Days of wine and profits: vineyards come of age with offerings at the high end of the spectrum and a variety to rival the wine regions of France and California

Latin CEO: Executive Strategies for the Americas, June, 2001 by Luis Zalamea

Brazil and Beyond

WHILE IT IS EONS BEHIND CHILE AND Argentina, Brazil has not been standing still. Its wine industry, founded by 19th-century Italian immigrants in Rio Grande do Sur and Santa Caterina, recently took an important step forward by adopting "certificate of origin" controls for its finer wines. These standards exist in every major wine-producing country. This has been coupled with imports of state-of-the-art winemaking equipment from Italy to improve quality At the marketing level, associations of winemakers are conducting an aggressive public relations effort under the banner of "Order Brazilian Wines," largely at restaurants and supermarkets. They have their work cut out for them. Domestic wine consumption is only 1.85 US liters a year per capita. Due to the country's mostly tropical climate, Brazilians prefer beer. But if their quality wines continue to improve, they could find a profitable niche as exports.

The powerhouses of Chile and Argentina, meanwhile, are pursuing synergies that give real meaning to the word globalization. Major winemakers from other parts of the world are participating directly in the boom in Chile and Argentina through investments, technical know-how and joint brands.

In Argentina, local wineries have allied themselves with world-class giants like France's Moet Chandon and California's prestigious Kendall-Jackson. International firms have purchased or bought into more than 20 family owned vineyards in recent years. Portugal's Sogrape, for example, bought the Finca Flichman winery at the end of 1997 for US$18 million. Japanese wine marketer Marubeni recently bought 40 percent of Vinas Argentinas for US$92.5 million to produce a high-quality line of whites and reds made especially for the Japanese market.

In Chile, the global partners make up an even more impressive roster: from California, Franciscan Estates, Kendall-Jackson, Laurel Glen and Robert Moldavi; from France, Chateau Mouton Rothschild, Grand Marnier and Domaine Paul Bruno; from Italy, Patasiolo; from Spain, Vega Sicilia. Already common on the shelves of US and European wine and spirt stores are such vintages as Los Vascos, a Rothschild (Lafite) brand cabernet sauvignon produced by Vina Los Vascos in Chile; Vina Calina, a brand developed in Chile by Kendall-Jackson; and a series of sparkling champanois wines being produced in Argentina and Chile by Moet Chandon. Even Australian and South African vineyards want a piece of the action. More large and small co-ventures are on the horizon.

According to Rafael Guilisasti, president of Vinas de Chile, the industry's main challenge now is to maintain a growth rate of around 10 percent a year and continue to market quality wines abroad. In this he emphasizes the importance of foreign investment and competition, as smaller producers become absorbed by larger players. After Sogrape bought Finca Flichman, for example, the companies brought in stainless steel fermentation tanks, computerized temperature controls and modem harvesting techniques. Less than two years after the purchase, Finca Flichman's Dedicado label won France's distinguished Civart award in 1999.