Chile's Wine Industry Estimates $250 Million Loss

As rescue efforts continue, wineries prepare for harvest and estimate a loss of almost 14 million cases of wine
Mar 3, 2010

Despite strong aftershocks that continued to rumble Wednesday in devastated areas of Chile following Saturday's massive 8.8 earthquake, the wine industry is beginning to get a clearer picture of its situation.

"We are estimating a loss of 125 million liters of wine [about 14 million cases] with a value of approximately $250 million," said René Merino, president of Wines of Chile, who met earlier today with the association's board, comprised of representatives from Chile's largest wineries. The winery-funded group represents 95 percent of the Chilean wine industry.

"While the number might seem high, it is in fact only about 12 percent of what the 2009 harvest was, by comparison. So the loss is not as significant as initially feared," Merino told Wine Spectator this afternoon.

The initial estimate does not specify how much of the wine is bulk versus premium wine as a more detailed assessment is still ongoing. Most of the wineries are insured against earthquake damage, however, with both wine and infrastructure covered, according to Merino. "There will not be a significant financial loss for the wineries."

He added that even with a one- or two-week interruption in the supply chain, stocks of wine in the U.S. market should not be affected. Both of the main shipping ports for the wine industry, San Antonio and Valparaiso, are now open and operating at about 50 percent capacity, according to Merino.

The news came as the country still struggles to assess damage and help the wounded and homeless. According to government sources, the death toll from the earthquake has risen to nearly 800. Overall damage estimates run as high as $30 billion, with about 500,000 homes destroyed and serious damage done to bridges, roads, ports and public transportation. Although a large aid effort is under way, tens of thousands of Chileans remain short of food, drinking water and shelter. In Concepción, one of the hardest-hit cities, thousands of government troops were sent in to restore order and prevent looting.

Reports from winery owners have been difficult to get, as communications are still disrupted in many places. Many winemakers and their families were still on their summer vacation when the quake struck, and their return to wineries has been very difficult. "The damage to the infrastructure and houses is extremely severe. It was heartbreaking to see some beautiful old houses completely down," said José Ortega, of Maule-based Bodegas y Viñedos O. Fournier.

Despite more immediate concerns, the damage assessment for wineries is important to the country as a whole. After copper mining, wine is Chile's biggest industry, and the country will need it to help fuel economic recovery.

While the industry's 125 million liter estimate is lower than initially feared, some wineries were especially hard hit. Viña Santa Rita estimates a loss of 8 million liters, 1 million of which was premium wine destined for its 120 brand or higher, according to export director Salvador Domenech. Viña Montes in the Colchagua valley estimates a loss of 20 percent of its icon level wines (Alpha M, Folly and Purple Angel) with 40 percent of its main Alpha line lost, according to Alex Guarachi, president of T.G.I.C. Imports, the winery's U.S. importer.

Other wineries with confirmed losses include Miguel Torres and Viña Santa Carolina, reporting losses of 100,000 to 200,000 liters, respectively, while MontGras estimates losses of around 5 percent of its tanks and 10 percent of its barrels. Viu Manent said losses would not exceed 15 percent of its inventory. Concha y Toro, the country’s largest producer, had been rumored to have lost 40 million liters of wine, but officials claimed that figure was wildly exaggerated, stating in a release yesterday that "losses will be significant, however."

Merino does not expect the actual loss to go much higher than the estimate. Though some areas are still without power or water, most of the member wineries have been able to assess the damage to their inventories, with the next phase for wineries being to assess any damaged buildings and facilities.

Most of the older buildings, typically constructed of adobe bricks, were the most severely affected buildings, with the most damage in the Cachapoal, Colchagua, Curicó and Maule areas. Much of the wine industry has moved its main production facilities to more modern buildings over the past generation, with more stringent building codes helping to offset the damage from an earthquake.

Damage to vineyards is also still being assessed. Merino said there had been no major land losses from the quake, but that it was impossible for wineries with vineyards in areas without electricity to assess any damage to their irrigation systems.

With harvest about to begin for white varieties, the industry has little time to catch its breath. Picking has already begun in cooler areas to the north, such as Casablanca, where there was relatively little damage. In addition, many wineries now have scores of workers in need of shelter.

"What really concerns us now is our workers, as many have lost their homes," said Merino. "This has to be addressed quickly. However, there is much that is out of our hands—electricity, roads, ports are obviously under government control, rather than ours."

Members of WineSpectator.com can follow Chilean wine industry earthquake reports in James Molesworth's blog as he posts updates there.

More Chile Earthquake

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Mar 1, 2010

Chilean Earthquake Hits Wine Industry Hard

Feb 28, 2010

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