were some ultra-luxury and allocated selections that transcended the challenges of the higher-priced categories. These are most often wellknown, well-regarded, and often very well-rated selections.”

Rodrigo Maturana, senior vice president of marketing and international business for Fetzer Vineyards, which offers Chilean wines at various price points through its position as official importer for the South American wines of Viña Concha y Toro, says the company’s lower priced wines, such as Frontera and Casillero del Diablo, performed well last year due to brand recognition and attractive pricing. “Our prestigious ultra-premium and above portfolio was impacted by a slowdown in the on-premise business for brands such as Marques de Casa Concha and Don Melchor,” he says. However, Maturana notes that both brands experienced strong growth in the first quarter of 2021 as the on-premise business began coming back on stream. 

And at retail, some are seeing enthusiasm for Chile’s more upscale wines. “The $8-$10 doesn’t ever really move so we stopped doing that,” says Tasha Zonski-Armijo, manager at Albuquerque’s Jubilation Wine & Spirits, noting the store’s preference instead to focus on wines in the $12-$20 range. In many cases, consumers aren’t familiar with some of the Chilean wines on the shelves. “We tell people if you like Spain and you like Portugal you’re going to like Chilean wines too,” she says. “Consumers are hesitant at first because they don’t really know too much about it. Once they taste it they realize how great it is.” 

At West Coast chain BevMo, Chile is also making headway on pricing. “There’s definitely a surge in the upper-tier price points for all of South America,” notes the chain’s category lead for wine Bill Hayes. “As we added brands like Lapostolle, Matetic, and Cousiño-Macul to our assortment, the customers seem to really like the price points. These are wines that customers will try and come back for again and again.” Casa Lapostolle Cabernet Alexandre is available at a ClubBev price of $20 while the line’s Sauvignon Blanc is $11. Matetic EQ Coastal Sauvignon Blanc carries a $26 price tag and Cousiño-Macul Cabernet Antiguas sells for $15 to ClubBev members.

Importers make the argument that many of those Chilean wines in the $15-$30 price range rival in quality their counterparts in California with far higher price tags. In Lehrman’s view, many of those domestic options are overpriced. “I can’t think of too many wines out in the market, even from other importers, that are overpriced,” he says. “We keep making the push about the stellar quality and value proposition coming from Chile.”

Sustainable Factor

Cabernet Sauvignon accounts for the majority of red wine produced in Chile, while Sauvignon Blanc and Chardonnay are prevalent among whites. Some Chilean producers are seeking to differentiate themselves through varietals not typically marketed from other countries; namely, Carménère and Pais. The two varietals have had mixed results with U.S. consumers. 

Perhaps a bigger differentiator for Chilean wines is the focus on sustainability. On Earth Day in April, Wines of Chile launched a promotion called Sustainability 365, which highlights the commitment of Chilean wineries to sustainability in viticulture, vinification and bottling, and social and wine tourism. The trade group is overseeing the certification of wineries, and more than 30 exporting wineries are involved. 

“About 80% of the wines exported are coming from wineries that are certified,” says Wines of Chile’s Alonso. He adds that sustainability is a strong driver of acceptance by retailers and resonates with consumers as well. “They realize that Chile is a far away, mysterious country but also pristine and pure. We have some conditions that other countries don’t hold, like being phylloxera-free and being truly committed to sustainability. They’ve responded to that. And of course, the market is going in that direction so we are aligned.” 

Quintessential’s Kreps says Matetic wines are farmed organically and biodynamically and have always been sustainable. That fact might be beginning to resonate. “People are drinking a bit less but are trying to be healthier,” he says. “I think they’re starting to hear the sustainability message. We’re seeing more demand for organically grown, organically farmed, or even organically made wines. There’s more space on the shelf and gatekeepers are asking for those particular selling points.” 

Chilean brand Natura is also capitalizing on its sustainable credentials. “Much like with Castello Banfi in Montalcino, sustainability and environmental responsibility are core to the Natura portfolio,” says Banfi Wines owner and CEO Cristina Mariani-May. “We very much embrace the sustainability aspect of Natura; it’s certified organic by EcoCert, vegan-friendly, gluten free. The overall purity messaging has been integral to building Natura over the years. While we have always been communicating these messages to trade, we are seeing an uptick in dialogue across our social media channels about these topics and an increase in requests for point-of-sale pieces that speak to these unique advantages.” 

Chilean producers will likely need every competitive advantage they can find. “There will continue to be a lot of headwinds this year,” Kreps says. “One will be California producers trying to make up for the losses on-premise and aggressively driving business. I think we’re also going to have a lot of competition from Australia because the Chinese markets have dried up. Those wines that can really hang their hat on quality, site-specific, terroir-driven wines I think will do well.”