STRATEGIC PLAN PISCO SECTOR
2013 - 2020
1
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
“The success of our Pisco is a challenge for us all”
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
INDEX
Pág.
I.- Introduction 5 II.- Sector background 9 II.1 Importance and development 11 II.2 Market Opportunity 15 II.3 Internationalization Strategy 18 II.4 Competitive environment 18 II.5 Introduction to the United States 19 III.- Strategic framework
23
III.1 Vision 25 III.2 SWOT analysis and Challenges 26 III.3 Missio 27 III.4 Pillars 28 III. 5 Objectives, Strategies and Metrics 30 IV.- Priorities for 2013 - 2020 33 IV1. The ‘Awareness’ Program: Remaining in the International consumers’ mind
35
• • •
Direction 1. USA development as a priority market Direction 2. Developing a Market Intelligence System Direction 3. Promotion in order to make pisco known in new markets
36 36 37
IV2. ‘Recognition’ Program: Premiumisation of the category in the internal market • Direction 4. Promotion of Pisco as an emblematic Chilean drink • Direction 5. Development of a world-class consumption experience
37 38 39
IV.3 Support program: internationalizing the prestige of pisco’s denomination of origin
39
•
Direction 6. Institutional strengthening of the denomination of origin
40
IV.4 Profitability program: Ensuring the efficiency of the production systems
41
IV.5 Other initiatives on the plan’s horizon
41
V.- Operation and budget 43 APP AG members, Workforce, Appreciations, Contact
49
APPENDIX 53
3
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
INTRODUCTION
5
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
“The Pisco agricultural industry is facing a major, long-term challenge that obliges us to examine the value chain and its environment from the perspective of the opportunities in the global market.�
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The writing of the Pisco Sector Strategic Plan is an initiative led by the Association of Pisco Producers AG (Asociación de Productores de Pisco AG, abbreviated to APP AG in Spanish), which is driven by the need to have an ambitious, comprehensive and shared vision of how to face the new challenges that are associated with the internationalization of the Chilean pisco sector. The directions in this plan are intended to guide the sector’s actions over the next few years, incorporating the plan’s goals within the businesses’ planning, and also in the sector’s support network. The pisco agricultural industry is facing a bigger, long-term challenge that obliges us to examine the value chain and its environment from the perspective of the opportunities in the global market, to develop a value supply based on the in depth knowledge of the international consumer, and to view the opinions in reference to importers and distributors as natural allies in this process. This prompts us to be careful with the steps we make when opening the markets projected for the first stage towards the year 2020 - on our way to building the Chilean pisco category abroad whilst contributing to Chile’s image abroad and assuring a promising future for the pisco industry family. This document has been written within this association with full participation of the pisco cooperatives and businesses; therefore, it has the advantage of integrating the wisdom of the traditional pisco producers with the strength of the ones who are just entering the sector. The background chapter discusses the importance of the sector and its development, showing how the vision of market opportunity has been growing, forming the internationalization strategy and prompting the introduction of the category to the U.S. (New York). Then, in the strategic framework chapter, the desired future is set down, together with a SWOT analysis and the identification of the plan’s main challenges, pillars, goals and indicators. Finally, there is a set of priority programs and guidelines for internationalization. Operation and budget data here are only estimates to identify the level of intervention. At the time of this plan’s release, the pisco family is united and optimistic, thanks to the rigorous and tenacious work that has been undertaken over the last few years and in which the Chilean State has been a constant ally. The new businesses and brands are reflecting the current dynamism and modernization of the pisco sector and its opening up to new markets. This document is an invitation to demonstrate our renewed work spirit and to identify how you; entrepreneur, authority, consumer or citizen, can help in achieving its goals. The partnership networks have developed and strengthened by means of innovation, helping to make our slogan a reality: “The success of our pisco is a challenge for us all!” With kind regards,
Pelayo Alonso, President of the Association of Pisco Producers AG
7
8
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Sector
BACKGROUND
9
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
10
“The annual income in sales for the pisco industry is over $250 million dollars, which generates about $65 million dollars of taxes – a number that is only exceeded by the mining industry.”
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Pisco production is a traditional industry in the Coquimbo and Atacama regions, formed by a production base of 2,726 farmers, who grow 10,504 hectares, generating more than 31,000 jobs annually. The sector has several businesses that make pisco, a drink that has presented several consumption cycles nationwide. Competition from international alcoholic beverages is now one of the biggest challenges the industry has faced since the 1990s. However, the capacity for innovation in the industry has meant that it has been able to overcome this situation and is now positioned to face one of its biggest challenges yet: taking advantage of the export opportunities that are seen in international markets, positioning pisco as a drink that reflects the nature of our country (Pure, sustainable and authentic) and its versatility (Transparent, aged and with great ability to mix it).
II.1. Importance and Development Chile’s pisco production begins with the country’s history and its development is protected and regulated by the Pisco’s Designation of Origin Law (Ley de la Denominación de Origen Pisco) established in 1931, under the agriculture ministry whose regulatory framework is currently fully valid (Law 18,455, Regulation No. 521, modified by the 75th Decree) In Chile, the pisco grape and pisco are only produced in northern Chile, in the Atacama and Coquimbo valleys, with their desert climate and privileged vine growing conditions, favoring the high concentration of sugars and aromatic features emblematic of pisco grapes. There are 13 pisco grape varieties established by the D.O (designation of origin). The most commonly grown nowadays are: Muscat Rosé, Muscat of Alexandria, Austrian Muscat, Torrontel and Pedro Jiménez. Currently, there’s a research and development + innovation project being developed for the recovery of pure genetic material of the other grape varieties. The industry’s agricultural productive base is made up of 10,504 hectares and an average annual production of 220 million kilos of pisco grapes. An estimated 2,726 agricultural producers work in the pisco industry; 70% of them own small areas (up to 12 rudimentarily irrigated hectares) - it is one of the sectors with the greatest number of small farmers who are mostly associates of pisco cooperatives. The cooperatives are the most effective way of coordinating the productive organization in the northern regions of the country. The processing industry currently brings together fourteen Pisco businesses, mostly heirs of the pisco tradition of their ancestors. These businesses are scattered throughout the territory and have diverse scales of production: Large businesses that generate large volumes with high technology; medium sized businesses, generating lower volumes but with good technology, and niche pisco businesses that produce products that are orientated to small markets because of their reduced volumes. The annual income in sales for the pisco industry is over 250 million dollars, which generates about $65 million dollars of taxes - a number that is only exceeded by the mining industry. The pisco agricultural industry also has an important social and economic role for the Atacama and Coquimbo regions, generating more than 31 thousand jobs annually, among producers, industry employees and also temporary staff at harvest time. This industry also supports a sector of older, small scale producers with few resources, improving their living conditions, not only by buying their grapes, but also by helping them with health programs, educational scholarships for their families and provision for holidays, among other benefits. The industry
11
also contributes to regional tourism income by means of the 150,000 tourists who visit the various pisco distilleries and enjoy the local cuisine every year. These tourists also make the most of the some of the clearest night skies on the planet. The development of the industry from 1986 to 2011 has four well-marked periods: the first corresponds to a period of growth (1986-1997) which shows that grape production grew at a similar rate to the increase in demand for pisco, resulting in the fact that most grape production was destined for pisco products. During this period, pisco was the main alcoholic beverage for national consumers, marking this preference with a consumption of 2.9 liters per capita. During this period, in terms of production, there was an increase in the number of plantations and in the price of grapes in accordance with the expansion of the industry (Figure 1). Figure 1
Evolution of pisco grape production and its detiny (Kg. Mill) 300 250 200 150
12
50
Pisco
Wine - Must
20 02 20 03 20 04 20 05 20 05 20 07 20 08 20 09 20 10 20 11
20 01
20 00
19 99
19 98
19 97
19 96
19 95
19 94
19 93
19 92
19 91
19 90
19 89
19 88
19 87
0
19 86
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
100
Total
Source: Fundaci贸n Chile and Capel.
In the second period, from 1998 to 2001, demand for pisco started to decrease, with 2000 consumption rates of about 2.2 liters per capita, forcing a substantial amount of pisco grapes to be destined for other products of lower value (e.g. wine must), with the consequent decrease in the price of grapes and a disincentive to plant. In this period, the pisco sector was also marked by the start of a strong innovation process to address the changes in consumer tastes by introducing new product lines based on pisco, such as cocktails. During those years, the price of pisco grapes decreased, with no incentives for developing new plantations or renewal of the existing ones. The third period is from 2002 to 2008. During that period, the total production of pisco grapes stabilized and there was an important replacement in the consumption of pisco by international liquors, with a growing rise of these categories (figure 2) with importations of such liquors rising from 2 million to 30 million liters between 2002 to 2008.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Figure 2
National importation of alcoholic beverages evolution (US$ CIF) 40.000.000 35.000.000 30.000.000 25.000.000 20.000.000 15.000.000 10.000.000 5.000.000 2005
Run
2006
Vodka Wisky
2007
Tequila
2008
Spirit
2009
Gin
2010
2011
Liquors Other
Source: ODEPA
During this same period, the positive results of introducing new pisco products are shown in the market, reflected in the rapid growth in cocktail consumption, from an annual volume of 5 million liters in 2004 to 15 million liters by the year 2008. The growth of the pisco premium (special) segment is also highlighted, which increased its participation in the national market from a level of 4.7% in 2006 to 7.1% in 2008. These market trends tended to raise the price of pisco grapes, however, an increase in the productive area and / or renewal of vineyards was not observed, remaining around 10,000 hectares. The weight of the adverse commercial conditions of the previous periods were beginning to be felt by those older plantations (of more than 20 years of age) and particularly on the smaller pisco farmers, who maintain traditional production systems and low efficiency irrigation infrastructure; these two elements (plantation age and low efficiency irrigation infrastructure) have a great impact on productivity and on the small producers’ income. Estimates of average yields for these small farms of pisco vines are between 18 and 22 tons of grapes per hectare, far below the yields of new plantations. Another effect of this situation was seen in the concentration of certain pisco grape varieties, affecting the productive diversity that the industry had originally with 13 varieties.
13
Chart 1 Rum and pisco consumption from 2009 to 2011 Year
Total Sales Volume (millions of liters)
Pisco per capita (Liters)
Total Sales Volume - Rum (millions of liters)
Rum per capita (Liters)
2009
35.7
2.1
21.4
1.3
2010
35.8
2.1
23.9
1.4
2011
36.3
2.1
23.4
1.4
Source: Compañía Pisquera de Chile
Lastly, the period from 2009 to the present day shows that the trend of decreasing pisco consumption starts to stabilize from 2009, breaking the downward trend of the previous periods. On the other hand, the other alcoholic beverages that competed with pisco and showed high growth rates, like rum, also started to stabilize. Growth in the pisco premium market continued, indicating a move in consumption trends away from the high level production products towards the higher value, quality ones. At the same time, the alternative market for the pisco grape is starting to have a revaluation, as expressed by Pelayo Alonso, president of the APP AG: “We have the advantage that in the wine world, the pisco varieties are being revalued, “ which has allowed a greater demand for these products. It is expected that in the future, wine made from pisco grapes will win out in the category and in demand, as already verified by the introduction of new products such as sparkling wines, among others. A greater demand for these pisco grape varieties will result because of this.
During this period, there is also a revitalization of the pisco business sector with new product ventures and strategic alliances, both focused directly on exportation. With new producers entering the market, the existing supply in the ultra-premium segment increased, producing the largest level of exportation of pisco for this period, and also increasing price levels. (figure 3) Figure 3
Liter Price and Pisco Export Value (US$/FOB) 2.000
6,00
1.800
5,00
1.600 1.400
4,00
1.200
3,00
1.000
2,00
800 600
1,00
400
Value (Thousands US$/FOB) Source: ODEPA
14
11
10
20
09
US$ FOB/ltr
20
08
20
07
20
05
20
20
05
04
20
03
20
02
20
01
20
00
20
99
20
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
19
90
200
19
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
During this last period, private-public efforts to internationalize pisco were beginning to gain steam, through two major sector initiatives financed by both the State and pisco enterprises: the Our Pisco - Regional Innovation Program (abbreviated to PIT in Spanish); and the Prochile Sector Brands program - both have aimed to boost exposure to the U.S. market and prospect other world markets.
JanuaryJuly 2012
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
In conclusion, from 1997 to the present there has been a decrease in pisco consumption nationally, and a sustained increase in the production volumes of pisco grapes, both of which have brought about a decrease in the price of this raw material; however, recently, the per capita consumption has tended to recover and there are new opportunities for the pisco grape. All this adds together to make for a real possibility of opening up to foreign markets, giving hope for a renewed and promising future for farmers and for the pisco sector as a whole, resulting in the production of high quality raw materials and a favorable environment to accept new challenges.
II.2 Market Opportunity Global consumption of alcoholic beverages has presented significant growth in the last decade, as the international British consultancy Wine & Spirit Research IWSR shows. The levels of consumption in terms of global spirits had grown in volume at a compound annual rate of 2.4% between 2004 and 2009. Nevertheless, as an effect of the global economic crisis, these numbers have decreased in the past few years, and the predicted growth rate between 2009 and 2015 will be only 1.4%. In spite of this slowing down in the rates of consumption increase, the global market value has grown permanently and at higher rates than those of volume, opening an important market for the high-quality liquor category. Figure 4
World Consumption of Spirits +9.07% 2.704
2.513
Figure 5
Volume - Billion 91 cases
World Consumption of Spirits (in value) +46.02%
2.741
2.682
205.935
157.693 -0.81%
+7.61%
2005
2009
+2.23%
2010 Forecast 2014
230.268
210.297
+9.50%
+30.59%
2005
Billion USD sorted on 2009
2009
2010 Forecast 2014
Source: Vinexpo
With regards to the highest level consumers by value, Asia Pacific stands out with 40% of the market share and with a growth of 50.5%, followed by America and Europe, expecting that there will be a rise in consumption of close to 10% in all these markets over the next few years.
15
Chart 2 World Spirits Consumption (Value by continet 2009 US$ billon)
% of 2010 consumption
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
2009
Evol 05/09
2010
2014
Evol 10/14
40.6%
Asia Pacific
55.539
83.570
50.47%
85.340
93.445
9.50%
25.3%
Americas
41.109
52.184
26.94%
53.289
58.350
9.50%
24.2%
Europe
44.694
49.788
11.40%
50.842
55.671
9.50%
9.9%
Others*
16.551
20.393
23.21%
20.826
22.802
9.49%
100%
Total
157.693
205.935
30.59%
210.297
230.268
9.50%
Source: Vinexpo
* Including CIS, Africa and Middle East
What’s more, in the global market, the national or local denomination alcoholic beverages (typical of a certain place and usually outside of the reach of large multinational businesses) which account for almost 54% of global consumption – tend to have lower than expected consumption rates which are expected to decline ever further over the coming years. This means that that the world is opening up to the internationalization of alcoholic beverages and this can be seen in the next graph which shows the growth in spirits importation in the global market. Figure 6
World Spirits Import (thousand US$)) 30.000.000 25.000.000 20.000.000 15.000.000 10.000.000 5.000.000
2007 Fuente: COMTRADE
16
2005
2008
2009
2010
2011
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Among the main sp irit importers, the most significant is the United States, followed by Europe and then Russia, China, England and Canada. Among the world wide imported products, whisky and grape based spirits (including pisco), are those which have had an important growth over the last two years; followed by vodka, rum and liquors. In respect of grape based spirits, these are most popular in the USA, China, followed by the Russian Federation, Germany and England. Figure 7
National Alcohol Importations Development (US$ CIF) 4.000.000 3.500.000 3.000.000 2.500.000 2.000.000 1.500.000 1.000.000 500.000 2002
2003
2004
2005
2006
PerĂş
2007
2008
2009
2010
2011
Chile
Fuente: COMTRADE.
The development of pisco importations in the world shows a global trend: an important growth during the last two years, this is due to the actions of two world exporters, Chile and Peru. The main destination for pisco exportations from both Chile and Peru is the United States, albeit with only a limited presence of only 0.3% of total grape liquor importations by value, and 6% of the market by volume for this country, equating to US$ 724 million. France is the biggest supplier here, representing 96.9% of the United States importations. With regards to the principle importing states of grape liquors in the United States, New York is the most noteworthy as the main pisco importer, followed by Florida and California, both important pisco importers. One important characteristic of the United States market is its evident Premiumisation, with young adult consumers fueling this trend, as they seek the great taste and the status associated with its consumption, showing a tendency towards premium and super-premium brands. Regarding other relevant markets for distilled liquor, in the case of grape liquors, significant growth rates of alcohol importations were observed especially among emerging markets; China, India, some European countries, even in Latin America (Brazil and Argentina), which added to the commercial agreements that have been signed with those countries - China for example, has a current duty of 4%, which will drop to 0% from 2015 - making it essential to understand the continuing development of these emerging markets, such as undertaking generic action in the promotion the product.
17
II.3 Internationalization Strategy The pisco sector as a whole has analyzed and evaluated the possible scenarios for internationalization, and it has defined a market sector strategy for pisco in the United States, owing to its attractiveness (intrinsic value as a potential importer of the product), and the competitive position of Chile (adaptation capacity that the Chilean alcohol industry would have to succeed there). Also, the U.S market is the model for the rest of the countries in terms of patterns and trends of consumption; therefore, it has to be considered the first stage of any internationalization process that is looking to achieve long term global significance. New York is the spearhead in the introduction of this new category owing to its market size and given the willingness of its consumers to try new products and also its character as a reference point in the consumption of alcohol, both in the U.S and at a global level. Without prejudicing the above, it is vital to progress in other relevant worldwide markets, as in the case of the United Kingdom, which is positioned as “the gateway to Europe�. In this case, the more favorable conditions are in London, in terms of its capacity to establish consumption trends and purchasing behavior. Therefore, achieving a place in this market will be key in order to achieve the market penetration of pisco in other places on the European continent at a future stage. Regarding emerging markets, it is essential to progress in China through its gateway Hong Kong, because of its important growth and its alcohol consumption levels. This port is strategically located at the end of the commercial Asian Routes, making for an easier development of one of the biggest commercial ports of the Asia-Pacific region. It has a big and growing segment of prosperous young consumers, with disposable income to spend on alcohol. Young adults and the emergent middle class are following the consumption patterns observed in Europe and the World, such as the Premiumisation.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Brazil is the key to Latin America, it has a drinks market widely dominated by local beverages, but with a growing trend in the consumption of spirits such as vodka, brandy, followed by whisky and rum. In this market, the increase in consumption of spirits has been driven by the upper income groups, especially in the adult and young adult segments. Another key factor to consider for the development of this market in the coming years is the opportunity to showcase the products at the next Olympics and the World Cup.
II.4. Competitive Environment EAs a first step in the international positioning of pisco, the competitive environment for the introduction of pisco could be established using the United States as a reference, with New York as the focus, corresponding to the prioritized market for pisco at sector level. Being the global epicenter of the distilled spirits market, and its complex commercialization chain (three levels: importer, distributor and consumer), a tremendous competition among categories and brands exists, therefore, to penetrate this market demands important levels of differentiation, investment and innovation. Pisco is legally categorized as a brandy in the United States (because it is made of grapes and is Hispanic), however, it tends to be associated with other Latin American products because of ignorance, its low profile status and its limited level of commercial development. The following are identified as direct competition in the distilled spirits category: Peruvian pisco, cachaza, tequila and imported rum. The following are a secondary area of more indirect competition: brandy, domestic rum, vodka, gin and whisky. The proliferation of brands in each category is very strong, introducing an average of over 900 new products / brands per year. Nowadays, there is an important proliferation of low cost premium and medium premium products, and this trend continues. The competitive environment produces a difficult scenario, but entry of a new category at sales points is not impossible, especially considering that most purchases in bars, restaurants, liquor stores and retailers are because of sale’s volumes or due to the scale of the marketing and promotion programs undertaken.
18
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
II.5 Introduction to the United States The magnitude of the challenge demands constant public and private efforts and investment to get results in the long term; that is why the internationalization strategy has been developed under the principles of a Sector Brand, of shared ownership between companies and the State. It means that the building of the Chilean Pisco category in new markets has been taken as a collective task, where strategic sector actions have opened the way and offer support to the individual actions taken by companies. According to the data outlined above, the Premium products segment is the reason for the growing rate of distilled spirits consumption in the U.S. On the other hand, the meeting of the product’s internal assessment (at origin) with the New York market’s requirements (based on 27-34 years old males and females as the end users of the product), makes for a positive evaluation of the hypothesis which indicates that the Chilean Pisco category could be introduced into this market as a high value product and consumption experience for the (Premium) consumer.
• Positioning Strategy The positioning strategy for the market defined as a priority (New York) is based on the tangible and intangible pisco values, through which an emotional connection between the consumers and the product is obtained: “The essence of Chilean nature is found in its Pisco, with its VERSATILITY in uses and mixology”
The nature and versatility values are based on the following attributes which are unique and differentiate the product in the market: Versatility: Transparent Product, Aged Product, Mixology. The message among these values is reflected in a transparent pisco to mix, an aged pisco to drink unaccompanied; even vodka isn’t a product with so many possibilities of mixology; pisco has an aromatic taste, personality and character. Nature: Sustainability, Origin, Tradition, Authenticity. In this case, the message refers to the traditional pisco producing families, the product’s Designation of Origin, the quality of the grapes and their production, the Andes mountain range, the quality of the clear skies in the valleys of the Atacama and Coquimbo regions, the pisco history that is as old as the history of Chile and its discontinuous distillation. The variety of styles and possibilities of mixology that the category offers, and the essence of nature that its production incorporates, are differentiating values which establish a strategic positioning for the category, helping to create an opportunities space in the market.
19
Figure 15 Differentiation Positioning Strategy Variety in Nature
OPPORTUNITY RUn Cachaça STYLES VARIETY
Gin
Tequila
Mezcal
Vodka
MIXIOLOGY VARIETY
PERUVIAN PISCO
HISTORY USE
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Regarding other markets of opportunity, where younger segments are those that are driving consumption, justification for a generic strategy designed for the New York market could be useful , however, it is highly probable that certain local adaptation could be required, which will require the development of key aspects in order for the product to gain success locally.
20
• Drink Strategy Due to the fact that the product is new in the market, the best chance of success in terms of the end user level is at the 25-34 years female segment, because this is a subgroup that is open to trying out new flavors and experiences, and they are the most frequent costumers at the establishments that present the highest probabilities of being able to understand and serve pisco (cocktail bars, hotels and restaurants). Given the magnitude of the costs involved in positioning the brand and creating awareness of it directly through mass media campaigns, the recommended actions for the first positioning stage are targeted at those who have influence over the consumption habits of this target group: the bartenders at cocktail bars, hotels and restaurants. Both bartenders and mixologists from New York are interested in offering opportunities of discovery for their clients, by means of the history related to the drink; it makes for an attractive talking point, creating a connection between the distilled spirit, the cocktail, the mixologist and the client. Therefore, the beverage strategy for this market is made up of the following:
“Presenting a portfolio of handcrafted Premium cocktails which illustrate pisco’s versatility, giving clients the opportunity for tasting and discovery.” In terms of the taste and preferences of the target group, there is a high probability that they will try a grape distilled spirit, and the most attractive drinks for them are red, sweet, fruity and soft ones. However, the drinks options change according to different consumption occasions, and they present trend variations, which make several cocktail options a necessity, making sure that the two ends of the flavor
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
spectrum are covered. In the later stages of market penetration, the drink strategy will target the opportunity in terms of volume at both 27-34 year old men and women, frequent clients of neighborhood bars who prefer simpler drinks, with only one or two ingredients.
• MARKETING PLAN The first tasks for the promotion of the Chilean Pisco Brand Sector were carried out during the first semester of 2012, contracted out to a public relations agency in New York, highly specialized in the distilled spirits market of the United States. With the brand image and supporting material (logo, fliers, promotional graphics, corporate video, among others), two main events were celebrated in New York: the launch of the Chilean Pisco Brand Sector, mainly for the media, and a Trade Show Room, given to those who are reference points of opinions and who influence consumption in New York; the content of the Trade Show Room was educational, concerning the positioning values of the Chilean Pisco category, distributing promotional material for the Sector Brand, as well as offering tastings of some cocktails based on pisco, especially designed by the renowned mixologist in this area, David Wondrich – this being part of the construction process of the Drink Strategy. Both activities were represented by the pisco producing sector and its support networks. A website was built and Twitter and Facebook accounts activated, all elemental tools for the promotion of the Brand through social networks. Impact indicators of those first actions are being measured to show the results at the end of the year.
SANTIAGO SOUR
ALBAHACA SOUR
ATACAMA CLUB
BELLAVISTA
EASTER ISLAND ICE TEA
MAPUCHE MULE
21
22 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Strategic
FRAMEWORK
23
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
“Our vision is to internationalize the Chilean Pisco category, positioning it as a Premium product and experience within the major global markets. ”
24
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The 2013-2020 pisco strategic sector plan is the result of an in depth study of the sector, with its aim to orientate the internationalization process using a strategic
The construction process of the Plan’s Strategic Framework is the result of an in depth evaluation of the sector, in which the aforementioned analysis of the sector data allows for questions to be asked and for the methodological processes that are summarized in the figure below. Figure 16. Strategic framework building process
framework composed of: vision, mission, strategic pillars, targets, tactics and programs which aim to: 1.- Achieve category awareness in the new
Who are we?
markets. 2.- Generate recognition as a Premium
VISION What do we look for?
PILLARS What are our major challenges?
MISSION how to achieve it?
PROGRAMS
product. 3.- Strengthen the support for Chilean Pis-
SWOT and Challenges
Objectives
Strategy and tactics
Indicators and Goals
Strategic Impact v/s Economic Impact
co to go international. 4.- Ensure the profitability of internationalization for the family of pisco producers, especially for the pisco grape farmers.
Internationatization of Chilean Pisco category
Opening new markets
The actions proposed in the plan have the aim of achieving exportations of 200 thousand boxes of pisco by 2020 annually.
III.1 Vision We are the emblematic Chilean Drink; a distilled grape spirit from the valleys with the clearest and starriest night skies in the World, with an ancestral designation of origin back up, a solid production base and the highest per capita consumption of all distilled spirits at a national level. Our vision is to internationalize the Chilean Pisco category, positioning it as a Premium product and experience within the major global markets. The goal we have set is to achieve export volume of 200 thousand boxes annually by 2020, which requires a rate of growth in exported volume of 30% per year.
25
III.2 SWOT Analysis and Challenges According to this vision, orientated towards internationalization, what follows is an analysis of the main strengths, weaknesses, opportunities and threats:
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Chart 3 SWOT analysis for the Internationalization of Pisco Opportunities
Threats
Projections of international growth for the distillated spirits markets, especially for Premium segments
High levels of competition in the international Spirits market
High growth in non-traditional Markets for Spirits (BRIC countries)
High levels of investment required by industry and the country to achieve success in the pisco internationalization process
More sophisticated and well informed Consumers of spirits seeking new experiences and products that are natural and sustainable; they want to know the drink’s origin and are willing to pay more for premium products.
New regulations restricting alcohol consumption
Premiumisation of the Spirits market allowing for pisco to be part of this trend
Higher taxes on alcoholic drinks, especially associated with Premium segments
Growing social networks which allow for regular global communication with consumers.
Complex commercialization structure in the United States, and high demands in terms of marketing promotion.
Introduction of global leaders of the alcohol industry to the pisco farming industry
No identification of product with a Sector Brand because of the absence of generic marketing campaigns in the competitive environment.
Growth in world tourism in general, and enological activity at a local level.
Predominance of Mass-produced piscos in the national market undermines the necessary convergence of the external (Premium) appreciation of the category’s values with that of the domestic.
Strengths
Weaknesses
Important industry partnerships established to confront the challenges of internationalization
Significant number of small producers with a lack of technological development and low innovation capacity, with poor skill levels that are required to guide their production to meet international demand
Industry with a significant degree of innovation in the value chain, creating new products and processes to satisfy the consumers’ demands
Higher production costs because of rises in labor force and input costs
Higher production costs because of rises in labor force and input costs
Lack of knowledge about pisco in international markets
Industry aligned with international production demands, with clean, sustainable and certified processes
Insufficient knowledge in the domestic market about the product’s values and its designation of origin
Agro-climatic advantages for the production of high quality spirits
Low investment capacity of the industry during the pisco internationalization process
Solid Designation of Origin
Lack og knowledge of the industry abaut the new markets for spirits (BRIC).
History that guarantees the pisco origin, with processes certified as world-class.
Incipient development of local enological tourism activity
Phytosanitary conditions in Chile
National market doesn’t complement the international strategy for Pisco
Regional factors differentiating our offer (clean and starry skies etc.), that allow for the creation of several world-class stories concerning the drink
Lack of profile of brands in the main target markets
It’s worth noting that because this is a sectorial tool, whose business base is heterogeneous in terms of sizes and talents (see II.1), it is difficult
26
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
to refer to the internal capacities in order to achieve the vision. In this aspect, the SWOT analysis and also the identification of challenges in order to take advantage of the opportunities are the reflection of the internal capacities which need to be considered in order to understand how the vision can be achieved. Sector challenges •
Achieve the positioning and Pisco brand awareness required, especially in those who have influence over the consumption decisions in the markets of New York and also in those U.S. states with high levels of distilled spirit consumption.
•
Generate a thorough knowledge of other distilled spirits opportunity markets (UK and emerging markets) through permanent monitoring to support market prospecting activities and drink promotion.
•
Increase exportations. Achieve 200 thousand boxes per year sales overseas by 2020.
•
Strengthen the D.O as an essential attribute of the category, adding prestige and product authenticity for the international consumer.
•
Support productivity efficiency improvements for farmers who present difficulties in adapting their production to the new international scenarios.
•
Promote pisco as an emblematic Chilean drink, and innovate the consumption experience in Chile, strengthening the wine tourism development as one more tool in terms of positioning internationally.
•
Generate public-private links that allow for the leverage of resources in the promotion of the drink internationally.
•
Generate a unique history of the historical, productive and cultural heritage associated with Chilean Pisco D.O to educate the market about this category.
•
Progress towards the internal market Premiumisation at individual and sector level, looking for the convergence between the category value at national and international levels.
•
Continue progress towards quality, environmental and social sustainability certification of the production base.
•
Develop the required R+D and Innovation in order to meet the required levels of sophistication in supply (e.g. Terroir, product development with reinserted varieties, etc.)
•
Introduce new practices at the different connecting points in the value chain that allow for the reduction of production costs.
•
Develop the commercialization chain and produce strong brands to achieve an attractive and wide offer in target markets.
III.3 Mission Our mission is to make the Chilean Pisco category international and to open it up to new markets. Because of this, we will continue developing the United States market, we will apply competitive intelligence globally, and we will prospect for other opportunities in every continent. In Chile, we will continue with the market Premiumisation, educating the consumer and visitor, and developing an international consumption experience. Through the D.O. Council we will ensure the quality, sustainability and profitability of the process for every member of the pisco family, especially for the small farmer.
27
III.4 Pillars The Strategic Pillars of our actions for the next few years are the following: • To achieve category awareness in new markets • To achieve category Awareness as a Premium product • To strengthen the support of the Chilean Pisco category in its launch World-wide • To ensure profitability for the pisco family during internationalization Category awareness is the desired goal here as the product provides a real option for consumers in new markets. This awareness of the category as a high value product and experience needs to be present in the consumer’s mind and in the minds of those opinion shaping groups. For this purpose, there will be an investment in the generic promotion of the category, through the Chilean Pisco Sector Brand, educating opinion shaping groups and consumers about pisco’s positioning values and different consumption methods. Identification of other prospective consumer market opportunities and drivers will result from research into the competition. At the business level, new commercialization chains will be developed, creating strong brands and innovating according to new markets.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
An increase in the Recognition of the category in Chile as a Premium product and experience is a key goal, promoting the Chilean Pisco’s D.O heritage value (historical, cultural and productive), and encouraging the development of an international consumption experience. Imparting knowledge of the category values to bartenders, Horeca, consumers and tourists from home and abroad will be intensified, and the creation of new products and services associated with the identity of the product and its region will be encouraged (e.g. traditional crafts, gastronomy and events etc.). At business level, the Premiumisation of the market will continue, improving the offer, and linking the consumption experience with national, world-class touristic values.
28
A higher level of support at international level is required to raise the prestige of the category by means of social and environmental sustainability and through the Chilean Pisco D.O Council, certified by the State. In addition to fulfilling promotion and defense functions, this council will ensure the implementation and continuity of the current Sector Strategic Plan for pisco internationalization. At business level, obtaining relevant certifications for the international markets will be encouraged. Profitability for all members of the pisco family will continue to be a priority goal, by means of continuous improvements in the efficiency of the productive farming and processing base; the technological transfer targeted at small farms will be a key priority, and basic and applied research will be developed in all areas that contribute to sector competitiveness.
Figure 17 Vision, Mission and Strategic Pillars
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Vision To internationalize the Chilean Pisco category, positioning it as a Premium product and experience.
Mission To build the category at international level, opening it up to new markets and strengthening the national base as a requisite for this process.
Strategic Pillars Awareness Recognition Support Profitability
III.5 Objectives, Strategies and Metrics
29
The following presents the objectives, strategies and indicators for the first stage of the projected development towards 2020 in the form of a summarized chart which shows the alignment with the earlier elements of the strategic framework. Chart 4. Strategic Framework for the Pisco Sector Plan
Vision: To internationalize the Chilean Pisco category, positioning it as a Premium product and expe
Mission: To build the category at international level, opening it up to new markets and strengthenin as a requisite for this process. Pillar
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Awareness
Objective
Positioning and permanence in the new markets.
Strategy
Deepen pisco insertion in United States: the opening of different opportunity markets.
Tactic
Sector: • Education of opinion shapers and consumers. • Generic promotion of the category in the market. • Consumption experience differentiation. • Market intelligence development and application. Prospection of other opportunity markets for the category •
Business: • Development of commercialization chains and internation • Individual brand promotion. • Strategy and product innovation according to new market
Recognition
Support
Profitability
Product and consumption experience domestically Premiumisation.
Prestige internationalization of Pisco de Chile D.O
Improving the efficiency of the productive base.
Education of the consumer and the development of a global consumption experience.
ID.O Council and Strategic Plan implementation
Sector: • Official story launching for Pisco Chile D.O. • Promotion as an emblematic national drink among consum • Development of a consumption experience for premium p
Business: • Premiumisation of the internal market. • Official story adoption in the media. • Strengthening in local market of a differentiated and intern
Sector: • Operation of D.O council and defense. • Permanent management of a short, medium and long term
Business: • Certification of social and environmental quality and susta
Promoting the innovation of technological transfer and productive systems.
Sector: • Execution of technological transfer programs to the small p • R+D+innovation project execution for the development an
Business: • Investment in the productive efficiency at field and proces
30
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
erience.
Indicators
ng the national base
Annual exported value (US millions) Annual exported volume (thousand boxes) Annual exported volume (thousand liters)
Base
Goals
2,8 64 580
6,8 200 1.180
Indicators • • • •
Annual growth of the average exported volume (%). Purchasing and price range for the consumer for/in specialized liquor stores (US/bottle). Category purchasing per year in distillery (Number of bottles/year). Markets with a defined sector positioning (Number).
• • •
Companies with distributors per specialized market (number/USA, number/others). Companies with Exportation promotion projects (number/year). Brands that are introduced by market (number/year).
• • •
Annual international events of pisco innovation and education (number). Touristic products and services that incorporate official information about pisco (number). Contact points with tourists that give official information about pisco (number).
national consumption experience.
• • • •
National purchasing value (US/year). Total Premium purchasing promotion (%). Price range of the national retail category (US). Number of national and foreign visitors at points of attraction in pisco zone (Thousands/year).
m Strategic Sector Plan
• •
Quality parameters, State sponsored certifications (number). 2020 Plan Sector Evaluation (number).
ainability parameters.
• •
Acquired certifications (number). Certification system adoption (company %).
pisco farmer. nd adaptation of new technologies.
• •
Executed technological transfer program (number). R+D+i project in execution (number).
ss plant level.
•
Pisco grape performance at small producer level (Ton/ha).
y.
nal alliances.
ts requirements.
mers and national /foreign visitors. pisco of international level.
31
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Priorities
FOR 2020
33
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
“To Continue with the development of the category in the United States as a priority market. The objective is to widen the insertion of pisco in the United States, primarily in New York and in those states that have high consumption levels of spirits.�
34
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The 2020 sector plan presents as a challenge the implementation of several activities in order to achieve its proposed vision, which are targeted and focused on the United States market. Some of these actions are the following: •
IV.1 “Awareness Program”: Remaining in the international consumer´s mind The foundation of this program can be summarized as follows: •
A concentration strategy has been defined and the United States has been prioritized, focused on New York for the first stage of internationalization. This decision is made due to the volumes and the maturity of the distilled spirits market that exists in this country; the greater propensity of consumers to try new products here; plus America’s ability to have influence on the trends of global distilled spirits consumption. However, this market presents a tough competitive environment to deal with; where the gap between positioning (knowledge of the category and its values) and awareness (the category remaining in the consumer’s mind as a real consumer option) is recognized to be a great challenge.
•
Other markets representing opportunities have been identified for pisco, but they need to be better understood in order to assure efficient sector spending on promotion; as is the case of emerging countries where the consumption of distilled spirits is a process in full development. This in no way prejudices individual actions that companies are undertaking in these destinations.
•
To succeed in these first internationalization stages, permanent monitoring of those signals that determine real opportunities for pisco in those market is necessary; as well as the monitoring of positioning and awareness indicators demonstrated in the prioritized markets (e.g. consumption trend variations, competitive environmental development etc.).
Invitation of international opinion formers to get to know the identity of national pisco.
•
Tasting and Seminars in New York.
•
Participation in showrooms in California, Miami and Chicago.
•
Participation in specialized cocktail events in New York.
•
Publicity in specialized media.
•
Media communication tools development for the creation of social networks.
•
For other markets, the prioritization of activities related to the participation in specialized spirits fairs of continental and global significance.
Based on the above, this program includes three priorities: the first of them is to continue with the development of the category in the United States as a priority market. The objective is to widen the insertion of pisco in the United States, primarily in New York and in those states that have high consumption levels of spirits. The second priority is related to the knowledge and identification of opportunities in other international opportunity markets for pisco, identified by means of market intelligence. The third priority aims to form direct and indirect links between importers, distributors, the press, professionals in hotels, clubs and restaurants, and opinion forming groups in other opportunity markets for pisco. This is to be achieved by means of generic promotional actions in the main centers for distilled spirits consumption on every continent.
35
Direction 1 Development of the United States as priority market This program’s objective is to widen the insertion of pisco in the United States, primarily in New York and in those states that have high consumption levels of spirits.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
To continue with the category positioning in United States (New York), a task that started in 2010, the program is designed to educate and influence “gate keepers”: importers, distributors, specialized press, on and off-trade buyers, sommeliers and opinion leaders; coupled with activities that are highly focused on end-user consumer segments. Activities considered are the following:
36
•
Invitations for journalists, buyers, sommelier, mixologists and other opinion forming groups to get to know the identity of local pisco
•
Tasting and Seminars at a fixed date once a year in New York.
•
Participation in ProChile showroom demonstration and tasting programs in California, Miami and Chicago, creating the Chilean Pisco Tour.
•
Participation in specialized cocktail events (Bar Smart, Manhattan Classic Cocktail, Tales of the Cocktail).
•
Publicity in specialized media.
•
Media development for the creation of social networks.
•
Design and printing of promotional material.
Direction 2 Development of a market intelligence system This will be an updated system of global market data for pisco and spirits importation. It will give detailed and accurate market information related to emerging markets, such as the type of products exported, the companies involved, the values and volumes etc.; and at the same time, this system will provide data on consumer trends in selected, prioritized mature markets. The marketing data will allow for the monitoring of the pisco category’s global opportunity, and for the development of its international positioning in accordance with the action plan and the changing scenery in the target countries.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Direction 3 Promoting knowledge of pisco in new markets With regards to other important centers of distilled spirits consumption who set trends (e.g. London in the UK), and emerging markets in other continents where opportunities for the introduction of (and sales potential in the short term) have been deemed possible, the following sector actions are proposed: •
Participation in ProChile Demonstration and Tasting Program Showrooms for two opportunity markets per year (e.g. the Chilean Pisco Tour in Russia and Hong Kong during the first year).
•
Participation in Specialized fairs of global and continental significance, carried out in opportunity markets for pisco: •
London International Wine and Spirits Fair
•
Prowein International Trade Fair Wines and Spirits
•
Vinexpo Le Salon international du vin et des spiritueux
•
HKTDC Hong Kong International Wine and Spirits Fair
•
Expovinis Brazil International Wine & Spirits Fair
IV.2. “Recognition” Program: Premiumisation of the category in the internal market The program’s foundations are summarized as: •
Trends in the consumption of distilled spirits in the reference market (the United States) indicate that the current growth in consumption of spirits is due to an increase in Premium products, especially in middle and low price range in this sector. On the other hand, the current exportation volumes indicate that Chilean Pisco does not exist as a category in the international market, which represents an opportunity to introduce the category within the fastest growing price range.
•
One of the first decisions taken at sector level relating to the internationalization was aimed at positioning pisco as a Premium product and experience. Related with this international experience, indications are that all local distilled spirits that have become successful in the world have usually enjoyed a high level of consumer recognition at a local level, reflected in high levels of knowledge concerning the category, and a willingness on the part of the consumer to pay more for quality brands.
•
Nationally, pisco is the category of distilled spirits with the highest level of consumption in per capita levels by volume. Although pisco consumption has been affected by the reduction of tariffs on imported distilled spirits in recent years, increases in income per capita, innovation and the Premiumisation of the pisco market locally has allowed for this trend to be reversed, underlining the importance of
37
value stabilization and the continued replacement of sales of lower priced spirits by Premium brands. •
According to the experience of big pisco companies, the level of knowledge (education) about the product and the attractiveness of its consumption experience have a direct impact over product recognition and, therefore, the willingness of consumers to pay a higher price for quality brands. On the contrary, in the face of ignorance of the product category and, under normal consumption conditions, consumers are attracted to purchase imported brands if they are available at a similar price.
•
In response to that, the aim of this program is to contribute with the sustainability of the internationalization process, raising recognition of the Chilean Pisco category locally with the implementation of two main methods: first of all, by the active education of the national consumer with regards to the category; and secondly, through the development of a consumption experience at a local level with the opportunity for opinion shapers, consumers and tourists (especially foreigners) to discover the product.
Direction 4 Promotion of pisco as an Emblematic Chilean Drink The initiative is to educate the market about the Chilean Pisco category, promoting it at a national level, with an international reach; its purpose is to raise recognition of the values associated with the Chilean Pisco category at a local level. The expected impact is the reduction of the gap between the internal and external valuation of the product, improving the consumer willingness to pay a higher price for high quality pisco brands (market Premiumisation).
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The proposed actions are as follows:
38
•
The creation of an official history in different formats and languages for the Chilean Pisco category as the national emblematic drink, with the purpose of educating the market: What is it? Where does it come from? Who produces it? How is it produced? The history will include Information about the product’s styles and characteristics, methods of consumption, where and how it is commercialized, its identity, its external valuation and its contribution to the region and the country, etc.
•
The design and execution of a pisco promotion program as an emblematic Chilean drink. The proposal is based on an open innovation platform, where each action has an educational and experimental component applied to the category and its internationalization program.
•
The holding of a chic cocktail contest based on pisco, aimed at target groups of bartenders, mixologists and opinion shapers with the invitation of international opinion shapers and their like from the prioritized markets.
•
The holding of a contest of ancestral and popular recipes based on pisco, aimed at consumers and general urban and rural public, with the participation of historians, poets and travel agencies.
•
To hold a competition to design material for a world class pisco (bottles, packaging etc.), aimed at companies and universities with the presence of experts in this area from New York and/or London.
•
To hold an International seminar about innovation, branding, and globalization in the world distilled spirits market for all the participants of the pisco value chain, with the participation of partnership networks and internationally renowned distilled spirits/brands.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Direction 5. Development of a world-class consumption experience This initiative attempts to incentivize the emotional connection between people and the consumption experience associated with Premium pisco, linking the category with world class Chilean tourism products. Its purpose is to help increase recognition of the product in the domestic market, offering an opportunity for discovery for both general consumers and tourists, helping to increase category awareness in the consumer’s (especially foreigners’) minds. The proposed actions are the following: •
To design a generic consumption experience for Premium piscos, linked with local and national touristic values with world-scale differentiation (i.e. emblematic products of the country).
•
To implement and operate a digital network for the promotion of the consumption experience locally, associated with Premium Chilean pisco, which includes an educational component with international scope.
•
To deliver printed support material and training to adapt and implement a new consumption experience at a local level, aimed at the principle pisco producers, tour operators, Horeca networks, bartenders and sommelier associations, both regionally and nationally.
•
To launch a new world-class consumption experience at sector level on a day of national significance (e.g. National Pisco Day) and with international scope (e.g. repeated in some Chilean embassies abroad).
IV.3 “Support” Program: Internationalizing the prestige of Chilean Pisco’s D.O. The foundations of this program are summarized as follows: •
As part of the internationalization process, the D.O is a covering letter for the category in the new markets, where it is recognized as a guarantee of authenticity, indicating quality and sustainability for consumers.
•
If we observe some referential cases where the D.O. has been applied for and designated in the world, we can appreciate that some common contextual elements do exist for each, but that the main differences case by case are found from a management point of view and this is reflected in the levels of governance and prestige that each D.O. has attained through history.
•
In the case of the Chilean Pisco category, the pisco grape producers and pisco processing plants understand that the Designation of Origin (D.O) is a foundation stone of their economic activity. This being the reason why they have taken care to ensure its prestige over the two centuries of their existence.
39
The D.O. as established by Law in 1931, signed by the State of Chile, is recognized in virtually all free trade agreements signed by Chile with other world partners. As such, the establishment of the Chilean Pisco category in external markets consists of the challenge of building the international prestige of the D.O., based on the prestige that this certification has already in Chile. At this new stage, the guarantee of origin and the authenticity of the product must be accompanied by an in depth analysis of the market and the consumers, which in turn will promote the development of sector certifications and guidelines to guarantee world-class levels of quality and sustainability.
Direction 6 Institutional Strengthening of the D.O. The objective of this program is strengthen the structure and functionality of Chilean Pisco’s D.O, through the implementation of a permanent public-private body (D.O. Council) that proposes to and will operate a State policy to support Chilean Pisco’s internationalization process. The purpose of this body is to help build the international prestige of Chilean Pisco’s D.O by the promotion of continuous improvements in consumer guarantees, and helping to achieve global standards in areas of authenticity, quality, as well as productive, social and environmental sustainability.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The actions are management related and include the following as a base:
40
•
A first stage in which the APP AG requests that the Pisco Designation of Origin Council be established by the state, under the article 18, decree 521, in order to strengthen institutionally the ability to face new challenges associated with internationalization.
•
Once this permanent and official request is filed, the second stage will feature an expert consultation in support of the design of the structure, functions, operational model and road map for this council, with the corresponding budget for its first years of operation.
For the purposes of this strategic plan, the implementation of the Chilean pisco’s D.O council is considered a priority as one of its immediate and most important functions will be the carrying out of this strategic plan for the sector and the monitoring of goals up to 2020. This will require a president or executive secretary of state who will work as a counterpart with the private sector in the first management stage; whilst in the second stage, the recommendation is to hire a dedicated management team, with its corresponding infrastructure and operating budget for the design and implementation phase. The setting up of this public – private sector body will strengthen Chilean pisco’s Designation of Origin at an institutional level, recognizing the fact that those consumers and networks of international allies that are developing around the category need a representative capable of translating the market signals into guidelines for this farming industry operation. This is the case for the promotion and defense of the D.O., the development of certifications of quality and for the advancement of social and environmental sustainability that all go to support its prestige.
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
IV.4. ‘Profitability program’ Ensuring the efficiency of the production systems The foundations for this program can be summarized as follows: •
Pisco is a noble product, a distilled spirit from grapes – therefore, the efficiency of the productive systems is essential for this farming industry’s economic and social sustainability. The profitability of all the businesses in the pisco family is dependent on this base, especially the incomes of a large number of farmers that have grown pisco grape varieties for many generations in the semi-arid valleys of the Coquimbo and Atacama regions of northern Chile.
•
The Chilean pisco D.O. region has world-class wine-growing areas, whose exceptional climatic conditions allow for the cultivation of a number of superb grapes varieties, grown for the production of a wide range of pisco styles which go to define the characteristics of the product throughout the wine making, distillation and cellaring processes.
•
As with all traditional and historical activity, the productive surfaces that sustain pisco grape farming have had periods of boom and stagnation that have encouraged or discouraged plantation development and the progress of the production areas. Currently, the vines’ age, work force costs and irrigation efficiencies are the main factors that determine the profitability and productivity of the 10,000 hectares that support the industry. This is especially true in the case of the smaller farms that represent more than 80% of the producers and less than 20% of the production.
•
While each pisco processing company is responsible for encouraging continuous improvement among its grape suppliers, at an industry level (and under the Pisco Producers Association AG’s supervision), the encouragement of these improvements is part of the commitment to the sector established in this plan. This is particularly true with regards to the small pisco farmers, whose quality of life depends on the revenue generated by the sale of grapes. The need for renewal of pisco vineyards (those more than 20 years old) has been estimated at 880 hectares, 66% of which correspond to small producers and 44% to medium-sized producers. Hence, this program aims to support private investment efforts to replant pisco vineyards.
IV.5 Other initiatives on the plan’s horizon In addition to the programs described above, the following priorities have been considered as less urgent from the sector’s point of view, or considered to be tasks for each business to carry out independently, but are still considered as important for the construction of our Vision: •
The development of international alliances and / or marketing platforms to achieve an attractive and varied international offer.
•
The sophistication of the product according to the market’s requirements (e.g. Pisco’s terroirs identification. Farming evaluation and the development of recently reintroduced non-commercial grape varieties)
•
Consumer guarantees through internationally recognized certifications (e.g. Water and Carbon marks)
•
Biotechnology innovations for enhanced capture of waste and by-products from the production chain.
•
New practices in the value chain’s various links that would allow for the reduction of production costs.
41
42 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Operation and
BUDGET
43
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
“The Chilean Pisco D.O. Council is seen as the agent for the promotion of the pisco sector plan - it is therefore called upon to lead its implementation.”
44
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
The Chilean pisco D.O. Council is seen as the agent for the promotion of the pisco sector plan, which must lead the different plan’s actions, tracking and monitoring of progress. Its strategic ally is the Chilean State, in its capacity as incumbent of the Chilean pisco Designation of Origin. The plan requires a total investment of $ 4,385 million over a period of 8 years, which includes private and public contributions. This estimate is based on referenced cases and the current co-financing policies of programs like MINAGRI (Department of Agriculture), ProChile, CORFO (Chilean Economic Development Agency), and the Coquimbo and Atacama’s regional governments, among others.
The operation of the Pisco sector plan requires a management agent, initial prioritization of action, an implementation timetable, and a budget with guidelines (as indicated below). Management: The Chilean Pisco D.O. Council is seen as the agent for the promotion of the pisco sector Plan- it is therefore called upon to lead its implementation. It is responsible for the monitoring and evaluation of indicators, the monitoring of the competitive environment, and for the analysis, together with the farming industry, of scenario changes, priorities and advances involved in internationalization,. Priorization of action: this is the plan’s dynamic element that must be observed in all the implementation stages and adapt itself to data from market intelligence indicators. The Initial priorization reflects the fact that this document meets the strategic and economic impact criteria developed and agreed to by the sector’s businesses within the process framework of this tool’s creation. Strategic allies: the main strategic ally and partner of the pisco sector is the Chilean State, as incumbent of the Chilean pisco Designation of Origin; this is explained by the social, economic and historical relevance that this farming industry has in northern Chile and its potential contribution to the country’s image in the world. Other strategic partners that help the plan’s success are the external investors that can invest their financial capital and know-how of the global market for distilled spirits at every step of the value chain. Funding sources: the initiatives included in this plan depend on public and private investment. The projections for resource leveraging are based on the current offer of public bodies who support innovation, productivity development, exportation promotion and regional development. Within this area, an important role is played by the Ministry of Agriculture (MINAGRI) in its alliance with ProChile, through the Forestry Export Promotion Program and the Sector Brands Program. Also significant here are initiatives developed by MINAGRI with its many services through the Agrarian Innovation Foundation and its Regional Innovation Program arm (INDAP), its productivity chains program, SAG (Agriculture and Livestock Service) as a regulatory authority, and INIA (Agricultural Research Institute) as a driving force for investigation and technology transference. These being the main stake-holders. Important roles are also played by, among others, CORFO, in their support of Research and Development + Innovation and for the development of the sector’s new ventures, along with the Council for cleaner production and the Coquimbo and Atacama Regional Governments. Timetable and budget: The values and execution times of all the initiatives considered in this Plan correspond to rough estimates, based on reference cases and current cofinancing policies. The financial support that each of these directions requires within the total budget aligns with its priority level, proportionally, as determined by the sector.
45
Chart 10. Budget in thousand of pesos (source personel compilation)
2020 PRIORITIES STRATEGIC PLAN PISCO SECTOR
2014
2015
2016
2017
Awareness
Direction 1
Widen in USA
389.000
385.000
385.000
385.000
385.000
Direction 2
Competitive intelligence
20.000
20.000
7.000
7.000
7.000
Direction 3
Opening other markets
17.000
17.000
17.000
17.000
17.000
460.000
422.000
409.000
409.000
409.000
Public Subtotal
60%
255.600
253.600
245.400
245.400
245.400
Private Subtotal
40%
170.400
168.800
163.600
163.600
163.600
PROGRAM
Recognition
Direction 4
Promotion as emblematic drink Consumption experience locally
60.000
16.000
16.000
16.000
16.000
46.000
9.000
4.000
4.000
4.000
106.000
25.000
20.000
20.000
20.000
Direction 5 Subtotal
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
2013
Program
Subtotal
46
Year
Public Subtotal
80%
84.800
20.000
16.000
16.000
16.000
Private Subtotal
20%
21.200
5.000
4.000
4.000
4.000
PROGRAM
Support
Direction 6
Strengthening of Pisco D.O.
61.000
30.000
30.000
30.000
30.000
61.000
30.000
30.000
30.000
30.000
Subtotal Public Subtotal
80%
48.800
24.000
24.000
24.000
24.000
Private Subtotal
20%
12.200
6.000
6.000
6.000
6.000
PROGRAM
Profitability
Direction 7
Improvements in productive efficiencies
1.500
80.000
80.000
80.000
80.000
1.500
80.000
80.000
80.000
80.000
Subtotal Public Subtotal
80%
1.200
64.000
64.000
64.000
64.000
Private Subtotal
20%
300
16.000
16.000
16.000
16.000
594.500,0
557.00,00
539.000,0
539.000,0
539.000,0
Public Subtotal
390.400
361.200
349.400
349.400
349.400
Private Subtotal
204.100
195.800
189.600
189.600
189.600
TOTAL
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
2018
2019
2020
Total
%
Public Input
Private Input
75 385.000
385.000
385.000
3.084.000
93
1.850.400
740.160
7.000
7.000
7.000
82.000
2
49.200
19.680
17.000
17.000
17.000
136.000
4
81.600
32.640
409.000
409.000
409.000
3.302.000
100
1.981.200
792.480
245.400
245.400
245.400
1.981.200
163.600
163.600
163.600
1.320.800
16.000
16.000
16.000
172.000
69
137.600
34.400
4.000
4.000
4.000
79.000
31
63.200
15.800
20.000
20.000
20.000
251.000
100
200.800
50.200
16.000
16.000
16.000
200.801
4.000
4.000
4.000
50.200 6
30.000
30.000
30.000
271.000
100
216.800
54.200
30.000
30.000
30.000
271.000
100
216.800
54.200
24.000
24.000
24.000
216.800
6.000
6.000
6.000
54.200 13
80.000
80.000
80.000
561.500
100
449.200
112.300
80.000
80.000
80.000
561.500
100
449.200
112.300
64.000
64.000
64.000
449.200
16.000
16.000
16.000
112.300
539.000,0
539.000,0
539.000,0
4.385.500
100
2.848.000
1.537.500
349.400
349.400
349.400
2.848.000
189.600
189.600
189.600
1.537.500
47
48 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
MEMBERS
49
50 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
APP AG •
Agrícola e Inmobiliaria San Félix S.A.
•
Agroproductos Bauza y Cía. Ltda.
•
Sociedad Agroindustrial y Comercial El Rosario Ltda.
•
Cooperativa Control Pisquero Ltda.
•
Soc. Agroindustrial y Comercial Rio Elqui Ltda.
•
Pedro José Alvarez Muñoz
•
Aba Drinks &Spirits S.A.
•
Pisquera Tulahuén S.A.
•
Vitivinícola Fundo Los Nichos S.A.
•
Pisquera Chañaral de Carén
•
Cía. Pisquera de Chile S.A.
•
Perigée Spirits S.A.
•
Cooperativa Agrícola Pisquera de Elqui Limarí Ltda.
•
Viñedos Alamo Ltda.
•
Soc. Agrícola Hacienda Mal Paso y Cía. Ltda.
2020 Plan Team Fernando Herrera Henríquez, Gerente de la Asociación de Productores de Pisco A.G. Paulina Cerda Collins, Investigadora INIA Intihuasi, Directora PIT Nuestro Pisco Pedro Hernández Pérez, Asesor PIT Nuestro Pisco
Appreciations The Association of Pisco Producers would like to thank the contribution of the following organizations for their assistance in the development of this sector strategic plan: Foundation for Agriculture Innovation, FIA, (co-financing) The Agricultural Research Institute, INIA CRI Intihuasi (technical support) General Directorate of International Economic Relations, Prochile Coquimbo Region (participation) Regional Ministerial Secretary (participation)
Contact Manager Fernando Herrera Henríquez,
Asociación de Productores de Pisco AG Los Carrera 380, Of. 414, La Serena, Región de Coquimbo, Chile.
Fono: 56 51 226484
51
52 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Appendix: Program
ENHANCEMENT
53
54 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
PILLAR “Awareness� GUIDELINES 1, 2 AND 3 Value (thousands of pesos) D1. USA Market Development
2013
2014
2015
2016
2017
2018
2019
2020
Mil $ Total
Invitations to journalist, clients, sommeliers, mixiologist and other related opinion to know the identity of local pisco.
70
70
70
70
70
70
70
70
560
Annual Tasting Seminars is New York.
31
31
31
31
31
31
31
31
248
24
24
24
24
24
24
24
168
Sample and tasting (Chilean Pisco Tour). Program Paticipation Showrooms of ProChile for California. Miami and Chicago cities. Participation of specialized cocktail events (Smart Bar, Manhattan Cocktail, Classic Tales of Cocktail).
100
100
100
100
100
100
100
100
800
Specialized media publishment.
50
50
50
50
50
50
50
50
400
Social communication media development
47
24
24
24
24
24
24
24
212
Promotional material design and printing.
10
5
5
5
5
5
5
5
45
Samples shipments.
1
1
1
1
1
1
1
1
8
Interntational agences contract
80
80
80
80
80
80
80
80
640
TOTAL
389
385
385
385
385
385
385
385
3.081
D2 y 3. IC and opening other markets
2013
2014
2015
2016
2017
2018
2019
2020
Total
Market Intelligence System Development
20
20
7
7
7
7
7
7
82
ShowRoom Participation in two annual markets (**)
17
17
17
17
17
17
17
17
136
Participation in 5 annual markets (*)
65
65
65
65
65
65
65
65
520
TOTAL
102
102
89
89
89
89
89
89
738
55
Strategy
2013
2014
2015
2016
2017
2018
2019
2020
Total
D1. USA Market Development
389
385
385
385
385
385
385
385
3.081
D2 y 3. IC and opening other markets
102
102
89
89
89
89
89
89
738
TOTAL
491
487
474
474
474
474
474
474
3.819
Public Input (50%)
246
243
237
237
237
237
237
237
1.909
Calculation Details Tickets
Travel Allowance
N° Of Day
Total Viá
Cost Fe
Others
Total
N° Business
Annual Total
London International Wine and Spirit Fair.
3.300
380
5
1.900
5.000
2.040
10.200
3
30.600
Prowein International Trade Fair Wines ans Spirits
3.300
380
5
1.900
5.000
2.040
10.200
3
30.600
Vinexpo Le Salon International du vin et des spiritueux
3.300
380
5
1.900
5.000
2.040
10.200
3
30.600
HKTDC Hong Kong International Wine ans Spirit Fair
4.000
336
5
1.680
3.000
1.736
8.680
3
26.040
Expovinis Brazil International Wine & Spirits
1.500
300
5
1.500
3.000
1.200
6.000
3
18.000
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Market *
56
Total US $
135.840
Total Mill $
65
Tickets
Travel Allowance
N° Of Day
Total
Cost Fe.
Others
Total
Particpating Businesses
Annual Total
Mercado 1
3.500
380
5
1.900
700
1.220
6.100
3
18.300
Mercado 2
3.500
380
5
1.900
700
1.220
6.100
3
18.300
Total US$
36.600
Showrooms **
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
PILLAR “Recognition�: DIRECTRICES GUIDELINES 4 AND 5 Thousand Pesos Value Activity
2013
2014
2015
2016
2017
2018
2019
2020
Total
D4. Pisco as an Emblematics Chilean Drink Promotion Program Survey and design story innovative education program
20.000
20.000
Competition 1 World class Cocktail
8.000
8.000
Competition 2 Popular Recipes Bases on Pisco
8.000
8.000
Competition 3 World-Class Destilled spirits design
8.000
8.000
International Destilled spirits globalization Seminar
10.000
10.000
10.000
10.000 10.000
10.000 10.000
10.000
80.000
Pisco Annual Pisco Gala Dinner
6.000
6.000
6.000
6.000
6.000
6.000
6.000
48.000
Total
60.000
16.000
16.000
16.000 16.000
16.000 16.000
16.000
172.000
2013
2014
2015
2020
Total
Activity
2016
6.000
2017
2018
2019
D4. World-Class consumption Experience development Consumption experience generation
25.000
25.000
Digital Web Implementation and design
15.000
15.000
Digital Web Operation
1.000
4.000
Introduction for the implementation of the first experience
5.000
5.000
Total
46.000
9.000
4.000
4.000
4.000
4.000
4.000
4.000
29.000 10.000
4.000
4.000
4.000
4.000
4.000
4.000
79.000
57
Strategy
2013
2014
2015
2016
2017
2018
2019
2020
D3 Pisco as an Emblematic Chilean Drink Promotion Program
60.000
16.000
16.000
16.000
16.000
16.000
16.000 16.000 172.000
D4 World - Class consumption Exprience development
46.000
9.000
4.000
4.000
4.000
4.000
4.000
4.000
Total
79.000
Total
106.000
25.000
20.000
20.000
20.000
20.000
20.000 20.000 251.000
Public input (80%)
84.000
20.000
16.000
16.000
16.000
16.000
16.000 16.000 200.800
Private input (20%)
21.200
5.000
4.000
4.000
4.000
4.000
4.000
4.000
50.200
PilLar “SUPPORT”: GUIDELINE 6 Value (thousands of pesos) Activity
2013
2014
2015
2016
2017
2018
2019
2020
Total
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
D6. Chilean Pisco D.O. Council Procedures for its Constitution
1.000
Management Hiring
10.800
21.600
21.600
21.600
21.600
21.600
21.600
21.600
162.000
Office Rent
1.200
2.400
2.400
2.400
2.400
2.400
2.400
2.400
18.000
Operating Expenses
3.000
6.000
6.000
6.000
6.000
6.000
6.000
6.000
45.000
Council Design Consulting Services
45.000
Total
61.000
30.000
30.000
30.000
30.000
30.000
30.000
30.000
226.000
Public input (80%)
48.800
24.000
24.000
24.000
24.000
24.000
24.000
24.000
180.800
Private input (20%)
12.200
6.000
6.000
6.000
6.000
6.000
6.000
6.000
45.200
APENDIX 4 “PROFITABILITY”: GUIDELINE 7 Value (thousands of pesos) Activity
2013
2014
2015
2016
2017
2018
2019
2020
Total
D7 Production Eficiency Improvement Program D7 Formulation
1.500
Execution
1.500 80.000 80.000
80.000
80.000
80.000
80.000
80.000
560.000
Total
1.500
80.000 80.000
80.000
80.000
80.000
80.000
80.000
561.500
Public input (80%)
1..200 64.000 64.000
64.000
64.000
64.000
64.000
64.000
449.200
16.000
16.000
16.000
16.000
16.000
112.300
Private input (20%)
58
1.000
300
16.000 16.000
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Possible sources of finance Program
Guideline
Source
Tools -Sector Brand
Awareness
USA Market Development
Prochile
Competitive Intelligence
FIA CORFO
Opening of new market Emblematic Drink Pisco Promotion Recognition
SUPPORT PROFITABILITY
Pisco World-Class Consumption Experience Pisco Designation of Origin Council Improved Efficiency in the Productive Base
Exports Promotion Program (PAE) -Territorial innovation Prgram -Public Goods
Prochile
-Export Promotion Program (PAE)
FIA CORFO GORE
-Territorial Innovation Program -Cultural Innovation -Regional FIC
FIA
-Territorial Innovation Program
CORFO FIA GORE
-Broadcasting and technological transfer program
*Some of the current tools relevant to each initiative are pointed out, according to the 2011 – 2012 behavior of the co-financing sources, the best moment to apply in each case are: • Sector brand: an open window • Agriculture Exportation Promotion: last quarter • Territorial Innovation Program: not defined yet • Technology Transfer and Broadcasting Program: an open window • Innovation Culture: call and an open window • Regional Fund for Competitiveness: second trimester
59
60 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
61
62 STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
Contact List E-mail
Phone
•
Agrícola e Inmobiliaria San Félix S.A.
emulet@telum.cl (51) 610985
•
Sociedad Agroindustrial y Comercial El Rosario Ltda.
elpiscodeatacama.bb@gmail.com
•
Soc. Agroindustrial y Comercial Rio Elqui Ltda.
rioelqui@terra.cl (51) 419050
•
Aba Drinks &Spirits S.A.
altoway@gmail.com (02) 3563016
•
Vitivinícola Fundo Los Nichos S.A.
emr@altoelqui.cl (51) 472911
•
Cía. Pisquera de Chile S.A.
hovando@ccu.cl (51) 553818
•
Cooperativa Agrícola Pisquera de Elqui Limarí Ltda.
rsalinas@capel.cl (51) 554313
•
Sociedad Agrícola Hacienda Mal Paso y Cía. Ltda.
fprohens@prohenscc.cl (53) 661500
•
Agroproductos Bauza y Cía. Ltda.
rodrigo@bauza.cl (02) 2345380
•
Cooperativa Control Pisquero Ltda.
ivanmartinac@yahoo.com.mx
cel. 93021198
•
Pedro José Alvarez Muñoz
alvarezasesorias@gmail.com
cel. 87868991
•
Pisquera Tulahuén S.A.
jcamposano@piscowaqar.cl cel. 94325185
•
Pisquera Chañaral de Carén
artal17@gmail.com cel. 83426686
•
Perigée Spirits S.A.
bournet.cl@perigeespirits.com
•
Viñedos Alamo Ltda.
chalamo@123.cl cel. 98705495
(51) 612892
cel. 75875684
Notes
63
INTIHUASI
PROGRAMA DE INNOVACION TERRITORIAL
2013 - 2020
64
Dise帽o y diagramaci贸n
.cl
STRATEGIC PLAN PISCO SECTOR 2013 - 2020
STRATEGIC PLAN PISCO SECTOR