Concha y Toro - The George Washington University

Comments

Transcription

Concha y Toro - The George Washington University
9-509-018
REV: JUNE 30, 2010
ROHIT DESHPANDÉ
GUSTAVO HERRERO
EZEQUIEL REFICCO
Concha y Toro
In February 2006, Rafael Guilisasti, vice-chairman of the board of Viña Concha y Toro SA, was
driving from the company’s Santiago headquarters to its winery in Pirque, approximately 17 miles
south, for a meeting with his brother Eduardo, the company’s CEO. As Rafael admired the tidy rows
of vines stretching on both sides of the road, ‘he reflected on the challenges facing the company.
Concha y Toro was Latin America’s largest wine exporter and among the world’s top ten wineries.
Yet, in the previous year, the firm’s operating profits had dropped 20.9%, while operating margins
had decreased from 16.1% to 12.4%. The profit reduction seemed to be due to pressure on sales prices
posed by an oversupply of wine in world markets as well as to the Chilean peso’s revaluation in
relation to the U.S. dollar. In Rafael’s view, some corrective action was needed—but what?
Chile
Chile occupied a narrow stretch of land located along the Pacific Ocean in Southwestern South
America. Extending approximately 2,650 miles north to south, its average width spanned less than
110 miles, yet its landscape ranged from arid desert in the North to forests, windswept glaciers, and
fjords in the South. The majority of Chile’s 15 million people lived in the fertile valley that made up
the country’s center.1
Since the end of General Augusto Pinochet’s 16-year military dictatorship in 1990, successive
governments had maintained the pro-market reforms that Pinochet had instituted. Chile had an open
economy, with foreign trade accounting for 32% of its GDP, and had negotiated free-trade
agreements with the United States, the European Union, and Mercosur. The country was the world’s
largest exporter of copper, fruit, and farmed salmon and was an increasingly important player in the
global wine industry. In recent years, high demand for Chile’s export commodities—copper in
particular—coupled with a weak dollar had prompted a serious revaluation of the national currency.
Most economists interpreted these forces to be long-term and predicted that the peso would remain
strong for the foreseeable future. On August 15, 2003, one U.S. dollar traded for 724.20 Chilean pesos
(CLP$724.20); however, by November 11, 2006, the exchange rate had declined to CLP$526.0.
________________________________________________________________________________________________________________
Professor Rohit Deshpandé; Gustavo Herrero, Executive Director of the Latin American Research Center; and Senior Researcher Ezequiel Reficco
prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of
primary data, or illustrations of effective or ineffective management.
Copyright © 2008, 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
509-018
Concha y Toro
The Global Wine Industry
In 2006, wine production was geographically concentrated, with three countries—France, Italy
and Spain—accounting for more than 50% of total world production (see Exhibit 1 for main wineproducing countries). At the company level, however, the industry was quite fragmented: while the
top three players in the spirits and beer industry claimed 43% and 25% market share in 2006,
respectively, the top three wine-producing firms constituted only 7% of the market (see Exhibit 2).
Chile was among the so-called “New World” producers, together with the United States, Australia,
New Zealand, Argentina, and South Africa.2 As noted by Patricio Middleton, director of Chilevid, an
industry association, New World producers were not Chile’s primary competitors. Rather, “France,
Italy and Spain [were] the big guys to beat.” Since the early 1980s, New World producers had gained
share at the expense of the Old World producers and, to a lesser extent, other producers (see Exhibits
3 through 6).
The superiority of European wines ‘over those of New World producers had long been taken for
granted. That changed with what became known as the Paris Wine Tasting of 1976, or the
“Judgement of Paris.”3 That year, Paris-based British wine merchant Steven Spurrier organized a
blind tasting of California and French wines in honor of the bicentennial of the American Revolution.
The nine-taster jury included eight of France’s top wine-tasting experts. Surprisingly, the judges
could not distinguish California from French wines. Moreover, California wines won the contest in
the red and white wine categories.
Only one journalist attended the event: George Taber, a Time magazine correspondent. His story
turned out to have a major impact, marking the end of European winemaking tradition’s undisputed
superiority and the coming of age of a new, more scientific approach to wine quality assessment. On
the one hand, California’s wine industry took off, commanding ever-higher prices; on the other,
French wineries were forced to innovate. The experience had been replicated periodically ever since,
with California wines often coming out ahead of their French competitors. But despite these setbacks,
the French still enjoyed a formidable position in the industry based on the strong quality of their
wines and an enviable set of positive attributes associated with the country. As one journalist put it,
“The French seem to have plenty going for them . . . Chic, classy, and the most romantic of people—
this is the general perception one has of them. After all, they are the creators of Champagne and
Chanel . . . The same goes for wine. We may not be connoisseurs, but there’s nothing like a glass of
Veuve Clicquot to add class to wining and dining.”4
An aura of refinement and sophistication had special implications for a product like wine, whose
quality attributes were opaque to most consumers.5 Positive country images led to what psychologists
called the “Halo effect”: people’s expectations led them to choose wines based on their assumptions
about product quality. For example, in 2005, Texas A&M University conducted an experiment in
which a group of people was asked to taste and grade three wines labeled French, Californian, and
Texan. Nearly all individuals picked the French wine as the best, the Californian second, and the
Texan third, despite the fact that all three wines were the same Texas wine.6
To many observers, the national image that a particular producer projected to the world was
important for wine marketing. “It’s easy to see why English-speaking Australia with its sunny image,
strong sports teams, and lucky country tag should have a positive image. Other countries, notably
those of Eastern Europe, have struggled to get out of the bargain-basement price bracket.”7 Most
success stories in the wine industry had a good “story to tell” vis-à-vis the consumer. Italian wines
sold well in ubiquitous Italian restaurants all over the world, and Spanish wines were also associated
with that country’s strong cultural profile. Many were wondering if Chile could replicate that path.
The country was well-known as a peaceful and stable exporter of commodities, but contrary to other
2
Concha y Toro
509-018
Latin American countries such as Mexico, Brazil, or Argentina, it didn’t possess a readily identifiable
music, cuisine, or cultural identity. As wine critic Tim Atkin put it, Chilean wines can be seen as “the
Volvo of the wine world . . .… safe but boring.” This anonymity was a source of concern to many
Chileans, who were thinking about building global wine brands on the shoulders of Chile’s national
image. In the words of Rafael Guilisasti, “They say country image can be built through advertising,
but what can we advertise?”
Transformation
The increasing influence of New World producers was radically transforming the global wine
industry. Whereas the industry had once been a producer-centered craft derived from the
combination of terroir8 and tradition, it was now becoming a global marketing- and consumeroriented business. The Old World was seen as better at producing subtler wines, and the New World,
bolder ones.9 Yet the differences between the two extended far beyond the product to include
industry structure, the type of producer that went into the business, the regulations these producers
were subject to, and the tactics that were used to market products (see Exhibit 7). Winemaking had
traditionally been structured based on regional origins: Bordeaux, Bourgogne, Rhine, or Rioja. But in
large part because of New World producers’ strategies, categorization had switched to grape
varieties, such as Cabernet, Merlot, or Malbec, in effect leveling the playing field for the Old and the
New World producers alike.
Another source of industry transformation was “structural and long-term oversupply that has
caused falling prices and margins all round the globe,” according to the latest report from Rabobank,
a trusted industry source.10 Globally, the amount of land area under vines reached a peak in the 1970s
and then started to decline because of the removal of vines—or “grubbing out”—in the European
Union and the former Soviet Union. “The European problem of overproduction has been addressed
by a policy of limiting production potential and encouraging the permanent abandonment of
production areas, contributing to a decrease from 4.5 million hectares in 1976 to 3.2 million hectares
in 2005.”11 It was estimated that grubbing out in Europe would lead to the abandonment of 80,000
hectares of vineyards per year,12 so that supply could adjust to the emerging pattern of wine
consumption: “less but better.”13 Outside Europe, on the other hand, growth of the planted surface
continued apace, to exceed 4.3 million hectares in 2006.14
Countries and companies that failed to adapt to changing consumer demands were losing ground.
Although Old World producers still occupied a commanding position, in recent years their
production had decreased. Between 1999 and 2004, the compound annual growth rate (CAGR) for
Old World producers was -0.4%, as compared with 2.3% for New World producers. Increased
competition was also putting pressure on New World producers, forcing them to offer strong price
incentives just to maintain market share. Australian producers, for instance, launched “BOGOF” (Buy
One Get One Free) campaigns to move their product in the U.K. market. To some experts, these price
incentives were creating a perilous downward spiral in the wine industry. Deep-discounted
promotions on wine led the shopper to act “like a junkie, waiting for the next fix, the next BOGOF,”
said Dr. Andrew Fearne, head of research at the Dunnhumby Academy of Consumer Research.15
To gain market share from Old World producers, New World producers were constantly trying to
develop wines that were more accessible and more conforming to consumer palates. According to
some experts, the most dynamic market segments (and those least exposed to price-based
competition) were those that sold in the United States in the $10–$25 per bottle retail price range (see
Exhibit 8). Reacting to competitive pressures, many producers were trying to build consistent global
brands that would generate consumer loyalty and assure a price premium through differentiation.16
Industry experts remained skeptical of this strategy’s effectiveness, noting that the specificities of
3
509-018
Concha y Toro
winemaking made it difficult to achieve product consistency in large-scale production. Since
consumers appeared to have little brand loyalty, and since demand as a whole seemed fragmented,
most wineries spent very little on marketing. Historically, media advertising expenditures in the
wine industry had been negligible compared with other alcoholic beverages (see Exhibit 9). To the
extent that wine producers did invest in marketing, they limited themselves to print ads in wine
journals, to investments in retail merchandising and point-of-sale actions, or to sponsorship of
events—such as wine tastings—targeted to key audiences.
Consolidation
Another important industry trend in recent years was global consolidation. At the producer level,
this trend was exemplified by the case of Constellation, an international producer and marketer of
wine, beer, and spirits. In late 2004, Constellation bought the Robert Mondavi Corporation for $1.36
billion, becoming the world’s largest wine company with annual global sales of 87 million cases—56
million cases of which were sold in the United States. According to Wine Industry Monthly, “in an
industry defined by consolidation, Constellation Brands is the consolidator.”17 Consolidation was
even more important at the distribution level. In the United States, where distributor consolidation
was especially marked, the top 20 spirits and wine wholesalers had amassed such scale that they
were projected to account for nearly 70% of an estimated $36.6 billion in wholesale beer and wine
revenues for 2006. The top five distributors in that market accounted for 42% of revenues, and the top
10 for nearly 60%.18 “In the U.S. market, the number of distributors went from around 2,000 to 300.
Some key states are handled by only four or five distributors—even two or three in some cases,”
explained Carlos Serrano, export manager at Viña Montes, a producer of high-quality Chilean wines.
As Rabobank reported, the distribution and retail chains were exerting their power over producers,
imposing price discounts.19 At the same time, distributor consolidation meant that “many small
wineries can no longer get distribution, which has led to an emphasis on direct shipping… More
wineries are taking responsibility for marketing and sales,” according to Cyril Penn, editor in chief of
Wine Business Monthly.20 To him, this was a long-term trend: “The logistical role of distributors . . .
will only strengthen.”21
Large distributors were pushing wine producers to market fewer brands—i.e., fewer SKUs. They
were also trying to exploit the low brand loyalty of most wine consumers, and increase profit
margins, through the creation of their own brands. The organic and natural food chain Trader Joe’s
had led the way with a highly successful Two-Buck Chuck wine line, sold under the Charles Shaw
label. Whole Foods Market, Albertsons, and Safeway soon followed with private labels of their own.
As of 2006, grocery store wine sales amounted to $3.7 billion, accounting for 25% of total U.S. wine
sales. Of that amount, private labels corresponded to only 2%, but most observers believed that their
share would increase. “The key is distribution,” said Brian Sharoff, president of the Private Label
Manufacturers Association in New York. “If Wal-Mart decides to become an aggressive wine
merchant, if Safeway decides to become an aggressive wine merchant, using their own brands, it will
show up in the market-share statistics very quickly.”22 Cyril Penn concurred on this point: “Private
labeling will be really big,” he noted.23
Consumer Behavior
Long-term global wine demand was growing modestly, both in absolute and per capita terms (see
Exhibits 10 and 11). However, this broad trend masked more complex realities. In mature markets,
such as those of Western and Eastern Europe, absolute demand was stable or slightly diminishing,
whereas in new markets, such as China, demand for wine was growing at double-digit rates. In the
United States, wine consumption was increasing, with wine becoming the alcoholic beverage of
4
Concha y Toro
509-018
choice, particularly among middle-aged male consumers (see Exhibit 12). Despite variations across
markets, one feature that seemed to cut across all was the “flight to quality”: the tendency was to
drink less low-quality, brik-packaged wine and more high-quality, bottled wine.
According to some studies, wine markets were particularly sensitive to information about the
wines’ country of origin.24 Academic research claimed that the presentation and perception of origin
in retail environments could greatly impact wine sales.25 A recent study that tracked the influence of
country of origin, varietals, and specialized ratings on pricing concluded that while French wines
could garner premium prices, producers in “Chile and South Africa . . . are penalized price-wisely in
the United States market.”26 Regions of origin and controlled bottling (such as Appellation d’origine
côntrolée or AOC) could act as points of reference to the consumer. Regions and terroirs could
underpin a brand so long as perceptions of the region’s winemaking quality could be solidified and
enhanced over time. “So, while building the brand of a country—Australia—or a region—Rioja—may
help to create image and distinction in the market, it is not enough,” according to the 2006 Rabobank
report.27
Most data suggested that consumer demand varied across markets. One recent study concluded
that country of origin was “the most important factor when Chinese consumers evaluate wine quality
for purchase,”28 perhaps because wine drinking in that country was a social statement. In
Scandinavia, on the other hand, 75% of wine sales were not packed in bottles, but used the bag-in-box
(BiB) technology, which allowed for longer shelf life. Most analysts attributed this preference to the
fact that many Scandinavians lived alone, and thus were able to dispense a 750 cubic centimeters box
over a longer period of time—around four to five days.
Opinions differed on how important brand loyalty really was in the wine business. Although U.S.
consumers were thought to possess the highest brand awareness and loyalty, even their brand loyalty
did not seem especially strong. Brand loyalty could play a role in the large popular segment, where
consumers lacked knowledge and were risk averse, but in the premium segment, consumers wanted
more choice and tended to seek out novelty.29 According to many observers, displaying knowledge of
wine attributes became a subject of conversation and a symbol of status in certain circles, which led to
an incentive for experimentation and brand-switching.
Chilean Wines
Chile had produced wines since the sixteenth century, when Spanish Catholic priests imported
vines to perform the Eucharist rites.30 The country’s geography made it a nearly ideal place for the
industry to spread its roots and prosper. Chile’s natural barriers—the Pacific Ocean to the west, the
Atacama Desert to the north, the Andes to the east, and Antarctica to the south—shielded it from the
tragic phylloxera plague of the mid-1800s, which destroyed most of the world’s vineyards. Chile had
become the world’s largest producer of Carménère grapes, a variety that belonged to the Cabernet
family and originated in the Médoc region of Bordeaux, France.
For decades Chilean vineyards produced only low-quality blends aimed at the domestic market.
After the overproduction crisis of 1983, the industry consolidated, modernized, and began producing
some high-quality varietals. By the end of the decade, exports started to take off, peaking during the
1990s. By 2006, 65% of Chile’s wine production was sold abroad. Chile commanded about 3% of
global production and ranked No. 11 as a producer. Its share of wine exports was twice as large,
making it the world’s No. 5 ‘exporter, both by volume and value (see Exhibits 1 and 6). By contrast,
Chile’s domestic market was relatively small and unsophisticated: a full 75% of domestic sales were
low-quality, brik-packaged wine, while 80% of exports were bottled wine.
5
509-018
Concha y Toro
Two winery trade associations supported the Chilean wine industry’s development. “Viñas de
Chile,” founded in 1949, counted 48 member wineries in 2006, including the largest producers of
high-quality wines. Traditionally the association had focused on influencing government policies and
regulatory frameworks affecting the domestic market, but in recent years it had also advocated for
export-oriented public policies and regulations. A second association, “Chilevid,” was founded in
1993 and represented 85 young and small wineries that accounted for 20% of Chile’s wine
production. Chilevid focused on raising financial resources to develop its members’ business as well
as on providing legal, technical, and commercial advice on wine exports. In the early 1990s,
Chilevid’s membership was eager to export but lacked the technical know-how. Hence, it sought
cooperation with the older winery association, Viñas de Chile. This resulted in the creation of “Wines
of Chile” in 1996, an organization 60% owned by Viñas de Chile and 40% by Chilevid. Focusing on
the export market, Wines of Chile was the recipient of money granted by the Chilean government to
promote Chilean wines abroad. In March 2003, the organization opened an office in London with a $6
million budget to sponsor events with wine experts and journalists, collect consumer information,
and work for the establishment of a “brand of Chile.”31
As Chilean wines became better known in global markets, they developed a reputation for “value
for money” across all price points. Most experts agreed that the quality of Chilean wine had
consistently improved over the years, but Chilean producers still tended to be positioned at the lower
end of the fine-wine spectrum. In 1998, a group of Chilean wineries led by Viña Santa Carolina
flooded the Japanese market with low-quality, low-priced bulk wines. This opportunistic move
generated short-term market share gains but left a mark in the minds of Japanese consumers, who
thereafter associated “Chilean” with “cheap” wine. It took the Chilean industry seven years of
sustained efforts to rid itself of that image. And according to René Merino, president of Chilevid, the
image “is still there, to a certain extent.”
Chilean wineries had long proved that they could excel at winemaking. On January 23, 2004, a
Chilean wine producer, Eduardo Chadwick of Viña Errázuriz, organized a blind tasting at the Berlin
Ritz Carlton Hotel where Chilean wines were compared with some of France’s and Italy’s top estate
wines. Chile surprised many by receiving three of the top five scores. The event marked Chile’s
coming of age as a serious producer of top-quality wines. Its effects were comparable to the
“Judgement of Paris”—”a similar evolutionary milestone for the Chilean wine industry (which) will
be doubtless come to be known in the history of Chilean wine as the ‘Berlin Tasting’.”32
No matter how good Chilean wines were, financial conditions remained an important concern. As
Mr. Merino explained, “the revaluation of the peso places a disproportional burden on two groups.
First, low-end producers, as the cost of producing low-quality wine is quite similar to that of a more
expensive type, which determines that their low margins are being squeezed even further. Second,
small producers, as they don’t have the broad shoulders required to navigate through these difficult
times; they will be the first to fall as profitability remains low.” Patricio Middleton, Merino’s
predecessor at the helm of Chilevid, concluded that “the only way to make money in this business
seems to be by buying and selling wineries.”
Concha y Toro
Concha y Toro was founded in 1883 by Don Melchor de Concha y Toro. The corporation became
public in 1922 and shipped its first consignment abroad in 1933. ‘The firm modernized during the
second half of the century, especially after Eduardo Guilisasti Tagle’ (father of the current CEO) ‘took
the helm in 1957.33 By the 1990s, Concha y Toro was expanding into global markets, and in 1994 its
shares were listed on the NYSE, a step no winery in the world had ever taken. The following year, the
6
Concha y Toro
509-018
company expanded, creating subsidiaries Viña Cono Sur in Chile and Trivento in neighboring
Argentina. In 1997, Concha y Toro forged a joint venture with Baron Philippe de Rothschild, the
prestigious French winery, to make Almaviva, an ultra premium red that retailed for $82 in the United
States. Concha y Toro grew consistently in the subsequent decade, with a CAGR of 13% between 2001
and 2005 (see Exhibit 13). By the end of 2006, the controlling group owned 42% of Concha y Toro’s
stock, with the Guilisasti family holding 27%. Two Chilean pension funds (Habitat and Provida) were
the largest individual shareholders outside the family.
Concha y Toro controlled 100% of the vinification process and grew 35% of its own grapes.
Vinification costs accounted for about 40% of total costs (see Exhibit 14). Concha y Toro owned about
7,000 hectares in Chile, of which only 5,500 were planted. There were 107,000 hectares planted with
vineyards in all of Chile. Industry experts had estimated the incremental direct cost of premium
wines (which retailed in the U.S. market at prices ranging from $7 to $14) at $1 to $1.4 per bottle; for
the ultra-premium segment (with retail prices of $14 to $50 in the United States), direct costs were
estimated at around $2 per bottle.
Concha y Toro’s priority had long been to capture share in global markets. By 2006, it had become
one of the few global wineries selling in 110 countries (see Exhibit 15). In the words of its CEO,
Eduardo Guilisasti: “To succeed in global markets, the first step is to inundate the mass segment with
a low price–good quality product—’value for your money.’ That gives you resources you’ll need to
upgrade your offering, as well as the critical mass you will need to give distributors something to
play with. Then you move upward. If you are small, distributors don’t pay attention to you, because
there’s not enough money to be made.”
In the early days, all exports were made under the Concha y Toro brand, although over time other
brands came to coexist within the company portfolio. “It turned out to be chaos. The proliferation of
brands wasn’t strategy-driven, but rather opportunistic and sales-driven,” explained Giancarlo
Bianchetti, marketing director for global brands. In 2000, the company partnered with Futurebrand to
develop a brand strategy; how should the company go about marketing its products in the global
marketplace? The decision was made to keep Concha y Toro as an “umbrella” brand, thus keeping
the brand equity built over the years intact. The firm also decided to segment the market, developing
a wide portfolio of well-defined sub-brands in order to offer choices for consumers. Those sub-brands
would encompass all price points (see Exhibit 16 for brand portfolio and price categories), keeping
the original premise of being “good value for the money” in each of those segments. Concha y Toro’s
entry-level brands were Frontera and Sunrise, which by 2006 were selling around 4 million and 1.1
million cases, respectively. In the premium category, Concha y Toro featured Casillero del Diablo
(annual sales of around $2 million) and Trio. Bianchetti defined the premium category as the “sweet
spot”: it offered good profit margins but was substantial enough to build a truly global brand. The
portfolio was completed with the Marques de Casa Concha, Terrunyo, Amelia, and Don Melchor subbrands. (The company also managed three other brands produced by related wineries outside the
Concha y Toro umbrella. These were Trivento, produced by the Argentine subsidiary; Cono Sur; and
Almaviva.)
According to Bianchetti, the decision to segment the market made sense given the low visibility
that the Concha y Toro brand had achieved until 2000. Had the brand enjoyed a higher profile, the
company might have thought twice before jeopardizing brand equity or risking rejection by
presenting consumers with sub-brands. Some executives recalled the experience of Toyota, which
had to create an entirely new brand (Lexus) to tackle the premium car market. Since 2000, Concha y
Toro had devoted considerable resources to building its brands and maintaining an advertising and
promotion budget of 3.5% of sales. In some of the firm’s key markets, advertisements appeared on
cable TV, in mainstream publications, and on billboards (see Exhibit 17). As Bianchetti observed,
7
509-018
Concha y Toro
advertising required a delicate balancing act. “We push like Coca Cola in the trade, but we try to
observe a more premium-like behavior with the consumer.” In any case, priorities had not changed,
according to Eduardo Guilisasti: “If I have to make a choice, our priority is the product; then,
marketing.”
The company had achieved some notable successes in the high-quality segments: the influential
Wine Spectator had awarded 95 points to Don Melchor 2003 and 93 points to Almaviva 2002, among
other recognitions. But despite these successes, as of 2006 Concha y Toro exports were still based on
the market segment that Rabobank called “basic”—around US$5 (see Exhibit 18). This segment
accounted for 57.5% of the firm’s exports by value and 74.4% by volume. In the previous year,
Concha y Toro’s average FOB price per case exported worldwide—$22.17—had been below Chile’s
average of $25.31. The difference was even greater for U.S. exports: $17.75 for Concha y Toro versus
$25.31 for Chile’s average (see Exhibit 19). On average, contribution margins in the industry were
estimated at 60% of sales prices.
The Way Forward
Although Rafael felt proud of what the company had accomplished in the last decade, he wasn’t
completely sure which route Concha y Toro should take moving forward. In recent months, he had
held a number of informal conversations with fellow board members, as well as with his brother
Eduardo. Through those exchanges, he had come to identify two possibilities.
The first consisted of a “bottom-up” strategy: avoid the margins squeeze by gradually leaving the
lower end ($5 to $7) of the price spectrum, which faced tougher competition, and emphasizing the
premium and super-premium segments ($10 to $15). (See Exhibit 16.) This strategy would require
marketing investments to reinforce Concha y Toro’s premium and super-premium brands. Some in
the company had expressed concerns about this path, noting that in the past, consumers had been
reluctant to accept an “upward” extension of brands. The French wine brand Piat had recently tried a
similar strategy, launching an expensive line of varietals. Most critics had found the wine to be good
quality, but consumers had turned their backs on it.34 In the auto industry, Ford had given up
investing in its premium brands Granada and Scorpio and instead had bought Jaguar and Volvo to
target the upper-class segment. Likewise, Toyota had gone to great lengths to keep Lexus at arm’s
length from the Toyota brand in the eyes of the consumer.
This second possibility advocated a “top-down” strategy whereby the firm would exploit the
prestige of its high-end wines to expand into the basic segment (i.e., $5 to $7 range). In conversations
with Rafael, some executives compared this strategy to the path that BMW and Mercedes had taken
when trying to capture the first-time car buyer with the BMW 1 series in Europe or the 318i in the
United States, respectively. A “top-down” strategy sought to improve margins through economies of
scale. Thus, it implied that investing in the back end of the value chain: expanding vinification
capacity and perhaps the surface of cultivated vineyards. From this perspective, the profitability
crisis actually presented an opportunity for expansion, since small Chilean producers struggling to
survive were vulnerable to acquisitions. Higher volumes would offset lower margins and provide the
means to integrate downstream towards distribution in key markets. With its own distribution
network in place, these managers argued, Concha y Toro would protect itself from price-cut
demands—a real threat that many saw looming in a not-too-distant future—and also secure retail
shelf space. For inspiration, some looked to Grupo Modelo, a firm that had successfully leveraged a
strong distribution network as a competitive advantage to sell its Corona beer. Either way, a decision
about the best growth strategy needed to be made quickly to prevent further erosion of margins.
8
Concha y Toro
Exhibit 1
509-018
Main Wine-Producing Countries (thousands of hectoliters)
Spain
France
Italy
United States
Argentina
Australia
South Africa
Portugal
Chile
Russia
Germany
China
Brazil
Greece
Moldova
2004
60,768
57,386
52,886
26,438
17,619
15,588
10,391
8,228
7,276
5,529
5,140
4,810
4,008
3,823
3,668
2003
41,843
46,360
44,086
19,500
13,225
10,194
8,853
7,340
6,682
4,530
8,191
11,600
2,620
3,799
3,215
2002
33,478
50,353
44,604
20,300
12,695
11,509
7,189
6,677
5,623
4,060
9,885
11,200
3,212
3,085
2,251
2001
30,500
53,389
52,293
19,200
15,835
10,347
6,471
7,789
5,658
3,430
8,891
10,800
2,968
3,477
1,224
2000
41,692
57,541
51,620
21,500
12,537
8,064
6,949
6,710
6,674
3,050
9,852
10,500
3,638
3,558
2,500
1999
33,723
60,535
56,454
19,050
15,888
8,511
7,968
7,844
4,807
2,560
12,123
10,261
3,116
3,680
1,332
Source: Adapted by casewriter from the “Situation Report for the World Vitivinicultural Sector in 2004,” and “Situation
Report for the World Vitivinicultural Sector in 2003,” Supplements to Bulletin de l’ Organisation Internationale de la
Vigne et du Vin (Le Bulletin de L’OIV).
9
509-018
Concha y Toro
Exhibit 2
Market Share of Top Three Players in Different Industries
80.0%
43.0%
39.0 %
37.0%
27.0%
25.0%
7. 0%
Sof t
Drinks
Source:
10
Spirits
Chocolate
Tea
Coffe
e
Compiled by casewriter using data from Rabobank International, 2002.
Beer
W ine
Concha y Toro
Exhibit 3
509-018
Share of Global Exports: Old World, New World, and Others
23%
2%
76%
18%
17%
14%
3%
8%
15%
14%
24%
Others
New World
Old World
79%
76%
71%
62%
81-85
Source:
Source:
91-95
96-00
2004
United Nations Food and Agriculture Organization (FAO) and the Organisation Internationale de la Vigne et du Vin
(OIV) estimate.
Exhibit 4
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
86-90
Main Wine Importers in 2004
Quantity (million liters)
Value (US$000)
887,803
447,940
992,225
165,746
255,236
180,859
235,757
435,013
201,365
179,398
119,168
56,492
162,346
43,507
46,757
324,473
2,544,236
2,339,360
1,666,762
788,634
646,694
602,096
579,020
424,097
406,116
360,985
263,712
184,738
164,388
141,506
110,736
429,760
United Kingdom
United States
Germany
Japan
Belgium
Switzerland
Canada
France
Netherlands
Denmark
Sweden
Italy
Russian Federation
Ireland
Norway
Others
Adapted by casewriter from FAO data.
11
509-018
Concha y Toro
Exhibit 5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Main Wine Exporters (by quantity, million liters)
Italy
France
Spain
Australia
Chile
United States
Portugal
Germany
South Africa
Moldova
Argentina
Bulgaria
Austria
Hungary
New Zealand
Others
2004
2003
2002
2001
2000
1,435,898
1,435,043
1,352,196
646,121
468,207
387,382
312,802
271,316
261,350
228,036
159,826
92,342
74,073
45,817
40,669
140,190
1,280,200
1,496,243
1,175,810
536,467
391,000
329,330
305,522
270,203
232,924
202,170
192,178
83,426
81,650
68,861
27,205
145,678
1,518,682
1,536,883
901,638
471,505
344,227
266,239
206,739
237,471
210,432
153,656
123,646
78,784
60,726
76,724
25,615
138,197
1,537,064
1,551,660
904,986
376,154
486,717
284,356
160,072
237,166
165,129
136,799
92,177
79,100
51,795
69,557
21,920
131,655
1,467,532
1,482,513
777,302
310,885
402,351
276,943
187,551
241,437
170,000
99,183
92,121
79,300
-80,225
38,257
115,726
Source: Adapted by casewriter from FAO.
Exhibit 6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Main Wine Exporters (by value, US$000)
France
Italy
Australia
Spain
Chile
United States
Portugal
Germany
South Africa
New Zealand
Argentina
Moldova
United Kingdom
Austria
Belgium
Others
2004
2003
2002
2001
2000
6,919,726
3,550,372
2,001,889
1,835,577
835,486
745,256
660,693
592,425
533,227
245,451
221,438
215,853
208,449
105,120
95,361
410,844
6,562,663
2,986,474
1,539,094
1,598,461
662,990
609,957
602,619
539,640
419,132
157,691
168,342
180,877
217,530
75,952
87,744
417,576
5,397,735
2,589,934
1,272,366
1,215,237
603,772
527,045
480,770
394,831
285,920
127,275
121,507
136,639
184,490
54,872
73,642
354,670
4,787,033
2,289,075
997,803
1,138,328
645,010
514,002
435,559
355,307
227,567
97,196
145,639
124,371
154,138
47,253
72,526
289,649
5,044,348
2,229,584
903,594
1,126,106
576,822
530,596
468,958
352,331
244,753
89,860
148,771
87,954
156,481
-83,820
287,165
Source: Adapted by casewriter from FAO.
12
Concha y Toro
Exhibit 7
509-018
Old World vs. New World Producers
Location
OLD WORLD
ƒ
Driven by tradition and availability.
ƒ
Land ownership highly fragmented.
Regulation
ƒ
Production
ƒ
ƒ
ƒ
ƒ
Marketing
Ownership
Tight regulation in grape production and
vinification.
AOC* systems as a barrier for innovation.
Land property and regulations maintain
traditional production methods.
On average, small and outdated facilities.
Conservative oenology (complexity, aged,
tradition).
NEW WORLD
ƒ
Location based on professional
analysis.
ƒ
Ideal weather for grape production.
ƒ
Lower level of regulations.
ƒ
Freedom for innovation and R&D.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Differentiation based on AOC.*
Tradition-driven products.
Production model: cheaper = lower quality.
ƒ
ƒ
Fragmented industry.
ƒ
ƒ
Larger production units with
economies of scale.
Industrial approach with new
facilities.
Modern oenology (easy to drink,
fruity, young).
Differentiation based on categories,
varieties and brands.
Production model allows premium
wines at affordable prices.
High concentration of industry
ownership.
*Appellation d’origine côntrolée (“Controlled term of origin”). It is the certification granted to certain French
geographical indications for wines and other agricultural products, all under the auspices of the government
bureau INAO.
Source:
Grupo Peñaflor documents, presentation by Alejandro Sorgentini, Buenos Aires, December 2006.
Exhibit 8
Growth Prospects for Wine Price Segments over the Next Three Years
Source: Montes Wines estimates, Douglas Murray, Santiago, October 2006.
13
509-018
Concha y Toro
Share of Alcoholic Beverage Media Advertising Expenditures by Category
Exhibit 9
6
15
15
3
7
3
6
2
7
2
7
4
5
3
6
3
6
20
20
20
22
22
1
9
2
1
11
10
23
25
11
27
24
25
22
38
50
Low-Alcohol Refreshers
Wine
Distilled Spirits
61
63
1985
1990
66
71
70
71
70
69
1992
1993
1994
1995
1996
Beer
65
64
64
1997
1998
1999
47
35
1975
Source:
14
1980
1991
Compiled by casewriter using data from “The U.S. Beer Market 2000,” in Impact Databank, Review and Forecast (New
York: M. Shanken Communications, Inc.).
Concha y Toro
Exhibit 10
Countrya
France
Italy
United Statesb
Germany
Spain
Argentina
China
United Kingdom
Russia
Romania
Portugal
Australia
South Africa
Netherlands
Hungary
Brazil
Switzerland
Greece
Canada
Japan
Austria
Belgium
Chile
Croatia
Georgia
Denmark
Bulgaria
Sweden
Yugoslavia
Ukraine
Uruguay
Czech Republic
Slovakia
Other countries
Total listed
countries
Source:
509-018
World Wine Consumption in Listed Countries (thousands of hectoliters)
2001
2000
1999
1998
1997
Average
1997–2000
2001 vs.
1997–2000
33,916
30,500
24,166
20,044
13,827
12,036
10,952
10,100
5,000
4,705
4,697
3,976
3,972
3,330
3,200
3,079
3,077
2,942
2,800
2,783
2,477
2,470
2,250
1,850
1,600
1,540
1,533
1,407
1,400
1,046
984
650
640
8,123
34,500
30,800
23,550
20,150
14,046
12,491
10,695
9,146
4,699
5,215
4,595
3,899
3,906
3,100
3,150
3,177
3,088
2,747
2,756
2,806
2,517
2,400
2,271
1,800
1,668
1,550
1,151
1,193
1,512
856
945
650
632
8,300
35,400
31,563
23,631
19,751
14,249
12,567
10,546
8,369
4,300
5,823
5,054
3,726
3,953
2,518
3,182
2,963
2,946
3,059
2,688
3,210
2,505
2,350
2,853
2,011
1,863
1,562
986
1,202
1,500
741
1,087
650
445
8,570
36,330
31,840
20,778
18,970
14,793
12,683
3,940
8,290
5,500
4,430
5,055
3,644
3,867
2,200
2,945
2,552
2,914
2,927
2,355
3,200
2,500
2,349
2,713
2,126
800
1,564
650
1,101
2,120
550
1,132
654
362
8,236
35,500
30,855
20,211
18,974
14,589
13,390
3,473
8,157
5,800
5,889
5,223
3,472
4,022
2,400
2,945
2,577
2,900
2,900
2,099
2,747
2,600
2,444
1,922
2,149
800
1,515
700
1,051
2,958
600
1,082
640
422
9,273
35,433
31,265
22,043
19,461
14,419
12,783
7,163
8,491
5,075
5,339
4,982
3,685
3,937
2,555
3,056
2,817
2,962
2,908
2,475
2,991
2,531
2,386
2,440
2,022
1,283
1,548
872
1,137
2,023
687
1,062
649
465
9,273
-4.28%
-2.45%
9.63%
2.99%
-4.11%
-5.84%
52.88%
18.96%
-1.47%
-11.88%
-5.72%
7.89%
0.89%
30.36%
4.73%
9.29%
3.88%
1.16%
13.16%
-6.95%
-2.12%
3.53%
-7.78%
-8.48%
24.73%
-0.50%
75.81%
23.77%
-30.78%
52.33%
-7.31%
0.23%
37.56%
227,850
226,646
227,875
217,489
216,624
223,297
2.04%
The Wine Institute website, http://www.wineinstitute.org, accessed March 2007.
a Ranked by consumption in 2001.
b U.S. consumption based on wine taxable withdrawals for wine, sparkling wine, and wine coolers reported by the U.S.
15
509-018
Concha y Toro
Exhibit 11
Per Capita Wine Consumption in Listed Countries 1997–2001 (liters)
Country
2001
2000
1999
1998
1997
Average
1997–2000
Luxembourg
France
Italy
Portugal
Croatia
Switzerland
Spain
Argentina
Georgia
Hungary
Slovenia
Austria
Uruguay
Denmark
Greece
Germany
Belgium
Macedonia
Romania
Netherlands
Australia
Bulgaria
United kingdom
New Zealand
Sweden
Cyprus
Chile
Moldova
Yugoslavia
Ireland
Slovakia
Norway
59.22
57.17
52.92
46.74
43.2
42.37
34.57
32.57
31.88
31.56
31.13
30.46
29.51
28.86
27.75
24.21
24.12
23.81
20.99
20.95
20.54
19.66
16.97
15.86
15.86
15.16
14.68
13.62
13.11
12.38
11.83
10.85
64.02
58.15
53.44
45.73
42.03
42.52
35.12
33.8
33.23
31.07
35.44
30.96
28.34
29.05
25.91
24.34
23.43
23.81
23.27
19.51
20.14
14.77
15.37
10.81
13.45
14.64
14.82
16.43
14.16
11.06
11.69
10.31
61.23
59.67
54.76
50.3
46.96
40.57
35.63
34.01
37.12
31.38
28.27
30.81
32.61
29.27
28.85
23.85
22.95
23.83
25.98
15.84
19.25
12.65
14.06
10.05
13.55
11.08
18.61
11.2
14.05
9.82
8.23
9.86
59.44
61.23
55.24
50.31
49.65
40.12
36.99
34.32
15.94
29.05
41.5
30.75
33.95
29.31
27.61
22.91
22.94
28.41
19.77
13.84
18.82
8.34
13.93
10
12.41
11.47
17.7
15.8
19.86
8.56
6.69
9.6
61.27
59.84
53.54
51.98
50.18
39.93
36.48
36.23
15.94
29.05
51.88
31.98
32.45
28.39
27.35
22.92
23.86
18.71
26.28
15.1
17.94
8.98
13.71
10.16
11.84
11.21
12.54
22.57
27.7
7.53
7.8
9.31
61.49
59.72
54.25
49.58
47.21
40.79
36.05
34.59
25.56
30.14
39.27
31.12
31.84
29
27.43
23.5
23.29
23.69
23.82
16.07
19.04
11.18
14.27
10.26
12.81
12.1
15.92
16.5
18.94
9.24
8.6
9.77
Source:
16
The Wine Institute website, http://www.wineinstitute.org, accessed March 2007.
2000 vs.
1997–2000
-3.70%
-4.28%
-2.45%
-5.72%
-8.48%
3.88%
-4.11%
-5.84%
24.73%
4.73%
-20.74%
-2.12%
-7.31%
-0.50%
1.16%
2.99%
3.53%
0.49%
-11.88%
30.36%
7.89%
75.81%
18.96%
54.69%
23.77%
25.34%
-7.78%
-17.44%
-30.78%
33.90%
37.56%
11.02%
Concha y Toro
509-018
Consumption of Alcoholic Beverages in the United States
Exhibit 12
Do you most often drink liquor, wine or beer?
50
47
47
46
46
45
42
43
44
45
42
39
32
29
27
34
31
31
33
33
30
27
21
20
18
22
18
19
22
18
22
24
39 40
36 35
30
Liquor %
25
Wine %
21 20
Beer %
15
10
5
0
n
Ju
n
Ja
6
3-
9
-1
16
0
-1
l7
Ju
05
1
20
-1
l8
Ju
04
20
-9
l7
Ju
03
1
20
-1
l9
Ju
02
22
20
9l1
Ju
5
01
-1
20
13
ov
N
6
00
-2
20
23
p
Se
9
99
-2
19
26
n
Ju
28
5l2
Ju
97
19
96
19
94
19
92
19
Source:
Compiled by casewriter using data from Gallup’s Consumption Habits Poll, conducted July 7–10, 2005.
17
509-018
Concha y Toro
Exhibit 13
Concha y Toro Income Statement (CLP$000)
Fiscal Year
ASSETS
Cash & Mrktable securities
Receivables
Inventories
Notes receivable & other
assets
Total current assets
Net prop & equip
Invest & adv to subs
Goodwill
Deposits & other assets
Total assets
96,796,271
169,453,282
159,007,379
7,473,353
4,924,084
2,417,779
343,275,877
94,465,346
70,186,000
57,555,000
46,431,000
45,178,000
146,937,823 123,429,000 100,379,000
88,128,000
78,972,000
149,067,803 125,530,000 109,964,000 100,240,000
95,527,000
6,979,890
6,482,000
6,017,000
5,618,000
4,569,000
4,099,466
2,294,000
2,000,000
1,789,000
1,698,000
877,810
404,000
13,000
7,000
364,000
307,962,792 258,139,000 218,373,000 195,782,000 181,130,000
LIABILITIES
Notes payable
Accounts payable
Cur long term debt
Accrued expenses
Income taxes
Other current liab
Total current liab
Deferred charges/inc
Long term debt
Other long term liab
Total liabilities
Shareholder equity
Total liabilities & net worth
26,748,536
25,612,569
8,916,780
7,500,873
891,841
17,840,068
87,510,667
8,739,504
61,731,295
3,127,403
161,108,869
182,155,611
343,275,877
18,625,210
16,254,000
14,041,000
15,409,245
17,300,000
14,422,000
12,637,050
13,127,000
8,660,000
15,331,381
2,461,000
1,715,000
NA
574,000
2,052,000
7,697,474
16,163,000
14,154,000
69,700,360
65,879,000
55,044,000
6,930,809
4,586,000
3,667,000
59,712,448
30,211,000
19,049,000
1,458,440
1,419,000
2,375,000
137,802,057 102,095,000
80,135,000
170,151,211 156,035,000 138,163,000
307,962,792 258,139,000 218,373,000
INCOME STATEMENT
Net sales
Cost of goods sold
Gross profit
Sell gen & admin exp
Depreciation & amort
Non-operating inc
Interest expense
Income before tax
Prov for inc taxes
Minority int (inc)
Net inc bef ex items
Net income after tax
215,842,797
141,447,262
74,395,535
50,072,271
190,008
598,024
4,294,001
20,437,279
4,275,096
1,670
16,160,513
16,160,513
201,367,002 188,207,000 153,344,000 128,321,000 111,641,000
131,373,455 116,091,000
94,333,000
78,249,000
70,283,000
69,993,547
72,116,000
59,011,000
50,072,000
41,358,000
45,084,854
41,695,000
36,948,000
29,562,000
23,239,000
161,174
150,000
145,000
134,000
119,000
1,331,942
-1,014,000
1,015,000
12,000
52,000
3,565,227
1,738,000
977,000
1,087,000
2,133,000
22,514,234
27,519,000
21,956,000
19,301,000
15,919,000
3,475,256
4,840,000
3,367,000
2,979,000
2,684,000
-169
-4,000
5,000
11,000
6,000
19,039,147
22,683,000
18,584,000
16,311,000
13,229,000
19,039,147
22,683,000
18,584,000
16,311,000
13,229,000
Source:
18
2006
2005
2004
2003
2002
2001
1,990,828
70,666,183
75,368,716
1,741,273
50,731,204
73,344,388
1,799,000
51,444,000
52,732,000
2,434,000
40,390,000
41,740,000
3,479,000
38,218,000
34,676,000
2,678,000
31,116,000
34,183,000
Adapted by casewriter from company filings to the SEC.
8,691,000
14,040,000
14,100,000
12,306,000
13,058,000
4,965,000
605,000
1,845,000
1,671,000
535,000
8,943,000
6,747,000
47,068,000
40,438,000
3,233,000
2,548,000
13,691,000
20,560,000
4,199,000
4,395,000
68,191,000
67,941,000
127,591,000 113,132,000
195,782,000 181,130,000
Concha y Toro
Exhibit 14
509-018
Breakdown of Concha y Toro’s Costs
% of Cost of Sales
Wine Cost
Dry Cost
Bottling Cost
Other Costs
40.0%
28.9%
5.0%
26.5%
100%
Source: Company documents.
Note:
Percentages may vary depending on the year and exchange rate.
Exhibit 15
Concha y Toro Exports Breakdown by Region (volume)
Source: Company documents.
19
509-018
Exhibit 16
Concha y Toro
Concha y Toro Portfolio of Brands
Source: Company documents.
Exhibit 17
Samples of Concha y Toro’s Advertising
Source: Company documents.
20
Concha y Toro
Exhibit 18
509-018
Retail Price Segments in the United States
Icon
Price range: >US$50
Volume market share: <1 %
Price range: US$25-US$40
Volume market share: 5 %
Ultra-premium
Price range: US$12-US$25
Volume market share: 10%
Super-premium
Premium
Price range: <US$7
Volume market share: 50%
Basic
Price range: US$10-US$12
Volume market share: 34%
Higher
Quality segments
Lower
Source: Adapted by casewriter from Rabobank International, 2002.
Exhibit 19
Concha y Toro Exports vs. Chilean Exports
Worldwide Exports
9-04 to 8-05
9-05 to 8-06
Exports to the United States
Variation
%
9-04 to 8-05
9-05 to 8-06
Variation
%
# of 9 lt. cases
Concha y T
Chile’s total
7,320,784
30,457,028
7,553,363
31,093,797
3.2
2.1
2,702,884
6,403,940
2,604,841
5,886,794
-3.6
-8.1
FOB price
Concha y T
Chile’s total
$157,075,118
$749,549,314
$167,455,352
$786,893,365
6.6
5.0
$2,702,884
$147,816,560
$2,604,841
$144,156,846
0.1
-2.5
Average price
Concha y T
Chile’s total
$21.46
$24.61
$22.17
$25.31
3.3
2.8
$17.09
$23.08
$17.75
$24.49
3.9
6.1
Source: Adapted by casewriter from Viñas de Chile data.
21
509-018
Concha y Toro
Exhibit 20
Source:
22
Product Mix: Sales by Category
Company documents.
Concha y Toro
509-018
Endnotes
1
www.encarta.com.
2 “‘New World’ Wine Producers Gaining Market Share from Traditional Industry Leaders,” Food & Drink
Weekly, July 9, 2001.
3 George M. Taber, Judgement of Paris: California vs. France and the Historic 1976 Paris Tasting That
Revolutionized Wine (New York: Scribner, 2005).
4
Loshini Catherine John, “All Things French…” New Straits Times, July 18, 2004.
5 According to Giancarlo Bianchetti, Concha y Toro’s marketing director for global brands, consumer wine
purchasing choices were made according to the following criteria, in descending order: (1) red or white, (2)
varietal, (3) country of origin, (4) brand.
6
Wes Marshall, “A Fair Competition,” The Austin Chronicle, April 8, 2005.
7 “Chile
near Top of Irish Wine Poll,” Financial Times, April 25, 2002.
8 A “terroir” is a group of vineyards from the same region, belonging to a specific appellation and sharing
the same type of soil, weather conditions, grapes, and winemaking savoir-faire, which contribute to give its
specific personality to the wine. (Terroir France, http://www.terroir-france.com/theclub/meaning.htm,
accessed March 2007.)
9
Tynan
Szvetecz,
“Old
World
vs.
New
http://www.savoreachglass.com/articles.php/1, accessed November 2006.
World
Growing
Styles,”
10
Arend Heijbroek, “Wine Is Business. Shifting Demand and Distribution: Major Drivers Reshaping the
Wine Industry” Rabobank International, January 2003.
11 “Towards a Sustainable European Wine Sector: Impact Assessment,” Com(2006) 319, European
Commission, June 22, 2006, http://ec.europa.eu/agriculture/capreform/wine/com2006_319_en.pdf, p. 3.,
accessed November 2006.
12 Commission Staff Working Document, Annex to the Communication from the Commission to the Council
and
the
European
Parliament,
SEC(2006)
770,
European
Commission,
June
22,
2006,
http://ec.europa.eu/agriculture/capreform/wine/fullimpact_en.pdf, p. 28., accessed November 2006.
13 The following statement, by Mr. Zoltán Somogyi (Hungarian Deputy Spokesman before the European
‘Commission’s Special Committee on Agriculture), is illustrative: “our… focus [will be] in restructuring and…
re-cultivating all those areas which were prestigious areas and produced good quality wine, but during the
socialist period wine production came down from the hills to the skirts of the hills because it was cheaper to
produce. The quality was lower but it was cheaper and more economical, but now we would like to bring it
back.” Reform of the EU Wine Sector, European Commission, Special Committee on Agriculture, March 8, 2007.
14
“World Statistics 2006,” International Organisation of Vine and Wine, p 2.
15
Maggie Rosen, “Wine Discounts Are ‘Too Deep’,” Off Licence News, 2006.
16 Arend Heijbroek, “Winning Strategies in the Wine Industry: Growth Opportunities in a Competitive
Market,” Rabobank International, May 2006.
17 “The
Top 30 U.S. Wine Companies of 2004,” Wine Business Monthly, February 2005.
18
Wine Business Insider, April 10, 2006.
19
Heijbroek, “Winning Strategies in the Wine Industry.“
20 Cyril
Penn, “The Top Wine Industry Trends for 2006 and Beyond,” Wine Business Online, December 2005.
21 Ibid.
23
509-018
Concha y Toro
22
Bob Norberg, “Being Label Unconscious: Grocers Produce Private-Label Brands to Tap into ‘Two-Buck
Chuck’ Phenomenon,” The Press Democrat, March 28, 2004.
23 Penn,
“The Top Wine Industry Trends for 2006 and Beyond.”
24 D. F. Duhan et al., “Origin Information and Retail Sales of Wine,” International Journal of Wine Marketing 11,
no. 3 (1999).
25 I.
M. Chaney, “Promoting Wine by Country,” International Journal of Wine Marketing 14, no. 1 (2002).
26 Leopoldo Arias-Bolzmann et al., “Wine Pricing: The Influence of Country of Origin, Variety, and Wine
Magazine Ratings,” International Journal of Wine Marketing 15, no. 2 (2003): 55.
27
Heijbroek, “Wine Is Business,” p. 26.
28
Pierre Balestrini and Paul Gamble, “Country-of-Origin Effect on Chinese Wine Consumers,” British Food
Journal 108, no. 5 (2006): 407.
29
Heijbroek, “Wine Is Business.”
30
http://www.winetravelchile.com/print/print_origen.htm, accessed February 2010.
31 Evert-Jan Visser and Peter de Langen, “A Chilean Wine Cluster? The Importance and Quality of Cluster
Governance in a Fast Growing and Internationalizing Industry,” paper presented at the 2nd Latin American
conference on ‘Clusters: Public-Private Collaboration for Regional Competitiveness, Villahermosa, Mexico,
December 1–3, 2003.
24
32
Jancis Robinson, Financial Times, February 14, 2004.
33
Eduardo Guilsasti was the current CEO’s and Rafael’s father, and had since passed away.
34
“Chile near Top of Irish Wine Poll.”

Similar documents