Wine tourism: Chilean wine regions and routes

Journal of Business Research 65 (2012) 13–21

Contents lists available at ScienceDirect

Journal of Business Research

Wine tourism: Chilean wine regions and routes David E. Hojman ⁎, Philippa Hunter-Jones 1 University of Liverpool Management School, Chatham Street, Liverpool L69 7ZH, UK

a r t i c l e

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Article history: Received 1 September 2009 Received in revised form 1 July 2010 Accepted 1 June 2011 Available online 8 September 2011 Keywords: Strategy Exports Heterogeneity Segmentation Wine routes Chile

a b s t r a c t Wine tourism is an important activity in several wine-producing countries. Yet the roles wine tourism plays within winery strategies remain unclear. This exploratory study investigates and differentiates the roles wine tourism plays within winery strategies in Chile. A generic literature review suggests that many questions remain unanswered within the wine tourism debate, substantial differences exist from country to country, and little of what researchers have uncovered seems to apply to Chile. The paper uses empirical data to systematically examine the various wine regions and routes in Chile, highlighting heterogeneities in demand and supply. One can classify winery business models into two broad strategies. The first is wineries that see wine tourism as a link in a long-distance, possibly inter-continental relationship marketing (RM) chain. The second is wineries that see wine tourism as their best hope of survival. The paper considers the implications of each strategy, both to Chile and to other wine-producing countries. © 2011 Elsevier Inc. All rights reserved.

Contents 1. 2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Understanding wine tourism . . . . . . . . . . . . . . . . . . . . . . . 2.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Wine tourism destinations . . . . . . . . . . . . . . . . . . . . 2.3. The wine tourist . . . . . . . . . . . . . . . . . . . . . . . . . 3. Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1. Chilean wine regions and wine routes . . . . . . . . . . . . . . . 4.2. Heterogeneity in wine tourism . . . . . . . . . . . . . . . . . . 4.3. Wine tourism as an inter-continental relationship marketing strategy 4.4. Wine tourism as survival . . . . . . . . . . . . . . . . . . . . . 4.5. Winery strategies: significance testing . . . . . . . . . . . . . . . 5. Conclusions and general implications . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Introduction In sharp contrast with Chilean wine exports (Farinelli, 2003; Hojman, 2006a, 2007; Visser and De Langen, 2006; Wine spectator, several numbers), wine tourism in Chile is not particularly successful (Kunc, 2009). Chilean wineries welcomed 294,000 winery visitors in ⁎ Corresponding author. Tel.: + 44 151 795 3704. E-mail addresses: [email protected] (D.E. Hojman), [email protected] (P. Hunter-Jones). 1 Tel.: + 44 151 795 3018. 0148-2963/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2011.07.009

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2006, who spent US$2.8 million (Zamora and Barril, 2007; www. achet.cl). Chilean wine tourism compares very unfavorably with the wine tourism experiences of California, Australia, and even Texas (US $2bn, US$1bn, and US$96.5 m, respectively) (Kolyesnikova and Dodd, 2008). In 2006, exactly 100 Chilean wineries were involved in wine tourism (over 300 are officially registered as exporters), yielding an average revenue from wine tourism of US$28,000 per winery. In terms of support to the winery's bottom line, this revenue is negligible. In fact, the total number of visitors to all Chilean wineries in 2006 was less than half the number of visitors (600,000) to just one winery, Mondavi, in Napa Valley (www.vendimia.cl). A total of 90 percent of

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D.E. Hojman, P. Hunter-Jones / Journal of Business Research 65 (2012) 13–21

wine tourists in Chile are day visitors. They stay in Santiago, the capital city and site of the main international airport. Little evidence exists to suggest that this situation will improve. Brown and Getz (2005), for instance, conclude that Chile as a wine tourist destination has only “modest potential, constrained by distance and lack of differentiation.” Yet despite these apparent limitations, Chile plays host to a number of wine routes and regions, which some winery owners, government officials and academics insist should be taken seriously. To understand why, this exploratory paper investigates and differentiates the role wine tourism plays within winery strategies in Chile. The paper begins by examining the concept of wine tourism in general, in terms of definitions, destinations and what constitutes a wine tourist. This review suggests that many questions remain unanswered, with substantial differences apparent from country to country. Following a methodological comment, the empirical findings present a comparative systematic review of regions and wine routes in Chile. The paper then identifies and analyzes two emergent strategies linked to wine tourism. The primary contribution of the paper is twofold. First, the paper adds to the literature comparing wine regions and countries (Getz and Brown, 2006a) by examining the case of a country that is currently under-researched. Second, the paper offers new perspectives into winery strategy that may be particularly relevant to destinations experiencing similar geographical isolation from main wine and tourism markets. 2. Understanding wine tourism 2.1. Definitions The recent increase in academic writing relating to wine tourism mirrors the emergence of this activity in practice, particularly from a New World perspective (Bruwer, 2003). Telfer (2001) attributes this emergence to changes in technology and growing techniques. Contemporary writings include various attempts at defining wine tourism, starting with the frequently quoted Hall and Macionis (1998, p. 197) definition: “…visitation to vineyards, wineries, wine festivals and wine shows for which grape wine tasting and/or experiencing the attributes of the grape wine region are the prime motivating factors for visitors.” Both the Winemakers Federation of Australia (2005) and Sparks (2007) broaden the scope of the activity to include visits to a wine region for recreational purposes: “a wide range of experiences… including: wine tasting, wine and food, the enjoyment of regional environs, day trip or longer term recreation and many companion/ complementary cultural, nature-based and lifestyle activities available in wine regions” (Symon, 2005). This extension is a reflection of the evolving nature of the concept. The extended concept goes beyond the notion of traveling around wine-producing regions simply to taste the produce, and explores factors linked to experiential consumption; the management of visitors, cellars and destinations; and the impact of this activity upon fragile ecosystems (Getz, 2000). Indeed, Sparks (2007, p. 1181) goes as far as to argue that “for some tourists, the ‘experience of the visit’ can be an important factor when considering visitation to a wine region.” 2.2. Wine tourism destinations While no international wine tourism map exists, a considerable body of literature profiles the activity. O'Neill and Charters (2000), Charters and Ali-Knight (2002) and the Winemakers Federation of Australia (WFA) (2005) address the economic significance of wine tourism in Australia. Getz and Brown (2006b) explore the importance wine consumers attach to destination and trip attributes when selecting a wine tourism experience. Telfer (2001) focuses on the formal and informal agreements between wineries, tour operators and the food

industry in the Niagara Wine Route area. Bruwer (2003) looks at the South African wine industry. Much of the literature documenting the existence of wine tourism destinations does so through reference to wine routes, which Gatti and Incerti (1997) describe as “a sign-posted itinerary, through a limited area (region, province, denomination area) whose aim is the discovery of the wine(s) product(s) in the region and the activities which are associated with it.” 2.3. The wine tourist Authors disagree over who the wine tourist is. Getz and Brown (2006b) attribute this disagreement in part to the fact that “the wine tourism product, or experience, cannot yet be confidently modeled. Numerous contributory factors shaping demand and experiences have yet to be examined.” Macionis and Cambourne (1998) and Mitchell (2001) identify wine tourist profiles which Sparks (2007) does not observe. Instead Sparks claims that wine tourists “represent a diversity of age groups, occupations, educational and economic backgrounds.” Johnson (1998) disputes the notion that all visitors to wineries are wine tourists, and uses the winery visit of a church group to demonstrate the differences — this group was not interested in sampling the wine, but rather in understanding the production process. Getz and Brown (2006b) argue that existing research most commonly focuses on visitors to wineries rather than wine consumers. Williams and Young (1999) profile wine tourists on how closely their drinking habits are linked to Australian national drinking habits. Maddern and Golledge (1996) opt for a self categorization approach, whereby the tourist classifies their wine knowledge in relation to advanced, intermediate and basic levels. Getz (2000) explores environmental and societal influences on consumer behavior. A particularly relevant instance of wine tourist segmentation separates visitors according to their levels of involvement (or interest, enthusiasm and excitement, Hollebeek et al., 2007). High-involvement wine tourists are likely to know more about wine, and to spend more money on it. In some cases they buy luxury wines, which Beverland (2006) describes as priced at US$100 a bottle or more. However, not all researchers share this definition. Tynan et al. (2009) refer to a continuum with luxury at one end and ordinary at the other. Researchers typically associate high involvement with a greater interest in the wine's region of origin (Hollebeek et al., 2007), versus low involvement (Barber et al., 2008). This association applies even more strongly to luxury wine consumers, who link authenticity to the notion of “terroir”, that is, a relationship to place (Beverland, 2006). On the other hand, consumers of luxury wines differ in the reasons for their behavior. Motivations are sometimes hedonic. Consumers associate luxury wine consumption with greater personal pleasure and a richer personal experience. But in other cases the motivation is social. Luxury wine consumption may be conspicuous, prestigeseeking or status-seeking (Terrien and Steichen, 2008; Tynan et al., 2009). Hedonic motives may not only be behind wine consumption, but also linked to experiential aspects of wine tourism (Bruwer and Alant, 2009; Charters, Fountain, and Fish, 2009). Another interesting form of segmentation refers not to consumer behavior, but to wineries’ strategies. Some wineries, especially small ones, in, for example, the United States or Canada, depend unambiguously on direct sales at the winery's cellar door (Barber et al., 2008; Wade and Pun, 2009). South African wineries seem to have similar experiences (Bruwer, 2003). In contrast, other wineries, in the same or other countries, are not interested in wine tourism (Getz and Brown, 2006a). Both Beverland (1998) and Fraser and Alonso (2006) mention wineries in New Zealand that see wine tourism as a distraction from the real business of making, selling and exporting high quality wine. Alonso, Sheridan, and Scherrer (2008) warn wineries in the Canary Islands about the dangers and likely disappointments of expecting too much from wine tourism.

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As wine tourist profiles and winery strategies vary significantly, managers and researchers may achieve greater understanding by adopting an in-depth destination focus, which reinforces the rationale for studying the Chilean wine tourism industry.

the data. Studies can pre-determine these themes and then amend them as the data set is developed Saunders et al. (2003).

3. Method

4.1. Chilean wine regions and wine routes

This study investigates and differentiates the roles wine tourism play in winery strategies in Chile. The authors collected empirical research in two stages. First, they built a winery database to include all the most important Chilean wineries. The attributes to qualify (only one qualifying attribute was required) were: being a member of a wine route in 2006 (74 wineries qualified); having won a gold medal in the International Wine Challenge (IWC) 2009 (14 wineries qualified); making luxury wines, defined as priced at US$50 per bottle or more, in 2008–09 (30 wineries qualified, with 10 of them making wines priced at US$100 or more per bottle); being selected as having wine tourist facilities of exceptional quality by the exclusive wine travel agent Enotour in 2010 (26 wineries qualified); and being a top exporter. Because of the rapid expansion of Chile's wine export activity, the criterion for definition as a top exporter has changed dramatically, from exporting half a million US dollars or more in 1992 (14 wineries), to US$5 m or more in 2004 (28 wineries), to US$15 million or more in 2007 (20 wineries), to US$30 millon or more in 2009 (10 wineries). The main data sources were the websites from Chilevid, Turisvino, Enotour, Vendimia and Chileinfo, plus international specialist press, including Decanter and Wine Spectator. For the research, the database contains data on 98 wineries. However, the fact that one of the qualifying criteria was joining a wine route by 2006 inflated this number. Many more wineries had joined a wine route by 2006 than fulfilled any of the other attributes. If the researchers drop this criterion, the database size falls to 55 wineries. The study tests several hypotheses linked to this database (see Findings). In the second stage, the authors conducted interviews with six winery representatives and other stakeholders. The objective of the interviews was to investigate how individual wineries perceived the quantitative, macro results linked to the winery database and reflect them in their individual winery strategies. These interviews complement, support and nuance the statistical material the authors present. The only criterion for selecting a particular winery for interview was that the winery was conducting, or claimed to be conducting, some activities in the broad area of wine tourism. Once piloted and the question wording altered accordingly, interviews were conducted in locations convenient to the informants (usually the wineries themselves). The researchers analyzed the interviews manually (for flexibility and additional insight) using template analysis, a system that uses a list of codes or categories that represent themes revealed by

Large physical distances separate the wine-producing regions in Chile. Eleven major wine-producing regions, valleys or official appellations exist from north to south (with smaller subdivisions in some regions). The regions are Elqui, Limari, Aconcagua, Casablanca, San Antonio / Leyda, Maipo, Cachapoal, Colchagua, Curico, Maule, and the southern region (Itata, Bio-Bio, and Malleco) (www.winesofchile.org). The north-to-south distance between the geographical extremes of this area is about 600 miles. Table 1 presents a summary of the regions and their key characteristics. In terms of access by potential visitors, a key aspect is distance to Santiago, the capital city and site of the largest population concentration and main international airport. Santiago- based tourists make day-visits to wineries, usually during the summer, but only to wineries accessible by day trips from Santiago. Wineries also receive visitors if they are near beaches or by busy motorways. Only one region, Colchagua, receives substantial numbers of overnight wine tourists. Some overseas visitors, who often come from far away (Asia, North America or Europe), are prepared to spend more and stay longer. However, many stay in Santiago and enjoy wine tourism as day visits. In the far north and far south wine tourism is negligible. Since about 2000, wine routes have become fashionable among some owners and officials (although not necessarily among consumers). However, “tourist facilities” in Table 1 often refers simply to a guided walk with a wine tasting, and maybe a shop. A similar caveat applies to wine routes. A wine route is often little more than some specially designed road signs, a free leaflet and map, and sometimes formal or informal agreements between the participating wineries, hotels and travel agents in Santiago. Some small wineries become disappointed with the performance of their respective wine routes soon after joining them (Zamora and Bravo, 2005). Many wineries in each region are unable or unwilling to join their respective wine routes. Some among them lack motivation or resources to join. Others constitute local production facilities owned by larger companies with their main interests (including touristattracting interests) elsewhere. In at least one region (Casablanca) some of the non-joiners feel that the demand for wine tourism is so large, in relation to what they are prepared to offer, that joining a wine route just does not make sense. Other wineries invest, some heavily in relation to their resources and commitments, in their own tourist facilities (www.vendimia.cl).

4. Findings

Table 1 Chile's wine regions or valleys, from north to south. Sources: Guia de Vinos de Chile (2003); www.winesofchile.org. Region or valley

Distance from Santiago, other geographical aspects

Comments / special factors

Elqui (new region, post-1990) Limari (new region, post-1990) Aconcagua Casablanca (new region, post-1973) (visitors 2006: 59,000) San Antonio/Leyda (new region, post-1990) Maipo (visitors 2006: 143,000) Cachapoal Colchagua (visitors 2006: 46,000) (Wine Enthusiast's Wine Region of the Year 2005) Curico (visitors 2006: 20,000) Maule (visitors 2006: 11,000)

500 km 400 km Located next to the Argentina–Pacific coast motorway Very close (30 min drive), next to the Santiago-Pacific coast motorway Convenient for second (beach) homeowners In Greater Santiago itself, or almost About 1 h drive 2 h away (about 150 kilometers)

Practically no tourist facilities, no wine route Practically no tourist facilities Old, established region, some tourist facilities Some good (mostly day only) tourist facilities

Southern region (Itata, Bio-Bio, Malleco) (new region, post-1990)

400–500 km

200 km 250 km

Only a handful of wineries, some tourist facilities The most traditional region, large wineries, historical houses Traditional, some tourist facilities The most successful wine route, Wine Spectator's Wine of the Year 2008, many attractions and tourist facilities Several good producers, some tourist facilities Traditional, many producers, a wine route but only modest tourist facilities A small wine route, very modest tourist facilities

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One must mention Colchagua separately because its wine route is, by Chilean standards, hugely successful. The respected international magazine Wine Enthusiast gave Colchagua its prestigious Wine Region of the Year award in 2005. Colchagua has good hotels, restaurants, museums, countryside attractions, beaches and even its own steam train. On the other hand, not everything is perfect. Some problems of the Chilean wine industry that are identified in other regions are also present in Colchagua (Hojman, 2006a, 2007). Still, the other wine routes tend to see Colchagua as their role model. But Colchagua is not the future for other regions. Repeating the Colchagua experience elsewhere may be impossible. 4.2. Heterogeneity in wine tourism Research identifies heterogeneity in wine tourism in other countries (Charters and Ali-Knight, 2002; Bruwer, 2003; Galloway et al., 2008). Wineries' expectations of wine tourism represent an important manifestation of heterogeneity. Table 2 provides an overview of the Chilean situation with quotations derived directly from the research interviews. At least two of the wineries are aware that some of their longdistance visitors are already in a long-term relationship with the wine before they visit—a fact the winery accepts and wishes to encourage. At least one other winery aspires to the same, sometime in the future. Another winery embraces tourism, but is acutely aware of segmentation among visitors. One of the wineries seems to be interested almost exclusively in tourism, and another one almost exclusively in good wine making. While these observations illustrate a diversity of winery business models, they also include some general patterns that one can classify into two broad strategies: first, wineries that see wine tourism as a link in a long-distance, possibly inter-continental, relationship marketing (RM) chain; and second, wineries that see wine tourism as their best hope of survival. 4.3. Wine tourism as an inter-continental relationship marketing strategy Marketers usually define RM as “marketing activities aimed at building long-term relationships with parties (especially customers) that contribute to a company's success. The goal is to ensure long-term value to customers, producing enduring customer satisfaction” (Oxford Dictionary of Business and Management, 2009, p. 473). RM has become increasingly prominent in business and academic literature since the 1990s (Egan, 2004; Gronroos, 1994; HennigThurau and Hansen, 2000). In essence RM may represent a muchneeded paradigm shift in marketing practices (Christopher et al., 1991); Buttle, 1996), whereby the basic focus on customer needs still applies, but businesses fundamentally change the way they practice marketing (Gordon, 1998). Beverland (2000), Getz (2000), O'Neill and Charters (2000), Bruwer (2003) and Beverland and Lindgreen (2004) apply RM to wine tourism. Possibly the most exciting case of wine tourism in Chile as a link in an inter-continental RM chain is Casa Lapostolle (Politzer, 2006; Wine Spectator, 2009). Lapostolle produces its top wine, Clos Apalta, in the Colchagua Valley, internet-advertised at prices ranging between US $60 and US$180 per bottle, depending on the year of harvest. The company is not particularly interested in conventional wine tourism. For example, the now-defunct Turisvino, the specialist wine tourism firm (http://turisvino.com), never listed Lapostolle among the 36 wineries offering wine tours. However, in 2006 Lapostolle built luxury hotel facilities at its Apalta winery. The price for a two-day visit for two people was US$1500, including all meals and drinks, winery tour, spa treatments and other minor items including tours of other wineries. At the time, Lapostolle explained, no profits were expected from these services. Instead they wanted only to strengthen the company's image (www.vendimia.cl).

Table 2 The heterogeneity of wine tourism in Chile. Source: Primary data. Winery comments

Winery characteristics

“We are small but we make some very good wine. We wouldn't mind becoming even smaller in volume, if that was the price to pay for making even better (and more expensive) wines… We are very proud of our tourist facilities.” “We have been around for a while… We know what we are good at, and what our customers like… Our tourist facilities are good, but traditional… Some of our visitors know exactly which of our wines they want to taste, drink, or buy, long before they arrive here.” “We make some of the best wines in the world. Many of our visitors know that. The wines are not cheap, because making them is expensive… We have survived recent market upheavals better than most… Everyone should visit us, because our winery is both very beautiful and very efficient. Our winery tours are not expensive… We will not be building any hotel facilities, precisely because almost everyone else around here is. We are good at making wine, but we know nothing about running hotels.” “Not as many people as we would wish have tasted our wines. Comparatively speaking, many more people are aware of our tourist facilities, which are excellent. But wine routes are not for us. Exposing our guests, who have paid at least US$150 per room per night, to be stared at by others who have paid only US$10 for a tour, as if they were exhibits in a zoo, is not fair or good business.” “We identified the potential of this area long before others, when everyone was thinking that the land was no good for wine, let alone wine tourism. We bought the land for almost nothing. We will be developing our facilities very gradually. A repeat visitor who comes back every year will be able to see something new every year for many years. But we are really concentrating on making good wine.” “We have been around forever, our tourist facilities are splendid, and we are very close to Santiago. Everyone knows about us… We have two types of visitors. Some want expensive lunches with the best wines. The rest want a cheap winery tour with a couple of glasses of reasonable wine at the end. We welcome both, but if we had to choose…’

This winery, which is among the top 30 exporters, joined a wine route by 2006 and won gold at IWC 2009. No luxury wines (US$50+ per bottle), no selection by Enotour in 2010.

This winery is not a top exporter, joined a wine route by 2006, was making luxury wines at US$50 or more per bottle in 2008–09, won gold at IWC 2009, and some of its tourist facilities were selected by Enotour as exceptionally good in 2010. This winery, which is a top exporter, joined a wine route by 2006. Some of its wines were luxury ones, selling at US $100 or more, in 2008–09. Some of its tourist facilities were selected by Enotour as of exceptional quality in 2010. No gold at IWC 2009 (but many awards in other competitions)

This winery is not a top exporter. Enotour selected some of its tourist facilities as exceptionally good in 2010. Not a wine route member in 2006, no gold at IWC 2009 (but some awards in other competitions)

This winery, which is not a top exporter, joined a wine route by 2006. No gold at IWC 2009 (but some awards in other competitions), no selection by Enotour in 2010.

This winery, which is a top exporter, was making luxury wines at US$50 per bottle or more in 2008–09. Enotour selected some of its tourist facilities as exceptionally good in 2010. Not a wine route member in 2006, no gold at IWC 2009 (but many awards in other competitions).

Lapostolle felt that at least some of those consumers who were prepared to pay over US$100 for a bottle of Clos Apalta would also be willing to visit the winery and would expect the best possible facilities and service. Two years later, in 2008, Wine Spectator magazine chose Clos Apalta as Wine of the Year, and shortly after that Wine Enthusiast magazine selected Lapostolle as New World Winery of the Year. By September 2009 the cost of the two-day, two-person stay had increased to US$1800 (www.lapostolle.com). Lapostolle may now be

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making money from wealthy wine tourists visiting Apalta, but not by design. On the contrary, profits from wine tourism are almost an accident. Much more money is made from selling the wine, 60,000 bottles per year, around the world. The tourist facilities at Apalta mostly, or just, aim to help with the global wine selling effort. French-owned (by Marnier–Lapostolle) and relying on the consulting services of flying winemaker Michel Rolland, Lapostolle is not the most typical representative of a successful Chilean winery. However, many others in Chile have adopted similar strategies, including high quality production, international recognition, wide international distribution, and expensive local facilities for highinvolvement wine tourists. Among the ten largest exporters of Chilean wine in 2009 (which do not include Lapostolle), seven were selling some of their wines at US$50 a bottle or more (and three of them had wines priced at US$100 or more). Five won gold medals at London's International Wine Challenge (IWC) or Decanter's Wine Awards 2009 or 2010. At least four had very high quality tourist facilities (although a couple of them were far too close to Santiago to attract more than day visitors) (www.vendimia.cl; www.enotourchile.com). Being too close to Santiago may be the main difference between Concha y Toro's silver bullet strategy (Van Agtmael, 2007) and Lapostolle's wine-tourismas-RM strategy. Concha y Toro is Chile's largest wine exporter. But a Chilean winery does not need to be among the ten largest exporters in order to attempt its own version of a Lapostolle-style, wine-tourism-as-RM strategy. The following three examples, taken from a much larger pool, are small or medium-size wineries that recently won gold medals in prestigious international competitions. Some aspects of each business model are winery-specific, but they also have much in common. Bisquertt and Perez Cruz are both very attractive destinations for potential visitors. On the other hand, repeat visitors, which are an important part of the picture in other countries (Beverland, 2000; Bruwer and Alant, 2009; Winemakers Federation of Australia (WFA), 2005), are unlikely. However, provided that these wineries continue winning international awards, and that any international distribution problems are solved (international distribution is not a trivial concern since these wineries are relatively small), good tourist facilities are a key part of the business strategy. If highincome, high-involvement overseas consumers know about these award-winning wines, and can buy them in their home countries, they may also wish to visit these wineries at least once, when they are in Chile for wine-related or other reasons. Thus, wine tourism in these particular cases is an important, and maybe essential, link in an inter-continental RM chain. But if the potential overseas visitor cannot buy these wines in his or her own country, then wine tourism becomes meaningless for the winery. Take for example, Casa Silva, which has its own hotel, restaurant and

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Chilean-style horse riding facilities. These facilities are expensive (http://turisvino.com). Casa Silva's target audience for these facilities is not local wine drinkers or mass tourism, but high-income overseas visitors. In 2009 Casa Silva completed a three-year study of the scientific determinants of the wine production characteristics of its micro terroirs (in the words of a winery representative, “each micro terroir's DNA”, www.vendimia.cl). They carried out the study jointly with a local university and with financial support from the Chilean government before presenting the findings, not in Colchagua or Santiago, but in London, which is one of Casa Silva's many target audiences around the world. 4.4. Wine tourism as survival However, not all wineries pursued a RM-linked strategy. Indeed the next group of wineries has a completely different approach to wine tourism. These include wineries that have failed as wine producers and exporters, or they are about to fail, or they are at least having serious problems. Some are unable to sell as much as they need to, at home and abroad. Other wineries are too small and unable to secure supermarket shelf space or reliable international distribution partners. Some are unsuccessful at securing a steady stream of prestigious international awards, or unable to obtain investment funds or other key resources. Some wineries are victims of the economic downturn or bad management decisions. Whatever the problems are, these wineries see wine tourism as their best hope of survival. They need tourism because their main line of business has failed, or is about to fail. Unfortunately, even this desperate option is too difficult for some of them, because they are in the wrong region, too far away from Santiago (see Tables 1 and 3), or away from any positive externalities that neighboring wineries or other tourist attractions generate. In many cases even the wine tourism solution can only take place if they receive generous subsidies (Sharples, 2002; Zamora and Barril, 2007; www.vendimia.cl). Unlike in other countries (Barber et al., 2008; Bruwer, 2003), no winery in Chile can survive by relying only on direct, cellar door sales. The tourist numbers are far too small, and the gap in relation to what would be ideally required is just too large. Consumers can buy every good wine from Colchagua for the same price in Santiago. For example, Winery Number One (this section does not list the wineries' real names), which is in the wrong (for wine tourism purposes) region, too far away for day visits, has been open to tourists for decades, accepts visitors every day of the week without advance notice, has bilingual tour guides, and offers generous and inexpensive tours. Still, the number of visitors is negligible (www.vendimia.cl; http://turisvino.com). Winery Number Two, in the same region, exports very little (about US$200,000) and has invested heavily in

Table 3 Evolution of wine tourist facilities and wine routes between 2003 and 2008, by region. Source: Guia de Vinos de Chile, several years. Region

2003: Number of wineries with tourist facilities (number of wineries in wine route)

2008: Number of participant and non-participant wineries in wine route

Day trips from Santiago

Elqui Limari Aconcagua Casablanca San Antonio/Leyda Maipo Cachapoal Colchagua Curico Maule Southern Region

0 2 (no wine route) 2 (no wine route) 2 (no wine route) 0 10 (no wine route) 5 (no wine route) 12 (11 in wine route) 16 (all in wine route) 11 (10 in wine route) 0

No No Yes Yes Yes Yes Yes Yes No No No

Total

60 (37 in 3 wine routes)

0, 1 3, 3 5, 1 5, 4 4, 0 27, 12 (the whole region) 7, 0 (Alto Maipo only) 7, 12 18, 16 17, 12 15, 11 4, 2 (Itata) 0, 3 (Bio–Bio) 0, 1 (Malleco) 105, 78 (at least 11 wine routes)

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D.E. Hojman, P. Hunter-Jones / Journal of Business Research 65 (2012) 13–21

hotel, restaurant, bar, spa, museum and other tourist facilities. This winery expects that eventually tourism will become its main line of business, but not in the short term. Winery Number Three, in a tourist-favored region close to Santiago, introduced an expensive tour (US$70) some years ago. But demand was very small, and a couple of years later they gradually abandoned this tour, and adopted something much more modest (US$20). No realistic amount of government subsidies can guarantee that any of these wine tourism experiments will save the respective wineries from disappearing. But even if saving some wineries were possible, the opportunity cost may be far too high (Beverland, 1998). The experience of other countries shows that wine tourism or wine routes do not automatically become a good tool for rural regeneration (Brunori and Rossi, 2000; Gatti and Incerti, 1997). Other factors also conspire against wine tourism as an effective survival tool for Chilean wineries under threat of failure. The first factor is the country's political economy and political culture. For several decades, the Chilean growth model has been based on free-market, open-economy policies (Hiscock and Hojman, 1997; Hojman, 2002, 2006b). Ordinary voters and all major political parties see this model as successful. The model has no room for massive across-the-board subsidies for failing activities or sectors. Second, a solution based on wine routes requires cooperation among wineries, and between wineries and other stakeholders. This solution would require a dramatic cultural change for many Chilean wine owners and managers, away from their current extremely individualistic and anti-cooperation attitudes (Farinelli, 2003; Visser and De Langen, 2006). An effective illustration of the very different prospects awaiting these two types of wine tourism in Chile, wine-tourism-as-RM as opposed to wine-tourism-as-survival, is the fate of the Turisvino website (http://turisvino.com). In September 2009 this website had a high profile, offering tours in 36 wineries, with prices starting at US$9 (nine dollars). Wineries One, Two and Three were among these 36 wineries. However, by June 2010 the website was no longer active. Instead, a new website appeared (www.enotourchile.com), with only 26 wineries (not including Wineries One, Two or Three), offering much more expensive packages, starting with full-day winery visits at US$45 to US$65 plus the cost of lunch at an expensive winery restaurant. A visit to Lapostolle's Clos Apalta winery in Colchagua, in the context of a wider tour booked through the new website, is only possible as part of their most expensive package (11 days, 10 nights, 15 wineries, price on application).

The value of the respective chi-squared test is 6.8 (against a critical value of the test, one degree of freedom, probability level p = 0.99, equal to 6.63). Therefore, the results support the acceptance of H1. A negative association exists between being a 2004 top exporter, and joining a wine route by 2006. H2. 2007 top exporters were significantly less enthusiastic about joining a wine route by 2006, as compared with the rest of the wineries. Evidence: Among the 2007 top exporters, about one winery joined a route by 2006 for each winery that had not. In contrast, wineries that were not top exporters had joined a route at a rate of over four to one (see Table 5). The value of the respective chi-squared test is 5.4 (against a critical value of the test, one degree of freedom, probability level p = 0.975, equal to 5.02). Thus, the evidence supports H2. Again, a negative association exists between being a 2007 top exporter and having joined a wine route by 2006. As compared with less successful wineries, the top exporters were less enthusiastic about wine routes even in 2007, that is, even after wine routes were becoming, or had become, extremely fashionable and practically everyone else was joining them (see Table 3). The top exporters, in both 2004 and 2007 (the 1992 and 2009 samples are too small for the test), did not need to join a wine route. They were too busy making and exporting good wine. H3. The 2004 top exporters were significantly less successful at, or significantly less interested in, being included in the exclusive wine travel agent Enotour's list of wineries with outstanding tourist facilities (in 2010), as compared to other wineries. Evidence: Only one in four 2004 top exporters are included in the Enotour list. In contrast, more than two thirds of the other wineries are included (see Table 6). The value of the respective chi-squared test is 10.6 (against a critical value of the test, one degree of freedom, probability p = 0.995, equal to 7.88). Thus, the evidence supports the acceptance of H3. The 2004 top exporter group of wineries and the Enotour 2010 group of wineries are not part of the same winery population.

H1. The 2004 top exporters were significantly less enthusiastic about joining a wine route by 2006, as compared with the rest of the wineries. Evidence: Among the 2004 top exporters, almost three in five joined a wine route by 2006 (the other two out of five had not). In contrast, wineries that were not top exporters had joined a wine route at a rate of almost five to one (see Table 4).

Three implications arise. Joining a wine route in 2006 does not at all indicate inclusion in the 2010 Enotour list. Joining a route in 2006 was practically open to all, and costless except for a nominal membership fee. Inclusion in the Enotour list is much more difficult. Enotour excludes any winery with tourist facilities that they deem less than exceptionally good. A winery may also choose to decline Enotour's invitation, if this winery wishes to discourage visitors (or discourage visitors via Enotour). On the other hand, those wineries that are interested in embracing RM may possibly prefer to be included in the Enotour list. The second implication is that, again, some of the most successful exporters are not interested in wine tourism, or do not need it. In contrast, some wineries that are less successful as exporters have developed very attractive tourist facilities (maybe because they think they need them). Finally, the third implication is that H3 addresses the evolution of wine tourism during a crucial period. In 2004 wine routes had not yet become as popular as they would be a few years later (see Table 3). But by 2010 almost everything had changed. The wine tourism industry and the wine routes had gone through a full cyclical process, with a phase of effervescence and optimism, when almost everyone

Table 4 Wine route membership in 2006 compared to top exporter status in 2004 (number of wineries). Source: Winery database compiled by the authors (see main text).

Table 5 Top exporter status in 2007 compared to wine route membership in 2006 (number of wineries). Source: As Table 4.

4.5. Winery strategies: significance testing Through the development of a winery database, the researchers can test several hypotheses regarding the emergence of the two distinct Chilean winery strategies. This section presents these hypotheses alongside the respective test results and implications.

Top exporter 2004 Not a top exporter Total

In wine route

Not in wine route

Total

16 58 74

12 12 24

28 70 98

2007 top exporter Not a top exporter Total

In wine route

Not in wine route

Total

11 63 74

9 15 24

20 78 98

D.E. Hojman, P. Hunter-Jones / Journal of Business Research 65 (2012) 13–21 Table 6 Enotour list inclusion compared to top exporter status in 2004 (number of wineries). Source: As Table 4.

2004 top exporter Not a top exporter Total

In Enotour list

Not in Enotour

Total

7 19 26

21 8 29

28 27 55

was joining a route (2006–07), followed by a phase of disappointment, crisis and polarisation (2009–10). Enotour in 2010 represents the expensive or upmarket extreme of the spectrum. The wineries aspiring to serious RM want consumers to see them in this group. At the other end of the spectrum, during this six-year period, at least seven wineries in the sample were sold, taken over, or went out of business. The prestigious Guia de Vinos de Chile listed all the wineries in every wine route in its 2006 edition (and in previous ones), but users no longer considered this information important enough, and the 2008 edition consequently dropped the listing. H4. Wineries that went into luxury production (defined as making at least some wines priced at US$50 or more a bottle) in 2008–09 were significantly less enthusiastic than the rest about joining a wine route by 2006. An alternative wording for this hypothesis is that the 2006 route joiners were significantly less able or less willing to make luxury wines in 2008–09. Evidence: among the 2008–09 luxury producers, 2006 route joiners outnumbered non-joiners by three to two. In contrast, among the non-luxury producers, the joiners outnumbered the non-joiners by almost five to one (see Table 7). The value of the respective chi-squared test is 6.5 (against a critical value of the test, one degree of freedom, probability level p = 0.975, equal to 5.02). Therefore, the data support the acceptance of H4. These two groups, 2006 route joiners and 2008–09 luxury wine producers are significantly different. Some (two in five) makers of luxury wine in 2008–09 rejected the temptation to join a wine route by 2006, maybe because, just like the top exporters (see H1 and 2), they felt that they did not need membership in a route. Conversely, many wineries that joined a route in 2006 were unable or unwilling to engage in the production of luxury wine in 2008–09. RM in wine tourism is more likely to work (or to be attempted at all) if the wine is expensive. A winery that is unable or unwilling to make the necessary investments in luxury production is also likely to be unable or unwilling to make other, different but equally necessary, investments in RM.

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Table 8 Luxury wine production in 2008–09 compared to IWC gold medal acquisition in 2009. Source: As Table 4.

Gold IWC 2009 Not gold Total

Luxury wines

Non-luxury

Total

4 26 30

10 15 25

14 41 55

gold medals at prestigious international competitions is a necessary condition for RM. But RM may not work if the wine is not expensive. Some gold medal winners may be genuinely unable to make luxury wines. But for a gold medal winner to voluntarily choose not to make luxury wines may be a strategic mistake. As to the luxury producers that are unable to win gold medals (and many exist), RM is impossible for them. Their wines may be expensive, but they are not necessarily particularly good. However, another important consideration is that the gold medal winners may be very different from one international competition to the next. The empirical work reported in this section offers strong statistical evidence, either directly confirming the central claims of this paper, supplying further information that is not in contradiction with these claims, or supporting them indirectly. Top exporters in both 2004 and 2007 were significantly less interested than other wineries in joining a route in 2006 (H1 and 2). More than half of the 2006 route joiners had no other positive attribute in their favor (see Section 3), which is a dangerous position in such a highly competitive market environment. Some of these wineries were desperate. As to the producers of luxury wines in 2008–09, they were also significantly less interested than other wineries in joining a route in 2006 (and/or the 2006 route joiners were significantly less able or less willing to make luxury wine) (H4). But not all the luxury producers were making wines of gold medal-winning quality. A very high price did not guarantee top quality (H5). Last but not least, the most successful exporters and the wineries with the most attractive tourist facilities were significantly different (H3). Wine tourism as RM is more likely to succeed if three of the above attributes are present. The wine must be of gold medal-winning quality (and the wine or winery must be popular with wine writers and the specialist press, and have an effective international distribution network), the tourist facilities must be very good, and the wine must be expensive. Some of the wineries potentially in this favorable position are Almaviva, Casa Silva, Concha y Toro, Errazuriz, Lapostolle, Matetic, Miguel Torres, Montes, Perez Cruz, Santa Rita, and Viu Manent. 5. Conclusions and general implications

H5. The luxury wine producers in 2008–09 were significantly different from the gold medal winners in IWC 2009. Evidence: Less than one in three IWC 2009 gold medal winners were luxury producers in 2008–09. Less than one in six luxury producers were gold winners (see Table 8). The value of the respective chi-squared test is 6.2 (against a critical value of the test, one degree of freedom, probability level p = 0.975, equal to 5.02). Therefore the data support the acceptance of H5. The main implication of H5 is that RM is only possible for a small minority of wineries. Making wines that are sufficiently good to win

Table 7 Luxury wine production in 2008–09 compared to wine route membership in 2006. Source: As Table 4.

Luxury producer Not luxury Total

In wine route

Not in wine route

Total

18 56 74

12 12 24

30 68 98

This paper investigates and differentiates the roles wine tourism play in winery strategies in Chile. To this end, a systematic review of Chilean wine regions and routes reveals that demand and supply heterogeneities plague wine tourism in Chile. Winery strategies vary as a consequence. Chilean wineries have different purposes for wine tourism. Some use enotourism as a key link in a long-distance, often inter-continental, relationship marketing strategy. Other wineries see wine tourism as offering a possibility of survival, the last option after poor performances in wine production or exports. The first strategy requires production of high quality wines and good international distribution networks. A wine tourist visiting a winery that engages in long-distance, possibly inter-continental RM, expects rewards that are likely to be experiential, and not limited to the moment of the visit. The experience is a long-term one, including drinking the winery's wine when s/he is back at home, after the visit, resulting in good memories. As to the winery, profit generation from wine tourism is not a key objective. The profits come from selling its wines, especially premium ones, abroad. Wine tourism just makes this endeavor easier.

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D.E. Hojman, P. Hunter-Jones / Journal of Business Research 65 (2012) 13–21

The second, less realistic strategy relies on, among other factors, generous government support. Yet subsidizing wine tourism or wine routes may not be the best approach to help struggling wineries or declining wine regions. While Chile is a country of splendid tourist attractions and is improving the quality of its wines all the time, a combination of beautiful tourist attractions and high quality wines does not inevitably generate a booming wine tourism market. Some of the most spectacular natural attractions in Chile, such as the Atacama Desert or the Patagonian glaciers, are far away from the nearest wineries. Also, quality winemaking (which in Chile is mostly for exports) and wine tourism are very different economic propositions. Profits in one of these activities do not automatically lead to profits in the other. One should not expect either of these activities to subsidize the other. Wineries near Santiago or by the busiest motorways (or in Colchagua) will always get some wine tourists. But most of these visitors are not prepared to spend much. Wine tourism can contribute to a winery's bottom line only if the winery is able and willing to produce very high quality wine and maintain highly effective international distribution networks. This experience is very different for those wineries that do not produce quality wines, or that are unable to sell their wines at home and especially abroad. Wine tourism will not save these wineries. Significant ramifications beyond this Chilean case study and implications for the broader world apply. Wineries in Australia, New Zealand, South Africa, and other New World produce their best wines for overseas consumers. Visitors to South Africa for the 2010 World Cup purchased South African wines priced at up to US$50 a bottle (www.vendimia.cl). A US$55 South African wine had already won a Decanter Wine of the Year Award in 2009 (Decanter, 2009, p. 90). In mid 2010, the Wine Society in England advertised a wine from Argentina at 45 British pounds (about US$65) per bottle. At about the same time Waitrose, the English supermarket chain, stored two Australian wines retailing at 150 and 275 British pounds per bottle (about US$220 and US$400, respectively). In the late 1990s, the Inniskillin Winery in the Niagara Region of Canada sold their halfbottles (375 ml) of unoaked and oaked icewine for 50 and 85 dollars respectively, mostly to Japanese tourists (Hashimoto and Telfer, 1999). Beverland (2005, pp. 1006, 1010) reports New Zealand and Lebanese wines priced at US$100 or more. In all of these cases, consumers who live thousands of miles from the respective wineries, literally on the other side of the world, are buying high quality, very expensive wines. Some of these consumers visit, or revisit, the producing country and winery. They expect high, or top, quality hospitality services, and they are prepared to pay accordingly. Refusing to provide the hospitality services expected by international consumers is incompetent winery management. Some of these visitors are already in a long-term relationship with the wine, if not the winery (even if the winery management does not know that they are). As to the rest of the visitors, their visit offers the winery a unique opportunity to start such a relationship. References Alonso AD, Sheridan L, Scherrer P. Wine tourism in the Canary Islands: an exploratory study. Pasos 2008;6(2):291–300. Barber N, Donovan JR, Dodd T. Differences in tourism marketing strategies between wineries based on size or location. Journal of Travel and Tourism Marketing 2008;25(1):43–57. Barber N, Ismail J, Dodd T. Purchase attributes of wine consumers with low involvement. Journal of Food Products Marketing 2008;14(1):69–86. Beverland M. Wine tourism in New Zealand — maybe the industry has got it right. International Journal of Wine Marketing 1998;10(2):24–33. Beverland M. Wine tourism: a tale of two conferences. International Journal of Wine Marketing 2000;12(2):63–74. Beverland M. Crafting brand authenticity: the case of luxury wines. Journal of Management Studies 2005;42(5):1003–29. Beverland M. The ‘real thing’: branding authenticity in the luxury wine trade. Journal of Business Research 2006;59:251–8.

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