CHILE: Analysts warn of tumbling prices for Chilean wine

The international rating agency Fitch Ibca, Duff & Phelps announced it expects the price of Chilean wines to fall 10-12% during 2001.

The company's chief wine industry analyst, Matias Acevedo, said aggressive campaigns by large wineries to gain market share are a major contributor to the price drop. Furthermore, strong competition in the domestic wine market led to an environment of overproduction, Acevedo said.

Fitch also blamed a drop in grape prices for the lower price of wine.

While Fitch predicted wine sales would increase by 4-5% during the year, the company pointed out that this percentage is not sufficient to counteract overproduction.

Over the past few years, an increase in demand for Chilean wine exports led wineries to predict encouraging returns for the sector. Vineyards began an unprecedented growth in 1997 when producers planted 7,500 hectares of new vineyards compared to 2,900 hectares between 1994 and 1996.

Fitch estimates wine production to reach 630m litres this year, 60m litres more than in 2000.

Chile Vid, a trade organization representing Chile's emerging wineries, said waning domestic demand is another factor in wine's devaluation. Per capita consumption in Chile fell from 19 to 14.9 litres per year during the year 2000 alone.

Though wine prices are falling, exports continue to grow. Chile Vid said it expects exports to increase 8-9% during 2001, which will mean a US$40-50m rise in sales.

Chile Vid also said it did not agree with Fitch's outlook for wine exports. Fitch said it expected the rebound of the US wine market to have a negative impact on the
Chilean industry.