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An Advertising Age International roundup

Consumers from the U.S. and the U.K. are uncorking wines from surprising countries. But a bigger surprise is that these wines are gaining cross-border distribution without major marketing efforts.

Hungary, Argentina and South Africa are joining Chile as up-and-comers on the world's wine list, thanks to low prices. But exporters are fighting volatile exchange rates, Byzantine distribution channels, limited marketing resources and naive sales approaches.

Perhaps the strongest emerging producer is Chile, with exports at an estimated $120 million last year from $3 million in 1979, said the Fine Wine Producers Association, Santiago. About 40% of its exports go to Latin America and 20% to the U.S., said Fondacion Chile, a Santiago marketer of wine production equipment.

One reason for Chilean wine's popularity is its marketing, with farflung wine tastings and ads supported by ProChile, the Ministry of Foreign Affairs' trade group. ProChile spends $2 million to $3 million annually in the U.S. on print ads themed, "It's not just a wine. It's a country," by Holt, Hughes & Stammel, Portland, Me.

Another factor is price. "Many of these $5 to $7 bottles of Chilean wine are made to look, feel and taste like California brands," said Wine Enthusiast Editor W.R. Tish.

"We're giving California a good run for its money, but 80% of U.S. wine consumption is Californian," said Richard Condon, exec VP of Excelsior Wines & Spirits, Farmingdale, N.Y., importer of Concha y Toro and other Chilean brands.

Despite a recent rise, wine imports in the U.S. plunged to 15% from 30% a decade ago. Chile now sells 8% of U.S. wine imports; Hungary, 1%; and Argentina, less than 1%, according to Market Watch, a journal tracking imports to the U.S.

The potential to expand import penetration is not the opportunity it seems, said Eileen Fredrikson, a partner at San Francisco wine consultant Gomberg-Fredrikson. "People all over the world have expected Americans to behave like other civilized people and sit down to dinner with a glass of wine, but they never do. They drink Pepsi-Cola and they drink beer."

Argentina, the world's fifth largest producer, had export profits of only $22 million in 1992. Chaotic exchange rates and government policy limited marketing development, said a spokesman at Penaflor, Argentina's largest winery.

"Although wine is an agricultural product, it is not a commodity like grains or oil," said Alejandro Castro, an economist with winery trade group Asociacion Vitivinicola Argentina. "Each country has different qualities that buyers look for and different prices."

Argentina is echoing Chile's expositions, tastings and limited advertising in wine titles. ExportAr, Argentina's state office for promoting exports, helps fund exhibitors at international festivals. And 16 AVA members contribute a total of $50,000 annually for literature, videos and ads, all handled by different agencies.

Hungary competes with low-priced exports from neighboring Bulgaria, forcing a $1.50 to $2 ceiling on a bottle of Hungary's Tokay in Europe, far below the domestic price of $7 to $9. Europe is becoming Hungary's No. 2 importer-a mixed blessing, as a bottle of Hungarian wine fetches only about $1.50 in the U.K.

"Chile is the country to watch. It has all the classic varieties such as chardonnay and cabernet sauvignon," said Geraldine Jago, senior wine buyer at Victoria Wines, the U.K.'s fifth largest liquor chain.

Hungarian and Chilean wines comprise small but growing sales at grocery giant J. Sainsbury, which sells 15% of the U.K.'s liquor, said Claire Gordon-Brown, wine marketing manager.

But exporters' inexperience often hurts them, said Janet Lee, wine buying controller of U.K. supermarket chain Tesco, which sells 800 brands from 28 countries. "Some are very unprofessional and turn up at the door expecting to see someone immediately."

The U.K.'s hottest new wine may be South African. "The last two years saw imports from South Africa grow .*.*. at a steady 5% annual increase" at Tesco, Ms. Lee said.

Sanctions leveled in the 1970s against South Africa's apartheid policies ruined its foothold until the sanctions lifted in 1992. "There's a surge of excitement because we're re-entering the world as the former pariahs," said Johannesburg wine critic John Platter. "The big question is whether the wines will survive the initial flavor-of-the-month phenomenon. But I'm very optimistic."

South Africa, exporting 60 million bottles in 1993, has been criticized for producing too little of its most popular variety, pinotage, and too little red wine, in increasing demand. It also lacks a wine marketing board and has been faulted for not providing a coherent wine image and marketing strategy, but independent wineries are creating their own.

Last year Vredendal cooperative winemaker Giel Swiegers printed peace dove labels on bottles of Goiya Kgeisje chardonnay/sauvignon blanc blends for the U.K. The design earned gushing reviews from the London Times ("A new South Africa, marked by a new 1994 vintage") and the Daily Telegraph ("Drink a toast to peace").

This year's Vredendal label features a giraffe. "It's designed to leap off the shelves from among the thousands of wines on store shelves in the U.K.," said Vredendal's agent Simon Halliday. "We're still trying to put South Africa on the map."

Written by Judann Pollack from correspondent reports.

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