Chile has already come a long way as a wine exporter in a short time but clearly has the potential to develop further. Michael Cox and Ricardo Letelier, respectively UK director and general manager of Chile's generic wine-marketing organisation Wines of Chile, discuss the country's progress, and the challenges and opportunities it faces going forward.

J-D: What does Wines of Chile do?

Letelier: Wines of Chile was formed in 2002 by two associations in Chile that decided to create one organisation to handle marketing functions. The biggest focus of Wines of Chile is to develop international markets for Chilean wines. Basically, we have developed two main areas - one, a corporate strategy and two, a strategy in each different market in which we operate. Under our corporate strategy, we prioritise our markets. We have scarce resources. The second strategy is to find a definite position for Chile in each market. Our third task is to develop a market strategy internationally (and) to make sure everyone in Chile understands and is aligned behind that.

J-D: How do you think consumers perceive Chile as a wine-producing nation?

Letelier: All our research in different markets showed that Chile had low recognition and a confusing image with consumers. The image of Chile was mixed with Latin America as a whole. For most consumers, Chile had a very good price/quality ratio, making mainly inexpensive wines. We decided to position Chile as an amazing place and an amazing corner of the world to produce high-quality wines. Everything we do has to complement and reinforce that position.

J-D: How seriously have Chilean producers begun to develop brands and invest behind the marketing of their wines?

Letelier: Chile has already started to develop strong brands… Why I hesitate is that it probably hasn't developed brands as fast as one would like but it is definitely progressing. Three years ago, there were no Chilean brands in the UK's top 20 hit list. Now there are two, so we see this as very real progress. There has been better marketing, better branding, better packaging and a better understanding of the market and the dynamics of the market.

J-D: How can Chilean exporters reduce price discounting in the UK and encourage consumers to trade up?

Cox: Over the last 12 months, there has been a firming of some prices but not right across the board - people are being very careful about this. There is a better balance of supply and demand; there have been currency-induced increases but strong brands are proving there is life above GBP5 (US$9.37).

Letelier: We want to focus on the price range immediately above where we sell today. By every indicator, we are definitely making progress. In value and volume terms, we've increased; our perception in the segment above GBP5 is increasing. Chilean wine sales rose 10% last year. Between GBP5 and GBP10, the total market rose 10%; Chilean sales rose 28%.

Cox: There has been increased stocking, more of the trade is stocking a wider range of wines above GBP5 and some of the leading brands are taking advantage of this opportunity. Half a dozen key Chilean wineries are driving the retail sector above GBP5. A wider number are taking the opportunity to break the mould of Chilean wines - by that I mean, not just being red or not just being entry level or stylistically just above that. There's a great confidence among the trade and ultimately a greater confidence to sell a wider range of higher priced wines from Chile.

J-D: The strength of the Chilean peso has caused problems for the country's wine producers who rely on success in export markets. What's your take on the situation?

Letelier: Chile is the 10th producer in terms of volume and 5th or 6th in terms of exports. The country has the most diverse portfolio of countries (it exports too). We export 70% of our production and get most of our revenue from international markets. It's a tough period. A dollar was worth CLP800 (US$1.53) a few years ago; now it's down to CLP550. This was too fast, it wasn't gradual, gives little time to adjust, but the industry will adjust. The peso is very strong, so a good local industry helps financial stability. Clearly, Chile is a small country and the internal market has always been small but we still face challenges as an industry and need to develop an internal market.

J-D: Could you give me a feel for how Chile is developing in export markets?

Letelier: One market where we decided to concentrate and where we have focused is the UK. We are very satisfied with the progress that we are making here and in other markets, in particular in the US, which is the same size as the UK and accounts for 20% of our exports. We have progressed in other markets: Canada; in Ireland we have increased our market share where we our second behind Australia; and in Germany. There are some other markets where we work with the government body ProChile, for example Asia, Latin America.

J-D: What does Chile have to offer that its New World rivals cannot?

Cox: Chile offers consumers a welcome bridge from the Old to the New World; to the subtlety - and some would say blandness of the Old World - to the aggressive opulence of the New World. So much has changed so quickly - there has been substantial investment in viticulture, investment in people and the art of winemaking, from the formulaic examples of wine from the 1990s to the greater diversity and interest in the period we see today. Even in regions like Maule - the bread-basket of Chilean wine - there is a fantastic amount of innovation going on and (it) is producing wines of great diversity.

Letelier: Chile offers very specific conditions in which to grow grapes so the expression of each grape variety offers something unique to Chile. We have many different microclimates; it's a very natural way to grow grapes. Chile is a bit isolated from other countries. In Chile, you find that there are many different areas where the growers are trying to find the right terroir for the right grape varieties - there is a lot of emphasis on viticulture.

Cox: Long-term, Chile has a competitive advantage. We have to be smart and make targeted investments to take advantage of that. The country is following a similar path to that which Australia saw in the 1990s. There is a similar level of dynamism and stylistically they both attract Old and New World drinkers. Chile can offer certain things that others can't.