Wine Exports
Whilst Concha y Toro shares may currently be undervalued, data from inside the Chilean wine industry does not paint a wholly rosy picture. According to the monthly export figures of wine industry association Vinos de Chile, growth in exports of wine peaked in October 2007 and has since tumbled back down to Q2 06 levels.
Government statistical body ODEPA notes that, while the volume of total wine exported in 2008 was 3.5% lower than in 2007, there was actually a 9.6% increase in total value due to higher unit costs and a shift towards bottled DOC wines rather than bulk and non-DOC wines. In 2009, despite a 9.5% increase in volumes exported in the first 6 months, unit prices have decreased once more, meaning the value of 2009 wine exports to August is 2.7% lower than in 2008. From this it may be surmised that Chile is slightly increasing its export volumes, although prices are being squeezed. In terms of recession-proofing, this is not necessarily a bad sign, as despite lower margins, market penetration (and therefore brand development) is increasing.Total Exports and the Price of Copper
Whilst total Chilean exports by value have fallen in the last 7 quarters (see table below - click on image for larger version), this comes on the back of 4 years of sustained growth, meaning they are still at Q1 06 levels. Chile is the largest exporter of copper, making the Chilean economy highly dependent on world copper prices.
From Q3 05 there was a pronounced spike in copper prices (see graph below), although they then fell sharply in Q1 08. The export data therefore needs to be read in the light of these fluctuations in the price of copper. Copper prices are important for the Chilean wine industry however, as they directly affect Chilean GDP and therefore the national wine market, but perhaps more importantly because several Chilean wineries are owned by companies or families with interests in the copper sector.
