Economy

Chilean Wines Struggle To Shed Their Budget Image

Chilean women picking their finest grapes
Chilean women picking their finest grapes
Ximena Bravo Pou

SANTIAGO – Some time ago, Derek Mossman went to a New York restaurant and asked if they served any Chilean wines. The waiter answered: “No sir, this is a nice restaurant and we only serve good wines.”

Mossman is the owners of Garage Wine Co, a Chilean winery. He was in the United States promoting high-end Chilean wines.

This anecdote is a good example of the uphill battle facing Chilean wine producers; particularly those who want to compete in the premium wine market. The main problem facing Chilean wines is stiff competition from Argentina, South Africa and Australia.

The Chilean wine industry has been hoping to increase the value of its exports, above all by increasing its presence in the luxury wine market. But in the past six months, Chilean bulk-wine (wine that is bottled at destination) exports increased by more than 101%, while bottled wine exports have essentially stagnated. For years, Chilean wines have been marketed as being a good value - good quality at a low price. But now producers are finding it very difficult to entice buyers to pay what they would pay for wine from other regions.

Some Chilean wineries have even seen their foreign affiliates in other countries successfully raise prices while they seem unable to. For example, the average price of exports for Concha y Toro, the largest wine producer in the country, fell 1.2% in the second trimester compared with last year, while its subsidiary in Argentina was able to raise its prices by 6.6%, and its American subsidiary by 6.8%.

Image is everything

In a global industry like wine that is highly competitive, the brand or image commanded by a country is an important ingredient. “When consumers think of Chile they think about wine and the Andes and maybe something else. Chile lacks material in the global imagination,” explained Juan Park, research director of wine market adviser Wine Intelligence in London.

Park and other experts say that Chilean wine producers need to do a better job communicating what the country has to offer, in addition to its wine. They explain that it’s a matter of positioning, and the wine industry has yet to do the legwork.

Santiago Achurra, manager of the Chilean winery Viña Requingua, says that the problem will disappear as soon as producers start spending money to tackle it. The problem is that global brand building is expensive, and the Chilean wine industry doesn’t have the resources to adequately market itself.

Other experts say that Chile’s problem has to do with the fact that when it first entered the wine market, it did so at very low prices as a way to break into the market. The problem is that by charging so little Chilean producers were devaluing their own product in the eyes of global consumers.

The other problem is the quality of the wines. In 1997, Chile had nine wines classified as excellent by the prestigious Wine Spectator magazine. The number rose to 40 by 2005. But in the same period, South Africa went from two to 86 excellent wines, Argentina went from three to 57 and Australia was in a completely different league, going from 70 excellent wines to 246.

Bye Bye Gringo

The U.S. market is the one most affected by the Chilean strategy, since it is the principle export market for Chilean wine, both cheap and expensive. But while high-priced wine exports have dropped in both volume and value, the amount of Chilean bulk wine bought in the U.S. has increased more than 400% in volume since 2011.

Some say this is just a temporary blip, but others see a deeper crisis. Michael Schachner, editor of the Wine Enthusiast magazine, says that Chilean wines had their golden years in the 1990s and will not likely be able to return to the growth rates seen 10 years ago.

Chilean wine has a long, difficult way to go. Otherwise it will simply be a dream that disappeared as quickly as it came.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ