Concha y Toro Eyes 8-12% Sales Boost, Diversifies Amid Glut

Key Takeaway

• Vina Concha y Toro SA projects an 8-12% sales volume increase this year, rebounding from last year's 5.7% decline.
• The company is diversifying by upgrading vineyards, acquiring premium brands, and venturing into wine tourism to combat the global wine glut.
• Adapting to consumer trends towards lower-alcohol and white wines, with a focus on premium products despite economic downturns.

Growth Amid Challenges

Vina Concha y Toro SA, a leading winemaker based in Santiago, Chile, is navigating its way back to growth after a challenging two-year period characterized by a global wine surplus. The company, known for its prestigious Don Melchor and Casillero del Diablo brands, is projecting an 8-12% increase in sales volume this year, a significant turnaround from last year's 5.7% decline. This optimistic forecast comes from Chief Financial Officer Osvaldo Solar, who highlighted the company's strategic moves to rejuvenate its vineyards and expand its product lineup, including the acquisition of the premium pisco brand Malpaso and increasing its stake in the Chilean brewery Kross.

Strategic Investments and Market Adaptation

In response to the global wine glut, exacerbated by higher interest rates and shifts in consumer behavior due to the pandemic, Concha y Toro is taking proactive steps to ensure its competitive edge. The company is not only upgrading its lower-yielding vineyards but also venturing into wine tourism to diversify its revenue streams. Despite the industry-wide trend of de-stocking, Concha y Toro's extensive global distribution network has positioned it to recover more swiftly than many of its peers, allowing direct sales to retailers. CFO Osvaldo Solar also mentioned the company's intention to reduce debt levels throughout the year, further solidifying its financial stability.

Navigating Consumer Trends and Market Opportunities

Concha y Toro's strategy includes adapting to changing consumer preferences, such as the growing interest in lower-alcohol beverages and white wines over reds. The company is also capitalizing on the gradual recovery of Chinese wine consumption and the sustained demand for premium products. Despite the economic downturn leading some consumers to trade down, many remain within the premium category, indicating a resilient market segment. Solar sees the current market conditions as ripe for opportunities, suggesting that the company's relative strength could lead to advantageous acquisitions or partnerships.

Management Quotes

• Osvaldo Solar, CFO of Vina Concha y Toro SA:

  "The maker of the Don Melchor and Casillero del Diablo labels expects sales volume to grow around 8-12% this year, after dropping 5.7% last year." "Today, when one is coming out of a more difficult moment, these are moments where more opportunities arise." "While global demand for more affordable labels remains soft, Chinese wine consumption has started to recover and sales of premium products has stayed fairly robust... Consumers who moved toward higher quality options in the pandemic are trading down amid lackluster economic conditions, but remain broadly within the premium category."