I remember when Chilean wine first hit the U.S. market in the 1980s. This South American spindle of a country came to the game with a winemaking climate as perfect as any in the world, low land and labor costs, and a small domestic market that meant there was an export-driven culture.
They took what sold: Napa Cabernet Sauvignon, Sonoma Chardonnay and Napa Sauvignon and just re-did it down in Chile. Even with the costs of shipping through the Panama Canal, Chilean wines were cheap and cheerful when they arrived in stores and on restaurant wine lists in the eastern and central U.S. It was a case of “anything you can do, I can do cheaper”. This strategy was effective at attaining a foothold in the U.S. market, the country’s primary export destination, but over time the Chilean wine industry started to experience the effects of outside competition and the country’s own economic success. Twenty years of virtually unbroken economic growth under a new democratic government meant that labor costs started to rise. Even more of a shock was the appreciation of the peso relative to the dollar. Simultaneously, competition increased from a re-emergent Argentinean wine industry bolstered by a two-thirds currency devaluation following a currency crisis in 2001. Australia also flooded the low end of the U.S. wine market with an endless succession of ‘critter’ wines. Continue reading