Required Report - public distribution

**Date:** 3/3/2009

**GAIN Report Number:** CI9001

CI9001

**Chile**

**Wine**

**Annual**

**2009**

**Approved by:**

![](media/image1.wmf)Joseph Lopez, Agricultural Attaché

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

**Wine production is expected to expand again in 2009 mainly due to
favorable weather conditions. But exports are expected to stay at
similar level than last year in volume due to the economic crisis which
will affect export demand. In the coming years, industry sources have
indicated that as new areas come into production, wineries will have to
invest in new processing and storage facilities to absorb the annual
additional output.**

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Planted Area 3](#planted-area)

[Production 3](#production)

[Table - Real Domestic Farm Gate Wine Prices
3](#table---real-domestic-farm-gate-wine-prices)

[Production Factors 4](#production-factors)

[Table - Wine Production, Consumption and Exports
4](#table---wine-production-consumption-and-exports)

[Consumption 5](#consumption)

[Trade 5](#trade)

[Table - Wine Export Volumes (HL) 5](#table---wine-export-volumes-hl)

[Table - Wine Export Values (Thous.US\$ FOB)
5](#table---wine-export-values-thous.us-fob)

[Table - Wine Export Prices (FOB current US\$ per HL)
6](#table---wine-export-prices-fob-current-us-per-hl)

[Table - Wine Exports by Country of Destination
6](#table---wine-exports-by-country-of-destination)

[Policy 7](#policy)

[TABLE: CHILE -- Production, Consumption, Trade and Stocks
8](#table-chile-production-consumption-trade-and-stocks)

# Executive Summary

Chile's wine production expanded again in CY2008, as weather has been
excellent in most growing areas and additional new planted areas are
coming into production. Another small expansion is expected for CY2009
as still a large area is in the increasing stage of production.

Chile has an estimated 8,000 producers of wine grapes. Planted area has
increased over 70 percent during the last 8 years. Industry sources
believe that once the new areas come into production, wineries will have
to invest in new processing and storage facilities to absorb the
additional annual output.

# Planted Area

As a result of good economic returns obtained for wine during the last
few years, farmers continue to plant new vineyards to varieties in
higher demand but at a lower rate of expansion. As a result the Ministry
of Agriculture's new estimate of total planted area of vines for wine is
now 119,000 hectares. Out of the total planted area, around 76 percent
are red varieties. Also, close to 75 percent of all planted area is
irrigated. As a result, Chile's total volume of exportable wine is
expected to continue to expand in the coming years.

# Production

Wine production in CY2008 increased due to excellent weather in most
wine producing areas together with newly planted areas that come into
production. In spite of large crops during the last few years that have
increased stocks to record volumes, prices paid to producers for wine in
CY2008 increased significantly. But due to the expected fall in export
demand as a result of the economic crisis, prices for grapes and or wine
(domestic Farm Gate prices) are expected to fall up to 30 percent for
the coming harvest in CY2009 as indicated by an industry official.

For CY2009 another small expansion in the wine production is expected as
weather has been good and still a large number of orchards are either in
the increasing stage or coming into production.

+-------+-------+-------+-------+-------+-------+-------+--------+
| #     |       |       |       |       |       |       |        |
| # Tab |       |       |       |       |       |       |        |
| le -  |       |       |       |       |       |       |        |
| Real  |       |       |       |       |       |       |        |
| Domes |       |       |       |       |       |       |        |
| tic F |       |       |       |       |       |       |        |
| arm G |       |       |       |       |       |       |        |
| ate W |       |       |       |       |       |       |        |
| ine P |       |       |       |       |       |       |        |
| rices |       |       |       |       |       |       |        |
|       |       |       |       |       |       |       |        |
| (CH\$ |       |       |       |       |       |       |        |
| Per   |       |       |       |       |       |       |        |
| L     |       |       |       |       |       |       |        |
| iter) |       |       |       |       |       |       |        |
| /1    |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| **1   | **1   | **1   | **1   | **2   | **2   | 2007  | 2008   |
| 981** | 985** | 990** | 995** | 000** | 006** |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| 242   | 130   | 135   | 201   | 460   | 215   | 183   | 266    |
+-------+-------+-------+-------+-------+-------+-------+--------+
|       |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| Exc   |       |       |       |       |       |       |        |
| hange |       |       |       |       |       |       |        |
| rate: |       |       |       |       |       |       |        |
| US\   |       |       |       |       |       |       |        |
| $1.00 |       |       |       |       |       |       |        |
| =     |       |       |       |       |       |       |        |
| CH\$6 |       |       |       |       |       |       |        |
| 49.32 |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| 1/    |       |       |       |       |       |       |        |
| P     |       |       |       |       |       |       |        |
| rices |       |       |       |       |       |       |        |
| are   |       |       |       |       |       |       |        |
| in    |       |       |       |       |       |       |        |
| Dec   |       |       |       |       |       |       |        |
| 2008  |       |       |       |       |       |       |        |
| Ch    |       |       |       |       |       |       |        |
| ilean |       |       |       |       |       |       |        |
| p     |       |       |       |       |       |       |        |
| esos. |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+
| So    |       |       |       |       |       |       |        |
| urce: |       |       |       |       |       |       |        |
| ODEPA |       |       |       |       |       |       |        |
| (Min  |       |       |       |       |       |       |        |
| istry |       |       |       |       |       |       |        |
| of    |       |       |       |       |       |       |        |
| Agr   |       |       |       |       |       |       |        |
| icult |       |       |       |       |       |       |        |
| ure). |       |       |       |       |       |       |        |
+-------+-------+-------+-------+-------+-------+-------+--------+

# Production Factors

Over 46 percent of wine storage containers at wineries are made of
stainless steel in the Chilean wine industry, which shows a high
technological development standard for the industry. Additionally, 39
percent of the wineries use oak barrels, French or American, for an
average of 3 to 5 years. Over 70 percent of Chilean wine makers believe
that they have sufficient storage capacity for their production, while
only 12 percent believe they need to expand.

+-------+------------+------------+------------+----------+---------+
| #     |            |            |            |          |         |
| # Tab |            |            |            |          |         |
| le -  |            |            |            |          |         |
| Wine  |            |            |            |          |         |
| Produ |            |            |            |          |         |
| ction |            |            |            |          |         |
| , Con |            |            |            |          |         |
| sumpt |            |            |            |          |         |
| ion a |            |            |            |          |         |
| nd Ex |            |            |            |          |         |
| ports |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
|       |            |            |            | **E      |         |
|       |            |            |            | xports** |         |
+-------+------------+------------+------------+----------+---------+
|       | **Area     | **Pr       | **Per      | **Mill.  | **Mill. |
|       | Planted**  | oduction** | Capita**   | Ltr.**   | US\$**  |
|       |            |            |            |          |         |
|       | **(Th.     | **(Mill.   | **Con      |          |         |
|       | Has)**     | Ltr.)**    | sumption** |          |         |
+-------+------------+------------+------------+----------+---------+
| 1982  | 105        | 603        | 52         | 8        | 11      |
+-------+------------+------------+------------+----------+---------+
| 1990  | 65         | 398        | 25         | 43       | 52      |
+-------+------------+------------+------------+----------+---------+
| 1992  | 62         | 370        | 17         | 74       | 119     |
+-------+------------+------------+------------+----------+---------+
| 1994  | 53         | 411        | 13         | 111      | 143     |
+-------+------------+------------+------------+----------+---------+
| 1996  | 56         | 481        | 16         | 185      | 294     |
+-------+------------+------------+------------+----------+---------+
| 1998  | 75         | 547        | 17         | 251      | 540     |
+-------+------------+------------+------------+----------+---------+
| 2000  | 104        | 679        | 15         | 276      | 585     |
+-------+------------+------------+------------+----------+---------+
| 2002  | 109        | 574        | 15         | 356      | 610     |
+-------+------------+------------+------------+----------+---------+
| 2004  | 112        | 655        | 16         | 474      | 845     |
+-------+------------+------------+------------+----------+---------+
| 2006  | 115        | 845        | 15         | 520      | 965     |
+-------+------------+------------+------------+----------+---------+
| 2007  | 117        | 828        | 16         | 613      | 1,262   |
+-------+------------+------------+------------+----------+---------+
| 2008  | 118        | 869        | 16         | 591      | 1,384   |
+-------+------------+------------+------------+----------+---------+
| 2009  | 119        | 890        | 16         | 580      | 1,358   |
| 1/    |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
| 1/    |            |            |            |          |         |
| FAS   |            |            |            |          |         |
| For   |            |            |            |          |         |
| ecast |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
| So    |            |            |            |          |         |
| urce: |            |            |            |          |         |
| Nat   |            |            |            |          |         |
| ional |            |            |            |          |         |
| Ag    |            |            |            |          |         |
| ricul |            |            |            |          |         |
| tural |            |            |            |          |         |
| So    |            |            |            |          |         |
| ciety |            |            |            |          |         |
| (SNA) |            |            |            |          |         |
| and   |            |            |            |          |         |
| Ce    |            |            |            |          |         |
| ntral |            |            |            |          |         |
| Bank. |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+

# Consumption

Total domestic wine consumption in Chile is more or less stagnant.
Statistics shows that average per capita consumption fell over 70
percent from a high of 52 liters per person in 1982 to a low of only 13
liters in 1994. Beer consumption has been substantially exceeding 27
liters per capita. However, beginning in 1994, per capita consumption of
wine slowly began expanding again and presently is of 16 liters per
person. Chile has the lowest per capita wine consumption for all major
wine producing and exporting country. Chile's per capita wine
consumption compares to 55 liters consumed in France and 40 liters in
Argentina.

# Trade

Chilean wine exports fell slightly in volume but increased in value
during CY2008 when compared to the previous year. Higher prices obtained
mainly for sparkling and bulk wine explain the increased returns for
exports in CY2008. Industry sources indicate that Chile is the tenth
largest wine producer and fifth largest exporter in the world. In spite
of the severe economic crisis which is affecting the world, the wine
industry in Chile expects exports in CY2009 to stay at similar level
than in CY2008. A reported fall of the wine production in France for the
second year in a row and a big effort in developing new markets, like
China, are the main reasons for their optimism in keeping export volumes
at the same level than last year. Improvements in quality and a good
price/quality relationship should also help to keep exports levels.

Chile traditionally exports both bottled and bulk wine. An increasing
number of wineries are making a big effort to increase premium-bottled
wine exports; as a result bottled wine kept expanding in CY2008 and bulk
wine exports fell. Currently, there are more than 70 Chilean wineries
exporting. Over 60 percent of Chile's total yearly production is
exported, supplying more than 100 countries.

+-----------------+-----------------+-----------------+-----------------+
| ## Ta           |                 |                 |                 |
| ble - Wine Expo |                 |                 |                 |
| rt Volumes (HL) |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Kind / Year     | **2006**        | **2007**        | **2008**        |
+-----------------+-----------------+-----------------+-----------------+
| **Sparkling**   | 15,565          | 19,405          | 27,279          |
+-----------------+-----------------+-----------------+-----------------+
| **Bottled**     | 3,507,669       | 3,645,246       | 3,705,824       |
+-----------------+-----------------+-----------------+-----------------+
| **Bulk**        | 1,681,360       | 3,052,497       | 2,180,703       |
+-----------------+-----------------+-----------------+-----------------+
| **TOTAL**       | 5,204,594       | 6,127,154       | 5,913,806       |
+-----------------+-----------------+-----------------+-----------------+

The average price obtained for all exports rose almost 14 percent.
Industry sources believe the increase in the average export price
reflects an improvement in the quality of the wine being exported.

+-----------------+-----------------+-----------------+-----------------+
| #               |                 |                 |                 |
| # Table - Wine  |                 |                 |                 |
| Export Values ( |                 |                 |                 |
| Thous.US\$ FOB) |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Kind / Year     | **2006**        | **2007**        | **2008**        |
+-----------------+-----------------+-----------------+-----------------+
| **Sparkling**   | 4,594           | 5,754           | 9,885           |
+-----------------+-----------------+-----------------+-----------------+
| **Bottled**     | 839,075         | 1,090,195       | 1,174,379       |
+-----------------+-----------------+-----------------+-----------------+
| **Bulk**        | 124,357         | 165,850         | 199,730         |
+-----------------+-----------------+-----------------+-----------------+
| **TOTAL**       | 968,026         | 1,261,799       | 1,383,994       |
+-----------------+-----------------+-----------------+-----------------+

+-----------------+-----------------+-----------------+-----------------+
| ## Table -      |                 |                 |                 |
|  Wine Export Pr |                 |                 |                 |
| ices (FOB curre |                 |                 |                 |
| nt US\$ per HL) |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Kind / Year     | **2006**        | **2007**        | **2008**        |
+-----------------+-----------------+-----------------+-----------------+
| **Sparkling**   | 295             | 297             | 362             |
+-----------------+-----------------+-----------------+-----------------+
| **Bottled**     | 239             | 299             | 317             |
+-----------------+-----------------+-----------------+-----------------+
| **Bulk**        | 74              | 54              | 92              |
+-----------------+-----------------+-----------------+-----------------+
| **Average**     | 186             | 206             | 234             |
+-----------------+-----------------+-----------------+-----------------+

## 

## 

Chile's main export market for wine continues to be the EU followed by
the US. China is the third largest export market in volume but not in
value since it imports mainly bulk wine. The industry continues its
focus on the Asian markets. However, less than 10 percent of total
exports go to that market, according to "Wines of Chile", a
public-private organization created to promote Chilean wine exports.

+-----------+--------+--------+--------+--------+--------+--------+
| ## T      |        |        |        |        |        |        |
| able - Wi |        |        |        |        |        |        |
| ne Export |        |        |        |        |        |        |
| s by Coun |        |        |        |        |        |        |
| try of De |        |        |        |        |        |        |
| stination |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
|           | **Qu   |        |        | *      |        |        |
|           | antity |        |        | *Value |        |        |
|           | (1000  |        |        | (Th    |        |        |
|           | He     |        |        | ousand |        |        |
|           | ctolit |        |        | US     |        |        |
|           | ers)** |        |        | doll   |        |        |
|           |        |        |        | ars)** |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
|           | **     | **     | **     | **     | **     | **     |
|           | 2006** | 2007** | 2008** | 2006** | 2007** | 2008** |
+-----------+--------+--------+--------+--------+--------+--------+
| **U.K.**  | 1      | 1      | 967,1  | 1      | 2      | 2      |
|           | ,018.1 | ,016.8 |        | 63,303 | 30,584 | 23,046 |
+-----------+--------+--------+--------+--------+--------+--------+
| **U.S.**  | 535.5  | 612.2  | 698.9  | 1      | 1      | 1      |
|           |        |        |        | 49,721 | 85,770 | 99,788 |
+-----------+--------+--------+--------+--------+--------+--------+
| **China** | 393.0  | 705.7  | 479.8  | 21,119 | 40,196 | 51,357 |
+-----------+--------+--------+--------+--------+--------+--------+
| **        | 399.7  | 590.9  | 473.5  | 53,167 | 70,886 | 65,091 |
| Germany** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| *         | 449.6  | 298.2  | 321.6  | 56,150 | 67,905 | 80,572 |
| *Canada** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| **        | 256.8  | 286.1  | 300.7  | 42,429 | 55,624 | 69,829 |
| Denmark** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| **Neth    | 177.4  | 224.7  | 253.1  | 42,106 | 54,233 | 67,492 |
| erlands** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| **Japan** | 127.7  | 186.8  | 226.0  | 30,585 | 42,376 | 54,861 |
+-----------+--------+--------+--------+--------+--------+--------+
| *         | 143.5  | 189.0  | 182.7  | 37,028 | 50,947 | 52,210 |
| *Brazil** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| *         | 164.4  | 196.7  | 168.9  | 20,131 | 21,979 | 21,984 |
| *France** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| *         | 236.8  | 184.1  | 150.0  | 26,069 | 30,636 | 30,555 |
| *Russia** |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+
| *         | 1      | 1      | 1      | 3      | 1      | 6      |
| *Others** | ,302.1 | ,636.0 | ,691.4 | 26,218 | 84,034 | 67,161 |
+-----------+--------+--------+--------+--------+--------+--------+
| **TOTAL** | 5      | 6      | 5      | 9      | 1,0    | 1,3    |
|           | ,204.6 | ,127.2 | ,913.7 | 68,026 | 35,170 | 83,946 |
+-----------+--------+--------+--------+--------+--------+--------+
| Source:   |        |        |        |        |        |        |
| ODEPA     |        |        |        |        |        |        |
| (Ministry |        |        |        |        |        |        |
| of        |        |        |        |        |        |        |
| Agri      |        |        |        |        |        |        |
| culture). |        |        |        |        |        |        |
+-----------+--------+--------+--------+--------+--------+--------+

Wine is mainly imported from Argentina in tetra pack cartons and/or bulk
to supply the domestic demand for in-expensive wine. U.S. wine is also
available, usually in premium outlets. However, demand is dampened by
prices well above the local market average. The current tariff rate for
all U.S. wine imports into Chile is 6 percent ad valorem. There is also
a 19 percent value-added tax and a 15 percent liquor tax applied to all
wines sold in Chile. The US-Chile Free Trade Agreement had no effect on
Chilean wine export volumes to the US, as the duty for most wine is 6.3
cents per liter and will be phased out over a total of 12 years (2016).
In the case of US wine exports to Chile, the 6% tariff will remain at
base rate until 2010. Beginning January 2011 duties will be reduced by
3.3%. In January 2012, duties will be reduced by 21.7 %. In 2013, duties
will be reduced by 40.0 %. In 2014, duties will be reduced by 58.3 %. In
2015, duties will be reduced by 76.7 %. U.S. wine can enter Chile duty
free in 2016. In agreements signed with other trading partners, Chilean
exports will have a zero tariff in 2011 in all Mercosur member
countries, a zero tariff in 2009 with South Korea and has already free
access in Canada, Mexico and the European Union. The present duty of
11.2 percent in China will be reduced to zero in 2015. The recent
agreement signed with Japan calls for a 12 year phase out period from
the present 15 percent duty.

# Policy

Wine production and exports are regulated and certified by the
Agriculture and Livestock Service (SAG) of the Ministry of Agriculture.
All wine produced in Chile for both the domestic and export market is
periodically sampled by SAG. SAG also issues the export certificates
that include the wine's origin and quality.

The government provides no direct subsidies to support wine production
or subsidize exports. Although Chile does have a successful market
promotion campaign called "tastes of Chile" that includes wine.
Promotions are managed by an organization called "Wines of Chile" which
is co funded by both of the wine producers associations in Chile, Vinos
de Chile and Chilevid. The Wines of Chile campaign has an annual budget
that is less than 1 percent of the total value of Chile's bottled wine
exports. The marketing funds are used for generic promotion. The
Government contributes 15 percent of the total amount, through its
export promotion agency called ProChile. Wines of Chile spend most of
its allocated budget on promotional activities in Canada, England,
Germany and the United States. Activities include the "Tastes of Chile"
campaign that promotes fruits and wine. The images used build on the
natural beauty of Chile and the quality of the products. Another
promotional program is the activity called "Wine Show and Tasting". This
activity takes place normally once a year. It consists of seminars and
wine tasting. ProChile contributes with logistics and market information
and the wineries pay the costs. With this strategy the wine industry is
promoting wines in markets like Russia, Netherlands, Denmark, Sweden,
Czech Republic, Brazil, Mexico, Venezuela, Taiwan and Hong Kong.

+------------------+---------------+-----------------+-----------------+
| ## TABLE: CH     |               |                 |                 |
| ILE -- Productio |               |                 |                 |
| n, Consumption,  |               |                 |                 |
| Trade and Stocks |               |                 |                 |
|                  |               |                 |                 |
| (Thousand HL)    |               |                 |                 |
+------------------+---------------+-----------------+-----------------+
|                  | **CY2008**    | **CY2009**      | **CY2010**      |
+------------------+---------------+-----------------+-----------------+
| PRODUCTION       | 8,690         | 8,900           | 9,100           |
+------------------+---------------+-----------------+-----------------+
| CONSUMPTION      | 2,680         | 2,700           | 2,760           |
+------------------+---------------+-----------------+-----------------+
| EXPORTS          | 5,900         | 5,800           | 5,850           |
+------------------+---------------+-----------------+-----------------+
| IMPORTS          | 42            | 55              | 55              |
+------------------+---------------+-----------------+-----------------+
|                  |               |                 |                 |
+------------------+---------------+-----------------+-----------------+

# 

#