Tuesday, 23 February 2010

Quandary for Chile's wine brands

An article on BrandChannel ("The Grapes Of Wrath: Chilean Wine Brands Taking A Beating", by Russ Josephs, 16 February, makes depressing reading for Chilean wine businesses that have sought to position their products at the upper end of the market, where profitability is maximised. According to this article, while the market for wines remains thirsty, there is a current preference for cheaper wine lines, notably in foreign countries. The author adds (quoting his sources):
"Foreigners are actually drinking more Chilean wine than ever, with shipments up nearly 18 percent in 2009, as opposed to California wineries, whose 2009 shipments dropped by 4 million cases ... The problem is that people are choosing cheaper vintages, preventing Chile's wine brands from being able to "break out of the $10- to $20-per-bottle price point"...

A few years back, the Chilean wine industry decided to simultaneously curb supply and fund a global campaign aimed at promoting their wares, all in the name of achieving higher prices. But the recession destroyed this goal, and currently the industry is in something of a holding pattern. Making matters worse are the vinters who are selling in bulk to compete with countries like Argentina, Australia, and South Africa – all of whom are fighting for a share of the low-end wine trade.

This means that when the recession finally lifts, the quality that Chilean wineries were hoping to embody may be tarnished ...".
While there is no easy solution to this problem, Chile's wine producers may want to consider doing what the manufacturers of some household goods do: sell the same product under one brand name to the 'expensive' market and under another brand name to down-market consumers. That way, it should be possible to preserve the prestige value of the upmarket brand, which is not tarnished if the same wine is sold under another name to less discriminating purchasers.

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