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South American wines will make further inroads into U.S. retail shelves in the coming years, regardless of whether California has a wine surplus or shortage. Value will be their calling cards, but quality will be their message.

BY DAN BERGER

When California’s wine industry reported a 33% increase in grape production in the 1997 harvest over 1996, all of a sudden the shortage of domestic wine faced by U.S. producers for three years was turned into a flood, and dire predictions were being made that imports would instantly suffer.

Don’t be too quick to buy that prediction. Especially when you consider South America and the great values it will continue to offer.

Led by significant gains in quality of bottled wine, imports of Chilean wine continued to rise significantly in 1997, and predictions are that the increases, which reached a value of more than $100 million last year, won’t tail off any time soon. And the reasons have to do more with quality than the long-known excellent value of Chilean wine. Moreover, Argentina is establishing itself as a major production force in the world. And the large Marcus James brand is relocating from Brazil to Argentina, giving the latter country more firepower in its quest for world recognition.

Historically, South American wines gained some important visibility more than a decade ago when a branch of the Rothschild family connected to Chateau Lafite-Rothschild invested in Los Vascos of Chile. This was potentially a major connection between the Old World of France (Bordeaux), the New World of California (since Chalone Group was cross-invested with Lafite) and the Emerging World of Chile.

Though that venture made headlines, it produced little heat and only a small amount of smoke: the Los Vascos brand never developed as expected. To date, its growth since the Rothschild/Chalone investment has been minimal — though it proved that Chile was a place to look at as a possible area of the world for wine development.

That finally came to fruition in 1995 when Robert Mondavi struck a joint-venture agreement with a major Chilean producer, almost at the same time that Chilean wine sales in the U.S. began to soar, hitting $71 million in dollar volume.

Errazuriz, a winery owned by the Eduardo Chadwick family of Chile, agreed to develop, with Mondavi, not only a superpremium wine selling for $50, but Mondavi agreed to take on the Chadwick brand Caliterra as exclusive marketers.

That meant that Mondavi, which in 1997 grew to domestic sales of more than 6 million cases, would have responsibility for an additional 500,000 cases of wine — an instant increase of more than 8% in sales growth for 1998 and beyond. And Chile had a strong entrée into U.S. sales.

As if that weren’t enough, Mondavi and Chadwick orchestrated a splashy release of a new wine called Seña, made by the joint venture between the Mondavi family and Errazuriz, at the predicted $50 per bottle. The 1995 wine was met with top ratings, and it kicked off a flurry of high-priced activity among Chilean producers.

  • Cousino Macoul’s 1993 Finis Terrae, which was introduced a year ago, now sells for more than $30. It is, as are the others, a cabernet sauvignon blend in the bordeaux mold
  • The producers of Montes Alpha released a striking new wine simply called M from the 1996 vintage. It sells for $54.
  • Concha y Toro formed a joint wine venture with Chateau Mouton-Rothschild to make an ultrapremium red wine. No price has yet been set for this as-yet unreleased and unnamed wine, but rumors are it may sell for $75.

Cabernet sauvignon is the key to all of these wines thus far, but merlot has also become a hot property in Chile, witness the success of Brown-Forman’s impressive Carmen wines and the Santa Rita wines of Vineyard Brands.

For the last decade, Chile has been known for its good value wines. Cabernet and chardonnay at $5 to $7 have been the norm, and it is here that Chile made its greatest impact in the U.S. in 1996, when case sales rose from about 2.1 million cases in 1995 to 3.5 million cases in 1996 — but when total dollar value dropped from $71 million to $50 million. Only in 1997, when volume rose to 6.1 million cases did dollar volume rise — and it hit $106 million last year. Paced by Concha y Toro’s 19.3% increase in U.S. sales in 1997 along with Banfi companion brand Walnut Crest’s 23.6% rise, Chile solidified its position as a powerful force in U.S. wine sales. Cumulatively, the two Banfi Vintners’ brands sold nearly 3 million cases here in 1997 — close to half of all Chile’s sales in the U.S. It’s clear that Chile is here to stay as a value-oriented, volume-conscious wine producer.

One of the recent success stories coming out of Chile is the re-emergence of the Viña Santa Carolina line of premium varietals. A year ago, the Canandaigua Wine Co. acquired rights to the brand and began marketing the line of chardonnay, merlot and cabernet sauvignon (and reserve versions) as premium wines selling for $7 to $10 retail. Featuring new, redesigned bottles, the brand responded. Indeed, Viña Santa Carolina increased case sales by 50% in 1997, to 300,000 cases. And the growth is continuing this year.

The great volumes of good wine available in Chile, partially from overproduction, has long placed Chile as the leader of the value wine on today’s shelves.

Today, the average bottle of Chilean wine sells in the United States for $4.50, though to be fair this does not include many of the new superpremiums that have been introduced only recently, nor does it account for some of the high-volume packages that began to make an impact first in 1997.

Most importantly, it does not account for all the gallonage that has come here in the last year as bulk wine, in tankers, to be bottled here.

Moreover, it can’t account for such things as a rise in quality with brands that are still small — such as 1996 Veramonte, from the estate of Agustin Huneeus. Nor does it really account for the expected growth of Kendall-Jackson’s Vina Calina brand. Or for the $20 price on a wine called Paul Bruno, from Paul Pontallier of Chateau Margaux and Cos d’Estournel’s Bruno Prats.

Both Vina Calina and Veramonte are buying grapes from various cooler regions, such as Casablanca Valley to make a more delicate, drinkable wine. In the last two years, prices for these wines were in the $17 per bottle range and represented a bold step forward in wine quality.

Also, about a dozen French wine producers are doing business in Chile; about 20 California wineries are invested there in one form or another, and four major Australian companies are there.

The latest effort occurred this spring, when Mondavi and Chadwick staged an elaborate rollout of Seña in Chile, and then brought versions of that rollout to four major U.S. cities. There are some 2,000 cases of Seña, a stylishly packaged bottle with a label all in Spanish and carrying the signatures of Mondavi and Chadwick.

Argentina, the fourth-largest wine producer in the world, is essentially an unknown quantity — and quality — in the United States thus far. It’s true, a few important brands such as Weinert, Trapiche and Flichtmann have already landed here to a round of polite applause. And quite frankly, the reception has been tame compared with the actual quality of the wines, which I think is superior.

But imagine this: Argentina has some 700,000 acres planted to wine grapes, making it roughly 40% larger than California. With such vast acreage, you can imagine that there are a plethora of microclimates and thus huge potential to make great wine.

It was this thinking that led huge Canandaigua Wine Co., the second largest in the United States, to announce recently that it was moving its production of the successful Marcus James line of wines from Brazil to Argentina in 1998.

Marcus James represented a 925,000-case line of wines in U.S. imports last year, a chunk of that in white zinfandel, and a company spokesman said the white zinfandel production likely would switch to the U.S.

Still, with some 700,000 cases or more of wine now coming out of Chile, said one analyst, Marcus James’ wine quality is expected to rise and retail prices will probably be unaffected.

Akey reason for this is that Argentina’s greatest weapon is great success with the malbec grape, in particular in the large Mendoza region, which accounts for 70% of the nation’s wine production.

Situated just east of the Andes Mountains, Mendoza is actually closer to the capital of Chile, Santiago, than it is to Buenos Aires, the capital of Argentina.

Argentina’s love affair with malbec has led to some splendid blendings that make red wines in a novel manner. There is ample fruit, reminiscent of the racy cabernet sauvignon planted there, but there is a maturity that fast comes into the wines when malbec is used to gain complexity and given some bottle aging.

Thus are many of the red wines of Mendoza more supple and harmonious when released than many California wines, which can have raspy tannins.

There is no question that South American wines will make further inroads into U.S. retail shelves in the coming years, regardless of whether California has a wine surplus or shortage. Value will be their calling cards, but quality will be their message.

You can bet that savvy retailers will be paying attention.


Dan Berger’s wine column is carried by the Los Angeles Times Syndicate, and he also publishes a weekly newsletter on wine, “Vintage Experiences” (e-mail: RLLS92A@PRODIGY.COM).


CHILE’S “MERLOT”

Much of the merlot planted in Chile is really a grape called carmenere, a modest-quality grape in Bordeaux, but a grape that seems to have taken a liking to Chile’s warmer regions. In Chile, it is a prolific grape that offers a more plummy aroma and texture than in Bordeaux, meaning the wines are fleshy when young and do not need as much bottle aging. And since Americans typically drink their wines young anyway, this grape is an ideal blending grape for the great cabernet sauvignon-based blends we are seeing from Chile.


ARGENTINE WINES

A decade ago, the white wines of Argentina were not considered of world-class quality; however, today that generalization is no longer true. Sonoma County winemaker Paul Hobbs worked a number of vintages in Argentina for the Catena brand, and today that experience has left the Argentineans with crucial data with which to build major improvements in their chardonnays and sauvignon blancs.

Moreover, Domaine Chandon of France’s Champagne district has a sparkling wine facility in Argentina and has made some remarkably fine, delicate and startlingly complex sparkling wines, which it is now marketing on a very select basis.

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