Chile’s greatest upset in China

For a long time, Chilean wine industry seems to have been stuck with churning out cheap and bulk wines that are flooding supermarket isles, but more recently the country is embarking on a fast evolution and has reinvented itself as a producer of exciting and world-class wines. Perhaps nowhere has this reinvention be more felt than in China, where Chile has staged what could be called the greatest upset in the Chinese wine market.

Just two years after 2015 when the import tariff on Chilean wine was removed thanks to an FTA agreement, China had surpassed the US to become Chile’s biggest export market.

Arguments can be made that Chilean wine exports to China were historically driven by bulk, and it’s not uncommon to see Chinese producers mixing Chilean wines with local plonk. But between 2017 and 2021, a premiumisation trend is taking hold. Not only did the size of Chilean wine market exponentially expanded, but Chinese drinkers now are uncorking more bottles of iconic Chilean wines than ever.

Trading up

Explaining on the rise of Chilean premium wines, Nicolai Samsing, Asia Director of Wines of Chile, credited the wine trade association’s early emphasis on quality and international wine critics’ commendation as well for driving the growth. “Chilean icon wines have had a great reputation in China, this reputation was confirmed in 2017 when three of top Chilean wines were awarded 100 points by James Suckling, and of course it has helped to uplift Chile’s whole wine category image,” he expands.

In 2021, coming off a pandemic-hit year, Chile’s premium sector growth gained an extra edge, as merchants are eager to find quality wines to replace Australian wines, which had previously taken up 40% of China’s imported wine market.

“Since this year we have noticed how the premium wine segment (above US$60 FOB per 9 liters case) has been growing, currently reaching 30% of our total exports to China,” says Samsing. To put it in context, this represents a 7% growth compared with pre-Covid market in 2019 or a 13% increase compared with 2015 when import tariff was just removed.

More encouragingly, the growth is registered at a time when China’s wine market contracted for third straight quarters (import wines down by US$518 million in Jan-Sept period) and consumers are still cautious with luxury spending in economic downturns.

With Chilean wines, Chinese consumers not only did not scale back, but they are trading up on what they drink.

According to data from Intelvid, sales of ultra-premium Chilean wines, which are exported at least of US$400 a case FOB, emerged as a growth engine for Chilean fine wine in China. This ultra-premium category is forecast to reach US$22 million by the end of 2021, which would account for 8% of all Chilean wine exports to China.

This means that the size of the ultra-premium sector would more than double 2020’s US$12 million and more impressively, quintuple pre-covid 2019’s US$5 million for the same premium category.

Speaking of Chilean wine’s premiumisation, Samsing enthused, “[This is] a huge achievement from our exporters. It´s clear how fast the luxury goods market has been booming in China the last years, and we see how fine wines have followed this trend that will keep developing more and more not only on tier 1 cities, also in fast developing cities along the country.”  

The main drivers of Chilean premium wine exports are the country’s most established wine behemoths including Montes, Chadwick and Concha y Toro to name a few. In fact, the number of wineries exporting US$400 or above a case to China have grown to 28, according to Wines of Chile.

Evolution 92+

Riding on the upmarket growth momentum and perhaps what could be described as once-in-a-lifetime opportunity when Australia, China’s former top wine supplier was essentially squeezed out of the market due to the crippling 218% anti-dumping tariff, Chile did not waste time and pounced at the opportunity.

This month, Wines of Chile hosted Evolution 92+, an event that aims to showcase top Chilean wines that are rated 92 points or above by international wine critics and publications such as Wine Spectator, Wine Advocate and James Suckling to Chinese trade and consumers in Shenzhen and Shanghai.

The event itself is a step-up from the association’s previous event series called 90+ events in terms of scores, and as Samsing says is a reflection of Chilean wine’s quality evolution as well. “This year we think that Chilean wine are prepared to jump to 92+, after quantitative research we understand that all Chilean wine exporters have more than one 92 points or above labels available in China market already,” explains Samsing.

And the market responded warmly. The event proved to be a huge success. Despite recent Covid surges that has now spread to some 20 Chinese cities, a total of 45 wineries and over 300 people attended the event’s masterclasses in Shenzhen and Shanghai, led by Fongyee Walker MW, Julien Boulard MW, and Lu Yang MS.

The grand tastings presented a plethora of Chile’s diverse wine regions from its best-known Central Valley to the Andes and all the way to the pioneering southern region near Antarctica. The tasting attracted over 600 wine professionals and lovers in Shenzhen, and another 500 participants in Shanghai.

“The concept of ‘Evolution’ is holistic. It´s clear how Chilean wines in China have been increasing their volume, value, and average price. Together with this, more and more Chilean wineries have been exporting to China (250 wineries in 2019), Chilean wines had won more recognition because of their high quality and finally I must mention diversity. Twenty years ago, our exports focused mainly on great red wines from the central valley, today you can find all type of grape varieties from different wine regions, with different geographic characteristics, growing processes and production techniques. Chilean wines have evolved, and we want to reinforce that holistic change to the trade and wine lovers,” he added, explaining on the event.

Going into 2022, the association will roll out constant and consistent promotions both online and offline, using more technology and innovations, says Samsing. Leveraging on China’s powerful and omnipresent social media platforms, the association will incorporate more livestreaming for events and develop WeChat mini-program for winery directory and information to facilitate business contacts.

“Social Media has been key to execute our strategy,” Samsing affirms. The association is active on three main Chinese social media platforms, namely WeChat, Sina Weibo and Douyin or Chinese tik tok.

Each platform serves a different purpose to reach targeted audience. While WeChat is directed at B2B professionals, its Weibo messaging is more consumer-oriented and Douyin is particularly effective in communicating to young consumers, he says.

“All the content for our three social media official accounts is prepared in China, in Chinese language for Chinese people; this effort and focus has been key for our communication success in China,” he concluded.

The Evolution 92+ event in Shanghai is also followed by an after-party that attracted some 150 attendees. Stay tuned for next year’s edition.