Firm Creation, Firm Evolution and Clusters in Chile’s Dynamic Wine Sector: Evidence from the Colchagua and Casablanca Regions

23

The transition to open market economies in Chile gave these newly created, or newly
exporting wine firms in Chile the chance to produce for the global market but the
challenge faced by Chile’s wine sector was the ability to produce a competitive product
for the global market (Gwynne, 2004). Humphrey (2006) says that to be competitive one
needs to upgrade a product; innovate to differentiate. A differentiated product is harder to
be found elsewhere so therefore it becomes more competitive in the global market.

Another reason for firms to innovate and improve their product is to increase the value
added on the global value chain. The global value chain is the market processes that
connect the spheres of production, often in a semi-peripheral country, to the spheres of
consumption, in core economies (Gwynne, 2008c). In this chain there is an
overwhelmingly disproportional amount of power and value added in the ‘downstream’
of the chain, that of the supermarkets in the core economies. As much as 79% of Chilean
wine in the U.K is sold in the off-trade, and of this 70% is sold via the top four
supermarkets (Gwynne, 2008b). Firms need to differentiate and innovate so that they can
stand out amongst the huge number of suppliers to these big chains. As Alberto Siegel
from Siegel winery says:

“Everyone knows how hard it is to sell a bottle of wine in a supermarket in which
there are lots of alternatives to choose from, a company has to be always
innovating, or offering a new product or becoming a better known winery” (Pg 3,
2008, translated by author)¹

¹ “Todos saben cuanto cuesta a vender una botella de vino en un supermercado en que
hay muchas alternativas para elegir, una empresa siempre tiene que estar inovando - o
ofreciendo un producto nuevo o que la vina sea mas conocida.”

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