Most major Chilean wine brands sell at the premium and sub-premium tiers, and the lower end’s dominance has long weighed down the overall category. As a result, Chilean wine import volumes in the U.S. market continue to tumble, with bottled table wine falling 7.1% last year to 5.54 million 9-liter cases.When bulk shipments are included, last year’s decline was even more acute, with total volumes dropping 19.7% to12.1 million cases.

At Chile’s higher tiers, however, the trend is quite different. “We’re accustomed to competing in a context of soft-to-declining demand for Chilean wines,” says Diego Lo Prete, senior vice president and general manager at MundoVino, a division of Winebow. “Despite those circumstances, our Chilean portfolio is healthy and growing.”

Lo Prete highlights the pedigree of MundoVino’s Chilean producers, which include the Chilean wine industry’s founding Cousiño family of Cousiño-Macul fame—with its Bordeaux-style blends from the Maipo Valley and Carménère-focused Terranoble—and Casa Lapostolle, whose wines from the Colchagua Valley’s Apalta District include Clos Apalta. “These are classic examples of producers delivering growth with exceptional value,” he says.

Dennis Kreps, co-owner of Napa-based importer Quintessential Wines, says the two Chilean brands in in his portfolio—Matetic Vineyards and TerraPura—are performing well. The company initially forecast selling 7,000-8,000 cases of Matetic EQ Coastal Sauvignon Blanc ($20 a 750-ml.) this year, but now is looking at roughly double that total. “The biggest problem right now is production,” Kreps says. “We’ve pretty much sold out this year.”

Innovation And Transformation

Many Chilean wine importers believe that better days are at hand. “Chile has yet to truly capture the imagination of young sommeliers, but I’m upbeat because of what’s happening in the vineyards there,” says Larry Challacombe, president and co-founder of Berkley, California-based Global Vineyard Importers. The company imports 11 Chilean brands, including Viña Maquis, Viña Penalolen, and Domus Aurea. “Over the course of this decade, Chile’s winemakers have started focusing on things like old-vine Pais and old-vine Carignan, as well as Syrah and Grenache,” Challacombe adds. “They’re doing exciting things.”

Kreps, too, sees promise in the younger, more innovative generation of winemakers. “Young producers are doing things differently in Chile to get the consumer’s attention,” he says. “The ones who take the time to produce great quality wines will start to rise above the rest, and that will change the overall perception.”

Perhaps no Chilean winemaker embodies Chile’s transformative efforts as much as Viña Errázuriz, one of the world’s oldest wineries, founded in 1870. As recently as three years ago, the total Errázuriz group was producing around 1.25 million cases of wine annually. Today, the company is close to achieving its goal of cutting total production for Errázuriz to around 450,000 cases, largely by eliminating the lower end of the portfolio.

“The original part of this revolution was to replace vines with better clones and develop wines from cool climate valleys,” says Errázuriz winemaker Francisco Baettig, noting that those efforts began as far back as 2004. “We had a long Bordeaux tradition in Chile, as the original Errázuriz winery and vineyards in the Aconcagua Valley are far inland—around 80 kilometers from the Pacific Ocean. But in 2005 we began planting vineyards in Aconcagua that were closer to the coast, only 10 kilometers from the Pacific.” The move helped create the cool-climate Aconcagua Costa appellation. “We really had to learn how to make elegant, cool-climate wines, particularly with the Pinot Noir,” Baettig adds. “We’re interpreting terroir better now. These wines are still fruit-driven and intense—very New World in that sense—but they’re much more refined—less alcoholic and less oaky. They express their variety better and are equilibrated and elegant, more drinkable.”

Errázuriz is handled in the U.S. market by New York-based importer Vintus. The portfolio is led by the Max brand, whose lineup includes Cabernet Sauvignon and Carménère from the Aconcagua Valley, as well as Pinot Noir, Chardonnay, and Sauvignon Blanc from the cool-climate Aconcagua Costa appellation, all retailing at $20 a 750-ml. The portfolio also includes Errázuriz Aconcagua Costa Chardonnay ($27). At the top of the range is the icon Bordeaux blend Don Maximiliano ($112), a so-called “Super Chilean” whose 2015 vintage was made with 69% Cabernet Sauvignon, 12% Malbec, 8% Petit Verdot, 8% Carménère, and 3% Cabernet Franc.

Mainstream Leaders

Despite the upscaling, big-volume Chilean wine brands illustrate the category’s larger problems. The top nine Chilean wine brands last year combined for a 5.5% decline to 4.9 million cases, according to Impact Databank. Two brands comprised over 60% of total Chilean wine volume, and both suffered big losses. Concha y Toro remains the market’s biggest Chilean brand, but its depletions slumped 9.3% to 1.82 million cases. Corbett Canyon, ranked second at 2.14 million cases, showed a 7% decline.  In all, seven of the top nine Chilean wines lost volume last year.

The two exceptions—Natura and Provisions—had strong showings, with Natura rising 11.2% to 128,000 cases and Provisions more than doubling volume to 124,000 cases. Provisions, a relatively new entrant from Precept Wines, is a boxed wine from both Chile and the United States, depending on the varietal. The Cabernet Sauvignon, Pinot Noir, Merlot, and Dark Red Blend are all sourced from Chile.

Natura, meanwhile, is benefiting from consumer interest in organic wines. “This is a bright spot for Chile,” says Rich Andrews, COO at brand owner Banfi Vintners. “We’re expecting continued growth for Natura, thanks to the overall demand for organic products. People are seeking organic food, so it’s a natural progression for them to want organic wine.”

Marketing And Merchandising Strategies

Country of origin is typically a selling point in wine, but the instinct among some mainstream marketers is to minimize Chile’s provenance because the category is still seen as too value-focused. “We don’t necessarily talk about wine from Chile,” says Quintessential’s Kreps. “We compare Chilean wines to similarly priced competitors from California. When we do that, we’re very successful.”

Challacombe of Global Vineyard Importers says that “more and more retailers are moving to varietal sets or flavor profile sets in the aisles, rather than country of origin,” citing Domus Aurea Cabernet Sauvignon from Viña Quebrada de Macul ($60 a 750-ml.) as a wine that fits perfectly with that strategy. “Very few shoppers go to the Chile section looking for a $60 bottle of wine,” Challacombe adds. “But when you put Domus Aurea with the upper-end Napa Cabernets, for example, it does quite well. It’s generally less expensive, and gets press that’s as good if not better than those pricier competitors. For the adventurous consumer, it offers a nice change of pace.”

Bill Hayes, wine buyer for BevMo, says categorization by varietal at retail has helped Chilean wines in the chain’s stores. “We used to have our South American wine set split between Chile and Argentina,” he says. “But now, we see good takeaway from our varietal set for Chile, especially when they’re a top value, when we display a ClubBev discount, and when a wine gets a good review.”

Hayes adds that many prominent Chilean labels are doing well at BevMo—especially those retailing above $10. “All the big brands that people recognize—Casillero del Diablo, Matetic, Concha y Toro, Montes—are still very viable,” he says. “When they go on sale, they sell.” But Hayes acknowledges that sales of Chilean wine overall are sluggish, particularly at the under-$10 tier. Bill Newton, wine buyer for Binny’s Beverage Depot in Illinois, also says the lower end is hurting Chilean wine sales, which were essentially flat at the chain last year.

Esoteric Varietals

Chile’s primary focus is the classic varietals, but some see opportunity outside the mainstream. At Pappas Bros. Steakhouse in Houston, wine director and master sommelier Steven McDonald says Chile’s newfound diversity is starting to resonate. While natural and organic wines fare well, McDonald says, there’s a small but growing interest in lesser-known grape varietals like Carménère and others.

Ed Lehrman, co-founder and CEO of Sausalito, California-based importer Vine Connections, which has eight Chilean wine estates in its portfolio, is also seeing an increased interest. “Carménère is still quite new to most people, and we’re having success with high-quality Carménère expressions,” he says. “We’re fortunate that we carry Casa Silva, because it makes such excellent Carménère. We’re showing growth of about 20% annually on Carménère priced at $15-$20. There are a lot of individual shocks happening that make varietals go up and down, but Carménère has been pretty consistent—even stronger than Cabernet for us.”

Andrews of Banfi is also keen on Carménère, calling it a potential sleeping giant, but adds that it hasn’t fully entered the consumer mainstream. “Carménère could be the varietal that helps define Chile in the consumer’s mind, but we’re not yet seeing it bloom,” he says. “It’s down both by volume and value, and it only accounts for 2.4% of our market share from Chile.”

Others see promise in Cinsault. “People inherently associate Carménère with Chile, but Cinsault is the hot ticket right now,” says Simi Grewal, co-founder and certified sommelier at retailer and wine bar DecantSF in San Francisco. “I’ve recently tasted some of the most fascinating, herbaceous, earthy, and unexpected wines from Chile, and all have either been 100% Cinsault, or predominantly made with it. That’s the grape to look out for in the next couple of years.” One popular Cinsault entrant at DecantSF is the 2016 Viñateros Bravos Itata El Túnel, a natural wine priced at $22 in the retail shop.

While importers still worry about the polarization between the high and low tiers in Chilean wine, there’s no question that progress is picking up at the higher end. “Chilean Cabernet should be selling three times as much as it is,” says Lehrman of Vine Connections. “The gap between large producers and small producers is so wide, and to build small producers takes dedicated small importers. So it will take time.”