[LINK] "China's Thirst for Wine Has Chile Raising a Glass"

[rfmcdonald]

Bloomberg View's Mac Margolis examnines how Chile has taken advantage of China to become a major exporter of wine to that country.

The national department of agriculture recently reported that Chile sold $163 million in bottled fine wine to China last year, overtaking its sales to the United Kingdom and the United States. Now, that may not sound like a whopping sum; it's only a fraction of the estimated $258 billion in global wine sales. But it means a lot to Chile, one of the so-called New World winemaking countries, which is aggressively trying to carve out its place in world markets. It's also a lesson for other Latin American nations still stuck on a Chinese-driven commodities treadmill.

China's breakneck industrial growth over the last decade drove production across the Americas, as nations rich in raw materials pumped iron ore, beef, soybeans and oil into the dragon's maw. But the commodities boom has passed, sending prices of copper, Chile's main source of export dollars, to a six-year low. Now most Latin American producers are sitting on inventory and dreaming of moving up the value chain.

That's where ambitious New World winemakers, such as Australia, South Africa and Chile, saw an opportunity. A few years back, the business media was flush with stories of newly rich Asians avid for luxury brands, and willing to pay top yuan to wash down their gourmet meals with the best of Bordeaux or Tuscany. Even now, the Chinese millionaire's dream du jour is to buy a chateau in France.

And yet as China's wealth trickled down, so did the taste for finer things. By 2012, China was drinking more red wine than France. That's been a boon for low-end national brands; the best-known domestic label, Great Wall, may not win many blind tastings, but goes for a palate-cleansing $5 or so a bottle.

Increasingly, however, it's the middle class that's driving China's consumer market: discerning college students and young professionals who are shopping for better but still affordable brands, something between a Petrus and plonk.

Enter Chile, a land of traditional and tech-savvy vintners, heralded for their highly regarded if lesser-known wines, and modest prices. Production is soaring, thanks to falling grape prices and a weaker peso, which makes the South American country's wine more competitive abroad. That combination has helped Chile grab market share from more august wine producers in global markets: In 2015, Chile sold more wine to Japan than France.