The Wine Sectors of New Zealand and Chile Dr Robert N Gwynne University of Birmingham Chile and New Zealand Between competition and cooperation? Victoria University of Wellington Friday April 22 nd, 2005
Comparative analysis of the wine sectors of Chile and New Zealand Political Economy links Land under Wine Grapes Wine Production Wine Exports Wine Export Destinations
800 Figure One: Wine Exports from Chile and New Zealand, 1988-2003 (US$mn) 700 Chile New Zealand 600 500 US$ mn 400 300 200 100 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
TABLE 1: PRODUCTION AND EXPORTS IN THE CHILEAN WINE INDUSTRY, 1994-2003 CHILE 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Producing Areas (hectares) Total Production mn. litres Export Volume mn.litres Export Value US$mn Export Volume as % of Prod. Volume 54,146 54,393 56,004 63,543 75,388 85,347 103,876 106,971 108,569 n.d. 359.8 316.7 382.4 431.4 526.6 428.0 641.9 545.2 562.3 668.2 109.5 129.0 184.1 216.3 230.9 229.9 266.7 311.0 344.3 391.3 142.2 181.7 292.8 412.2 503.1 514.7 573.4 592.5 600.0 667.1 30.4 40.7 48.1 50.1 43.9 53.7 41.6 57.0 61.2 58.6 Source: ChileVid, Banco Central de Chile.
TABLE 2: PRODUCTION AND EXPORTS IN THE NEW ZEALAND WINE INDUSTRY, 1994-2004 NEW ZEALAND Producing Areas (hectares) Total Production mn litres Export Volume mn litres Export Value NZ$mn Export Volume as % of Prod. Volume 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 6,110 6,110 6,610 7,410 7,580 9,000 10,197 11,648 13,787 15,800 n.d. 41.1 56.4 57.3 45.8 60.6 60.2 60.2 53.3 89.0 55.0 119.2 7.9 7.8 11.0 13.1 15.2 16.6 19.2 19.2 23.0 27.1 31.1 41.5 40.8 80.3 75.9 97.6 125.3 168.6 198.1 246.4 281.9 302.6 19.2 13.8 19.2 28.6 25.1 27.6 31.9 36.0 25.8 49.3 26.1 Source: New Zealand Winegrowers Annual Report, June 2004
Figure 2: Change in Land Under Six Main Wine Grape Varieties, Chile, 1996-2002 45 40 35 Thousand Hectares 30 25 20 15 Cabernet Sau Pais Merlot Chardonnay Sauvignon Bl Carmenere 10 5 0 1996 1997 1998 1999 2000 2001 2002
Figure 3: Change in Land Under Six Main Wine Grape Varieties, New Zealand, 1996-2002 4,000 Hectares 3,000 2,000 1,000 0 1996 1997 1998 1999 2000 2001 2002 Chardonnay Sauvignon Blanc Pinot Noir Merlot Cabernet Sauv Riesling
Enterprise Development and Wine Regions Structure of New Zealand industry Structure of Chilean industry Enterprise Development and the Wine Regions
New Zealand Wine Industry Large wine enterprises linked to TNCs Montana (Allied Domecq) & Nobilo (Constellation Brands). 52% 2004 vintage. Medium-sized wineries some linked to TNCs (Wither Hills Lion Nathan) but most not. 30% 2004 vintage. Small-scale family-owned wineries. In areas near large metropolitan areas, significant sideline of wine tourism. 18% 2004 vintage.
TABLE 3: MAIN NEW ZEALAND WINE REGIONS ACCORDING TO LAND UNDER DIFFERENT GRAPE VARIETIES, 2002 (hectares) Grape Variety Marlborough % Gisborne % Hawkes Bay % Other Regions % Total % Sauvignon 3,051 53.2 37 2.1 299 8.6 298 12.1 3,685 27.4 Blanc Chardonnay 989 17.3 995 56.1 957 27.7 486 19.7 3.427 25.4 Riesling 298 5.2 24 1.4 24 0.7 184 7.4 529 4.0 Pinot Noir 915 16.0 67 3.8 218 6.3 829 33.5 2,029 15.1 Cabernet 96 1.7 6 0.3 512 14.7 132 5.3 745 5.6 Sauvignon Merlot 103 1.8 77 4.3 759 21.9 138 5.6 1,077 8.0 All Other Varieties 279 4.8 568 32.0 694 20.1 406 16.4 1,950 14.5 TOTAL 5,731 100.0 1,774 100.0 3,463 100.0 2,473 100.0 13,442 100.0 Source: New Zealand Grape and Wine Statistical Annual 2003
Figure 4. New Zealand s M ain W ine Regions Auckland G isborne Hawkes Bay Auckland W a ira ra p a Nelson M a rlb o ro u g h Canterbury Mt Ruapehu Napier Hawkes Bay Poverty Bay G isborne Central Otago Nelson W e llin g to n Blenheim Cook Strait C hristchurch Q ueenstown Dunedin 0 50 100 150 M iles 0 5 0 100 150 Kilom etres
Chilean Wine Industry Large domestic firms with a long brand history Concha y Toro, Errazuriz Subsidiaries of large foreign-owned wine firms can be wholly-owned or joint ventures. Medium-sized companies attempting to target niche export markets (UK 1 st ) Large cooperatives that have managed to upgrade (Cooperativa de Curico).
TABLE 4: MAIN CHILEAN WINE REGIONS ACCORDING TO LAND UNDER DIFFERENT GRAPE VARIETIES, 2002 (hectares) Grape Variety Maule & Curico % Rapel % Maipo % Acon. & Casabl anca % Others % TOTAL % Cabernet 15,592 33.3 15,536 51.0 6,202 59.3 593 11.9 1,340 8.5 39,261 36.2 Sauvignon Merlot 5,669 12.1 5,083 16.7 1,155 11.0 551 11.0 310 2.0 12,768 11.8 Carmenère 2,263 4.9 2,621 8.6 527 5.0 164 3.3 229 1.5 5,805 5.3 Pais 8,812 18.7 308 1.0 5 0.1 75 1.5 5,750 36.5 14,949 13.8 Other Reds 3,814 8.1 3,613 11.9 882 8.4 810 16.2 1,043 6.6 10,162 9.4 TOTAL REDS 36,150 77.1 27,161 89.2 8771 83.8 2,193 43.8 8,672 55.1 82,945 76.4 Chardonnay 2,621 5.6 1,602 5.3 953 9.1 1,962 39.2 419 2.7 7,561 7.0 Sauvignon 4,965 10.6 924 3.0 397 3.8 638 12.7 118 0.7 7,041 6.5 Blanc Other Whites 3,141 6.7 773 2.5 340 3.3 213 4.3 6,550 41.5 11,017 10.1 TOTAL 10,727 22.9 3,299 10.8 1,690 16.2 2,813 56.2 7.087 44.9 25,610 23.6 WHITES TOTAL 46,877 100.0 30,460 100.0 10,461 100.0 5,006 100.0 15,759 100.0 108,564 100.0 Source: Chilevid
Figure 5. C hile s M ain W ine R egions Region Subregion Aconcagua San Felipe Casablanca Maipo Casablanca Santiago Rapel Curico Santa Cruz Rancagua Cachapoal San Fernando Maule Itata Mataquito Talca San Javier Cauquenes Curico Molina Bio-Bio Regional border National frontier River Borders of wine regions Wine towns Laja 0 100 200Km
TABLE 5: LAND UNDER THE DIFFERENT WINE GRAPE VARIETIES IN THE RAPEL REGION, CHILE, 2002 (Hectares) Cabernet Sauvignon 15,536 Merlot 5,083 Carmenère 2,621 Chardonnay 1,602 Syrah 1,195 Tintoreras 963 Sauvignon Blanc 924 Semillon 483 Cot 447 Cabernet Franc 374 País 308 Pinot Noir 197 Alicante Bouschet 154 Other Grapes 573 TOTAL 30,460 Source: Sauter (2004)
Conclusions Wine sectors in both New Zealand and Chile represent examples of sectors unable to grow in the inward-oriented paradigm. With the scale of potential markets shifting from the national to the global, the wine sectors in both countries had the opportunity to follow a completely different trajectory. This is partly for geographical reasons linked to the environmental characteristics of certain regions within both countries. With investment in wineries and vineyards it became apparent that these regions could produce quality wines for global markets. After a process of trial (and error) with grape varieties, certain regions were recognised to have the climatic and soil prerequisites to become iconic regions for the production of those varieties at the global scale. The Marlborough region came to specialise in the production of the Sauvignon Blanc variety and the Rapel region in Cabernet Sauvignon and Carmenère.
Sustained growth? Both New Zealand and Chile could now be entering an era of sustained growth in their wine sectors. Over the past decade production, exports and investment have grown rapidly. A favourable spiral of expanding investment, upgrading of wineries and vineyards, improved products and increasing sales has developed. This has allowed for not only increased export volume but also for higher prices for those exports (per unit of volume).
A Paradox? There is an apparent paradox in the relationship between the wine industry and the political economy framework in New Zealand and Chile. In New Zealand, a long period of significant and enlightened state regulation of and intervention in the industry has resulted in an industry in which foreign-owned TNCs dominate the industry. In Chile, with a much longer history of market-and outward-orientation, a much more differentiated firm structure has developed but one in which foreignowned TNCs have little significance in terms of direct ownership.
Culture and economy explanation? Traditionally, New Zealand has been a beer-drinking country and formerly wine production in bulk was dominated by breweries; meanwhile, small-scale wine production was largely in the hands of Croat immigrants with little chance of significant growth in production.
In contrast, Chile has a long history of being a winedrinking country, and formerly wine production incorporated large numbers of firms that produced for the domestic market. With the shift to higher quality and export-oriented production, the required investments were taken on by a large number of these companies in Chile. These firms both competed against each other in certain business areas (such as in gaining access to export markets) whilst collaborating in others (as in technological acquisition). Thus, the contrasting cultural history of enterprise development in the two countries may provide at least part of the explanation to the paradox