Chilean Earthquake hits wineries hard

When last weekend’s gigantic earthquake struck Chile, it hit the southern coast of the country particularly hard, but it also hit wine producing regions like Maule, Colchagua and Bio-Bio, close to the epicenter of the tremor.

As the shockwaves hit, they caused piled up barrels and bottles to fall to the ground and tanks to buckle under the pressure caused by tons of liquid moving inside them. Buildings were damaged, power was lost and workers were affected by the destruction of their homes. At least one winery worker died, as reported by Movi Chile, an association of small, independent wineries.

Early estimates of the losses ranged as high as 200 million liters lost, a total as high as all Chilean bulk wine exports to the United States. As the tally becomes more precise, the total seems to be lower. At least, that’s what Wines of Chile, the industry association, has been stating.

Still, the losses are now estimated to amount to some 12.5% of all of Chile’s cellared wine, which remains a huge figure. At Vina Santa Rita, some 8 million liters were lost. Concha y Toro, the largest wine company in the country, denied that 40 million liters were lost, as originally reported, but has had to shut down production for a week – and has yet to offer an official figure. Tweets by James Moleworth, of Wine Spectator, indicate first-hand reported losses in the hundreds of thousands of liters for Vina Santa Carolina and Montgras, Torres. Montes also seems to have lost a lot of wine – maybe as much as a million liters.

As Eric Asimov pointed out on his blog, the damage wrought by this natural catastrophe to the wine industry also comes at a particularly difficult time, since harvest was set to begin these days. Many wineries are not able to start harvest, which may cause them significant problems as ripe grapes can’t wait for very long on the vines. Beyond the cleanup, trying to process thousands of tons of grapes without electrical power is simply impossible. The repercussions of the quake could be significant beyond the immediate loss of inventory.

How that will play out for the bulk market around the world is also an interesting aftershock of the quake. Chilean bulk wine has been used to make “domestic” bottlings in many markets, including the United States and Canada. Much of the Cellared in Canada wines come in huge containers from Chile. Will other regions find an opportunity to move surpluses to fill the gap? How much will prices and production of these international blends be affected?

If the supply chain is temporarily displaced, with Chilean wineries (at all levels of quality) being unable to provide the volumes they usually did, will they be able to take back the lost market share after things return to normal? In the current context of oversupply and increased competition, it’s not exactly clear how that will play out over the longer term.