Day 3 - Exportadora El Parque & Errazuriz Winery

It was another excellent day in Chile - and yet one so very different from yesterday.  We continue to learn more about the country and its economy and understand the opportunities and issues in doing business here.  Today's visits took place about two hours outside of Santiago.  Both were housed at the Errazuriz Winery.

Our first visit was with Sr. Sebastian Bulnes who is the owner of Exportadora El Parque.  This company integrates a number of large growers in the commercialization of their products.  The company has more than 1,000 hectares planted with avocados, table grapes and citrus.  They primarily market to the US, Europe, and Asia.  In fact, if you have grapes or avocados at home right now, chances are good that they came from El Parque. 

Of particular interest to our MBA students was the fact that the business model for El Parque was developed five years ago by Sr. Bulnes as a project in his final class (Entrepreneurship and New Venture Formation) for his MBA at the Kellogg School of Management (Northwestern University).  The business model tries to eliminate distributors and link producers and retailers more closely together.

Sr. Bulnes told us that food is Chile's second most important export.  Overall, Chilean exports are forecasted to drop 25% in the next year, but food exports are forecasted to grow 9% to at least $13.5 billion US dollars.  If this happens, food exports could represent 25% of Chilean exports in 2010.  Food products are one of the most stable sectors in the country. 

Chile has four advantages which are creating the conditions for the country to become a world food power:  1) a mediterranean climate and and ecologic island status which protects the country from diseases and pests thus reducing costs associated with eliminating these, 2) they are counter season with the most important markets for food exporting - US, Europe, Asia, 3) Free trade agreements - Chile has FTA's with more than 88% of the world's GDP, and 4) committed management with know how to do business in more than 100 countries. 

Following Sr. Bulnes' presentation, we took a very interesting, precarious bus ride up to the orchards to see their avocado fields.  Once there the group divided in two and in turns went further up into the fields. We learned that a single plant can produce 20 kilos of fruit per year. All the fruit is harvested by hand and it takes about three weeks for the fruit to get from the tree to your supermarket.  Interestingly, the fruit can be "stored" on the tree after it is ripe.  They simply get larger and richer. El Parque uses high density farming.  In the past, approximately 100 trees were planted per hectare. Now they plant 1100 trees per hectare.  They intentionally keep the trees small and dense.  The picture below is of "baby" avocado still on the tree.  It will take approximately nine months for these to mature. 

Our day in the Aconacagua Valley continued with a visit to the Errazuriz Winery and an excellent presentation by Sr. Luis Enrique Izquierdo. We were all looking forward to this and were not disappointed. The winery is a boutique firm focused on producing premium wines.  Their challenge is to grow the market for Chilean wines as a whole and to differentiate themselves strategically. 

A key date for the company was January 23, 2004 at a blind tasting in Berlin.  Chilean wines triumphed over wines from Bordeaux and Tuscany.  Wines from Errazuriz took first and second places (Sena and Maximiliano Founder's Reserve brands) in the tasting by wine experts from around the world.  This success has been repeated many times elsewhere around the world.  This is, in fact, a key aspect of the winery's marketing program.  Placing an ad in Wine Spectator (a leading industry magazine) costs $25,000 US dollars -yes, you read this right!.  The tastings are a more effective way to reach the opinion leaders and grow the reputation of Chilean wines.  Recently Eduardo Chadwick - the current CEO and decendent of the founder - was named the 39th most important person in the wine world, in large part because of the quality benchmark that the winery produces. 

The winery aims for excellence in all strategic areas and pursues a differentiation strategy based on five factors: 1) brand image, 2) owning their own vineyards, 3) emphasis on human resources, 4) distribution with international partnerships (did you know that the UK drinks more wine per capita than anywhere else in the world???), and 5) development of iconic wines.

Following an excellent lunch hosted by the vineyard with tastings of white, red, and a sweet dessert wine, we were given a comprehensive tour of their facilities including a gorgeous new building for their iconic wines. This building is designed in the shape of a spiral that turns the same way water flows in the southern hemisphere.  It also is designed to be very kind to the wine, using gravity whenever possible rather than forcing the wine through pipes in an un-natural manner. 

 

Then came the really tough decision - what to buy to bring home?  It was a difficult decision among excellent alternatives and we got back on the bus with lighter wallets but completely happy.  We only wish we could have taken home this much wine!