Chile’s wine industry accounts for about 7 per cent of global production, with 1.8 million tonnes of wine produced in 2013. Chile’s wine grape growing regions stretch 900 kilometres from the Elqui Valley in the north to the Malleco Valley in the south, along the western side of the Andes. Like Argentina, Chile’s wine grape growing regions are shielded from pests and diseases by high altitude and low humidity. The most common varietal wines produced are cabernet sauvignon, sauvignon blanc and merlot.
Chilean wine production grew significantly between 2000 and 2013, increasing by an average of 12 per cent a year (FAO 2016). This was the fastest rate of growth among the world’s top wine-producing nations and a result of two decades of investment in the industry. Area planted to wine grapes more than doubled and the industry increased use of imported technologies such as stainless steel fermentation tanks, trellis systems and drip irrigation. Grape yields increased from 11.5 tonnes a hectare in 2000 to 15 tonnes a hectare in 2013 (FAO 2016). Unfavourable weather conditions affected yields in 2014 (USDA–FAS 2015b).
Chile has the lowest per person wine consumption of all the major wine-producing and wine-exporting countries, at around 17 litres a person a year (USDA–FAS 2015b). That compares with 29 litres a person in Australia, 40 litres in Argentina and 55 litres in France (ABS 2015). Beer is the preferred alcoholic beverage in Chile. The expansion of the Chilean wine industry has been export focused because of low domestic wine consumption.
In 2015 Chile was the fourth-largest exporter of wine globally, shipping 877 million litres valued at US$1.85 billion. Bottled still wine accounted for over half of Chile’s wine exports (487 million litres), followed by bulk wine (386 million litres) and sparkling wine (4 million litres). The value of Chile’s wine exports peaked at just over US$2 billion in 2013.
Chile’s wine exports to the European Union, its most important market by value, totalled US$630 million in 2015 (Figure 4). The United Kingdom accounted for a third of that value. The United States is Chile’s second-largest export market, accounting for 14 per cent of its exports. China and Japan have grown dramatically in importance. Together they accounted for 6 per cent of Chile’s wine exports in 2000 but 23 per cent in 2015. Brazil is Chile’s most important South American market, accounting for 6 per cent of its export share.
Chile is a major exporter of bottled and bulk wine, ranking fourth globally for both by volume in 2015. Bulk wine accounted for around half of Chile’s wine exports to the European Union and the United States and for two-thirds of its exports to China.
Bulk wine is often bottled locally or blended with domestic production in China (Hornby 2016). The Chilean Government’s support for free trade has delivered significant benefits to Chile’s wine exporters. The government has established free trade agreements with all of its major wine export markets. Chile’s 2003 free trade agreement with the European Union led to the elimination of the European Union’s tariff of €3.2 a litre by 2008 (European Commission 2003). The value of Chile’s exports to that market increased by 60 per cent between 2003 and 2015. Under the 2005 Chile–China Free Trade Agreement, the 14 per cent tariff on bottled and sparkling wine and the 20 per cent tariff on bulk wine were phased out by 2015 (China FTA Network 2005).
Between 2005 and 2015, the value of Chile’s exports to that market increased more than twentyfold. Chile is only the second country to obtain tariff-free access to the Chinese wine market. New Zealand gained tariff-free access in 2012 (NZ Foreign Affairs and Trade 2008). Chile has also established free trade agreements with the United States (2004), Japan (2007) and Australia (2009).
China has also been an increasingly important market for the Australian wine industry. Australian exports to China grew at a similar rate to Chile’s exports between 2005 and 2015, despite Chile’s relative competitiveness in that market given its free trade agreement. Australian wine exports will not be tariff-free until 2019 under the China–Australia Free Trade Agreement. However, returns to Australian wine exports are higher than to their Chilean counterparts, because they trade at different price points. Between 2005 and 2015, Australian bottled still wine traded at a 42 per cent premium to Chile’s in constant dollar, weighted average terms—at around US$5.10 a litre compared with US$3.60 a litre (ABS 2016). Australian bulk wine traded at a 56 per cent premium to Chilean bulk wine over the same period. However, bulk wine does not account for a significant share of Australian exports to China by value.
Chile’s focus on improved quality is evident in not only the growth in its exports generally but the changing mix of wine exports to China. Between 2005 and 2015, the share of Chilean bottled still wine exports to China increased from 40 per cent to over 70 per cent by value, reflecting China’s growing appreciation for high-quality Chilean wine. The growing status of Chilean bottled wine, combined with its lower relative price, will continue to support Chile’s global competitiveness.
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