technology, even in the face of increasing competition from substitutes such as beer, pisco,
sodas, which had made enormous gains in the market for beverages.
Thus, by the beginning of the 1980s, new vines, planted after 1974, were entering
production despite the fact that total area planted had declined. In this manner, the yield per
hectare increased by the replacement of old, low-yield vines. Furthermore, the industry went
through a process of inverted creative destruction
as a consequence of the crisis created by the
easing of previous restrictions and the erosion of its position in the domestic beverage market.
These developments made producers begin to understand that they had to orient their output to
international markets. The sharp real depreciation of the Chilean peso that ensued as trade was
rapidly liberalized after 1974 also encouraged producers to look toward export markets.
Led by Viña Cánepa, a traditional Chilean winery, and Miguel Torres, a Spanish firm that
set up Chilean production facilities in 1981, one of the early technological changes introduced in
the industry was the use of stainless steel vats in place of wooden vats. Almost at the same time,
Miguel Torres introduced the use of small (220-liter) oak barrels, already in use nearly
everywhere else, to replace the old 4,000-liter “fudres” in which all Chilean red wines were kept.
These two innovations revolutionized the industry and raised the quality of Chilean wine, at a
time when the industry was redirecting its production to international markets. The exemplary
role of the success enjoyed by Viña Miguel Torres in exporting high-quality wine moved other
firms to seek to enter the export market.
3.2.1 The Stainless Steel Revolution
In 1980, Viña Cánepa, was the first Chilean-owned vineyard to introduce the use of stainless
steel vats, by importing Vallefondri vats from the United States. These vats were very robust,
having a thickness of 4-6 mm; today vats are built with better technology and are just 2-3 mm
thick. Cánepa bought vats of 50,000, 80,000, 100,000, and 200,000 liters. This huge investment
was undertaken at a time when the peso was appreciating in real terms, and the dollar had been
fixed at a a price of 39 pesos. In what would become the undoing of the firm later, the
investment was financed with foreign credit. Don Pepe Cánepa was the son of an Italian
immigrant who kept close contact with the wine industry in Italy, from where he had gotten the
idea of introducing this kind of vat.
A high-alcohol liquor made from grapes.
We say “inverted” because the crisis triggered innovation and not the other way around.
Because the vats were bought in parts and pieces, assembly was needed. In 1980, there
was no experience in stainless steel welding, so Vallefondri sent an expert to Chile who could
train some workers in the task. The firm in charge of the assembly was Marmevit, which had
been created by a former production manager of Viña Santa Rita who realized the need for well-
trained maintenance teams and equipment suppliers in the industry. Thus, Marmevit learned how
to assemble imported vats and carried out the task during 1981. Soon afterward, it started to
produce small vats and assisted in the assembly of larger imported vats for other vineyards.
Almost at the same time, Miguel Torres was also importing stainless steel vats, and had
the problem that nobody in Chile knew how to assemble them. The firm had to rely on the
technical support of the vats’ provider, Herpa SA, from Spain, who also trained some Chileans in
the assembly work.
By 1983, Marmevit and Herpa workers assembled a new lot of vats for Miguel Torres.
Then Marmevit followed with the assembly of vats for Viña Santa Rita during 1986-87 and for
other vineyards, such as Concha y Toro. Concha y Toro also began importing Staineker vats by
the mid-1980s. During this period, Marmevit started sending workers to train in Spain.
In 1994, Marmevit and Herpa S.A. created a joint venture, Herpa Chile, with the
objective of selling Herpa vats, while retaining the assembly work of Marmevit. This joint
venture soon fell apart due to management problems, whereas Marmevit kept assembling and
importing Herpa equipment on its own. By 1999, Marmevit had decided to import from Spain
only the cooling system for the vats, which could not be produced economically in Chile.
The introduction of stainless steel vats, an apparently minor innovation, allowed
producers to bring the quality and taste of Chilean wines up to international standards. These vats
have some important properties that allow wine to be exported safely from a sanitary point of
view. Moreover, in contrast to concrete tanks and large wood barrels, the stainless steel vats do
not retain wine residues that can affect the taste and smell of the wines the following season.
Finally, steel vats allow the producer to control the temperature of the wine during the process of
fermentation, which is fundamental when producing a good quality wine.
At the same time as the stainless steel revolution, there was another important change in
the industry: the emergence of the production line in the first half of the 1980s. Before the
introduction of the production line, bottling and corking were not standardized; in spite of the
fact that all bottles contained three-quarters of a liter, bottles were reutilized and had different
shapes. By the beginning of the 1980s, through business associations, bottle characteristics were
made uniform, bottle recycling was eliminated – and with it all the problems of untoward smells
that cling to bottles that were used to store other products, including kerosene – and the modern
production line became the industry norm.
3.2.2 Other Technical Improvements
Benavente (2006) has documented the fact that, until the 1990s, most of the industry’s
innovations were transferred from abroad rather than the result of R&D activities by Chilean
firms. Since then, innovation in the Chilean wine industry has evolved along several different
lines. The first channel, “learning by looking,” consisted of foreign travel at harvest time by
Chilean oenologists and viticulturists to the international centers of winemaking, mainly France
and the United States. Indeed, today it is not rare for a young oenologist to make his first vintage
in Chile after having participated in a few abroad. Some of the expenses of this travel abroad
were originally defrayed by government development agencies.
The second channel was the participation of foreign oenologists in the Chilean harvest
season. Some of them were sent to Chile by supermarket chains and distribution channels. In this
manner, a direct exchange of experiences was produced between the main actors in wine
production, the oenologists. Since then, traditional channels, such as participation in professional
congresses, international wine fairs, courses, and seminars, have become routine activities for
As will be discussed below, during the 1990s, there was growing cooperation between
Chilean and international winemakers. In addition, since the mid-1990s, there has been
remarkable growth in the area planted, to the levels existing at the beginning of the twentieth
century. Table 5 shows the evolution of the area planted by type of grape. It can be noted that the
area planted to cepa país (the most ordinary type of grape) has remained stable, whereas other
varieties have grown remarkably: by factors of 50 (cabernet franc), 6 (carmenère), and 4
But technology transfers have not been circumscribed to the vineyard level. To improve
fruit quality, wine producers have transferred newly acquired knowledge to grape growers. It is
now a common practice that business contracts specify handling procedures, irrigation systems,
It is interesting to note that carmenère is a variety that disappeared from France during the phylloxera crisis and
now is planted only in Chile. Rootstocks had been taken prior to the onslaught of the disease in France.
and performance indicators such as yield per hectare. Wine producers also offer technical
assistance in the field. The Chilean Development Corporation (Corporación de Fomento de la
Producción, CORFO) has a subsidized technical assistance program for the development of
suppliers (Programa de Desarrollo de Proveedores, PDP) that has been used extensively by
winemakers to improve the quality of grapes produced by external suppliers.
Some firms have stated that an important factor promoting wine exports from the mid-
1980s until the mid-1990s was the recession and the strong depreciation of the peso (resulting
from the financial and balance-of-payments crises of 1982-83), which allowed producers to
purchase at very low prices land that was suitable for the production of wine. The growth of the
industry has also been linked to the discovery and bringing into production of land in new
valleys devoted to growing grapes for winemaking (such as Casablanca by Viña Morandé and
Apalta by Viña Montes).
Last but not least, a factor explaining the growth of wine production and exports was the
evolution of world demand for wine during the 1980s and 1990s. According to Vergara (2001),
during the second half of the 1980s, Chilean exports focused on the U.S. market. This market
shifted from demanding mainly European products, in which the denomination of origin was
fundamental, toward producers that offered varietals utilizing modern production processes (and
yielding lighter wines). By the end of the 1980s, Chilean producers intensified their efforts to
export to Europe.
3.3 First Mover and Market Leader: Two Different Actors
3.3.1 The First Mover
The Spanish vineyard Miguel Torres was the first mover in starting the new stage of wine
exporting activities in Chile. This is both because this firm was the first to introduce new
technology and because of its export orientation. Miguel Torres started selling wine in 1870,
although the Torres family had been producing wines for about two centuries before then. Today,
Miguel Torres is a winemaker with an international reputation known for producing high-quality
wines and brandies.
During the 1970s, Miguel Torres, one of the descendants of the original family, went to
France to study. While there, he befriended Alejandro Parot, a Chilean who convinced him that
the central valley of Chile presented good investment opportunities in the wine industry. It was a
region with the right climate and conditions, was free from phylloxera, and had a longstanding
winemaking tradition, albeit one that had remained behind modern production and consumption
trends. Thus, in 1979, Miguel Torres made its first investment in Chile, buying the Maquehua
farm, comprising 90 hectares suitable for the production of high-quality Merlot and Cabernet
Sauvignon. Since then, Miguel Torres has bought four other “fundos” apt for the production of
other grape varieties. These investments were fully funded by Miguel Torres from retained
earnings. Indeed, an important characteristic of Viña Miguel Torres is that it reinvests 95 percent
of its profits and does not rely on outside finance.
Miguel Torres introduced in Chile stainless steel vats together with smaller, 220-liter oak
barrels. These changes allowed the firm to produce a wine with international characteristics in
Chile. A fundamental element in the launching of Torres’ new products was the presence of a
leading oenologist from Spain, a tradition that continues today. This was very important because
this oenologist knew the characteristics of international demand and made a Chilean wine to
In the first stage, Miguel Torres was oriented to the domestic market, but by the mid-
1980s it started to export. In Chile, Torres concentrated on the production of premium quality
wines using its brand recognition. The firm did not require a lower-end product for international
markets, because it already had one. The output from the Chilean vineyard was marketed abroad
through the distribution channels that Miguel Torres already had in its main markets. Thanks to
this advantage, Miguel Torres became the first Chilean producer to export premium wines, an
initiative that Concha y Toro imitated in 1988.
Thus, from the early to mid-1980s, Chilean firms witnessed the introduction of new
winemaking technology, the production of wine of much higher quality, and the success of a
foreign firm in exporting high-quality Chilean wine. This natural experiment, a pull factor, and
the crisis that afflicted the sector at that time, the push factor, were the main determinants of the
transformation of the Chilean wine industry.
We must clarify that there was no government intervention whatsoever in the investment
decision and further development of Miguel Torres. Only recently has the firm received
government funds to develop irrigation canals and improve the quality of their input providers.
We consider Miguel Torres to be the first mover and pioneer of Chilean wine exports.
Although both Miguel Torres and Cánepa introduced the new technologies at about the same
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