Governance and the wine commodity chain: Upstream and downstream strategies in New Zealand and Chilean wine firms

copy 2006 The Author doi 101111j1467-8373200600321xJournal compilation copy 2006 Victoria University of Wellington

Asia Pacific Viewpoint Vol 47 No 3 December 2006ISSN 1360-7456 pp381ndash395

Governance and the wine commodity chain Upstream and downstream strategies in New Zealand and Chilean

wine firms

Robert N Gwynne

School of Geography Earth and Environmental Sciences University of Birmingham Edgbaston Birmingham B15 2TT UKEmail rngwynnebhamacuk

Abstract

This paper explores the theme of governance as it relates to the evolution of globalcommodity chains in agro-industry and their incorporation of wine firms in two countries of thesemi-periphery New Zealand and Chile The paper goes on to specifically examine the upstreamand downstream relationships of selected New Zealand and Chilean wine firms to the widercommodity chains in which they are involved Brief case studies will analyse the downstream andupstream links to the commodity chain of key wine firms in both countries Such cases provideindicative evidence of the underlying processes of the commodity chain that are constantlychanging

Keywords

agro-industry

Chile

global commodity chains

New Zealand

wine

the need for farmers and farming enterprises tointroduce and develop new technologiesMeanwhile at the scale of the agro-industrialenterprise export growth strategies have toinclude producing specific products for partic-ular global markets Farming enterprises andagro-industrial firms are increasingly becomingpart of a global agri-food system which incor-porates the upstream suppliers to farmers farm-based production downstream manufactureand the global marketing and distribution of thefinal product It is in this context that globalcommodity chains become relevant as an ana-lytical framework to explore the nature of cross-border linkages between agro-industrial firms inglobal production and distribution systems offood supply (Gereffi 1994)

The question that this paper seeks to examineis how insertion into global commodity chainsaffects firm strategies in two different countriesof the semi-periphery New Zealand and ChileThere are different types of chain depending onthe way that the chain is coordinated In manyways global commodity chains can represent acontinuum from armrsquos-length market relation-ships through to complete vertical integrationof ownership and supply However within this

Introduction

Over the past two decades many countries ofthe semi-periphery have liberalised their tradingregimes and become more fully integrated intothe global economy Much of this trade is ori-ented towards the lsquotriadicrsquo or core economies ofNorth America Western Europe and Japan(Gwynne

et al

2003 112) This is particularlythe case for trade in agricultural and agro-industrial products In what has been termed asthe third food regime (Friedland 1994) con-sumers in the core economies have increasingpower in influencing change in agriculture andagro-industry through the intermediation ofnon-farm companies such as supermarketsMany authors (Le Heron 1993 Robinson2004 Murray 2005) have argued that the thirdfood regime is characterised by transnationalnon-farm firms linking production and con-sumption within an increasingly flexible andglobal network of food supply and distribution

One consequence is that farms are increas-ingly having to operate as enterprises ndash incountries of the semi-periphery in particularFurthermore there is an increased dependencyof farmers on transnational finance capital and

382

copy 2006 The AuthorJournal compilation copy 2006 Victoria University of Wellington

RN Gwynne

continuum global trade can be organisedthrough networks of legally independent firmsusing a variety of transactional relationships(Humphrey and Schmitz 2001 20) Humphreyand Schmitz (2002 1018) argue that there aretwo particularly important types of coordina-tion First there are networks that bring togetherpartners with complementary competenciesSecond they refer to a quasi-hierarchy lsquoinwhich there is asymmetry of competence andpower in favour of one partyrsquo which is often theglobal lead-firm based in one of the coreeconomies

In this way the issue of governance can beintroduced and the systems of control whichunderlie the global commodity chain Gover-nance in its widest sense can be defined as thenon-market coordination of economic activity(Gereffi

et al

2001 4) A chain without gover-nance would just be a series of market relationsbetween firms The theme of governance is par-ticularly important for firms in the semi-periph-ery to understand as they develop transactionalrelationships with powerful global buyers fromthe core economies It can have positive ele-ments for these firms as in the generation trans-fer and diffusion of knowledge which can leadto innovation in the firm and hence improve itsperformance Innovation is the key to develop-ing farming and agro-industry in countries of thesemi-periphery as it allows localised techno-economic capabilities to develop providing thevital ingredient for sustaining economic growth(Robinson 2004) However a quasi-hierarchi-cal relationship can provide negative elementsas with the steady worsening of contract termsbetween global buyers and local firms orbetween local firms and contract farmers

In terms of economic activities in countriesof the semi-periphery (such as New Zealandand Chile) agents of transnational capital candirectly or indirectly influence the organisationof local production logistics and marketing sys-tems Through the governance structures thatthey create they make decisions that haveimportant consequences for how linked firms inthese countries become inserted into globalmarkets and the range of activities that they canspecialise in

This paper aims to compare global valuechains governance and firm structures relatedto wine production in two countries of the semi-

periphery New Zealand and Chile Chile andNew Zealand have evolved new patterns ofregulation over the last two decades and theirmode of insertion into the world economy(based partially on export specialisation in agri-cultural agro-industrial and forestry products)can be seen as increasingly similar (McKennaand Murray 2002) The similarities (as well asthe differences) between these two countrieshave been detailed elsewhere (Murray andChallies 2004 Gwynne 2006) as a responseto moves by both governments for closer eco-nomic and strategic partnerships between thesetwo lsquoPacific rim playersrsquo More specifically thepaper will1 Explore the theme of governance as it relates

to the evolution of global commodity chainsin agro-industry and their incorporation offirms in countries of the semi-periphery Thiswill be based on an eclectic mix of literaturesfrom development studies and economicgeography

2 Examine the upstream and downstream rela-tionships of selected New Zealand wine firmsto the wider commodity chains in which theyare involved

3 Examine the upstream and downstream rela-tionships of selected Chilean wine firms tothe wider commodity chains in which theyare involved

These latter two sections will use brief casestudies derived from the authorrsquos interviewingof key wine firms in both New Zealand andChile between 2003 and 2005 The case studiesare all formatted on the basis of an analysis ofdownstream and upstream links to the com-modity chain following a brief description of thewinery firm under review In both New Zealandand Chile a large and medium-scale companyhave been selected Such cases provide indi-cative evidence of the underlying processes ofthe commodity chain which are constantlychanging

Governance structures and agro-industry in the semi-periphery

As Gereffi (1994 97) pointed out governancestructures in global chains are important toassess as authority and power relationshipslsquodetermine how financial material and humanresources are allocated and flow within a

Governance and the wine commodity chain

copy 2006 The Author

383

Journal compilation copy 2006 Victoria University of Wellington

chainrsquo Subsequently Gereffi (1999 41) arguedthat particular attention must be given to therole of powerful lead firms that lsquoundertake thefunctional integration and coordination of inter-nationally dispersed activitiesrsquo As previouslynoted chains can be conceptualised as stretch-ing from market-oriented relationships to morecontrolled forms of vertical coordination

Vertical coordination can take a variety offorms One system of governance is verticalintegration a very direct form of internationalcoordination In this system of governance theglobal firm attempts to control as many aspectsas possible of the agro-commodity chain Thisincludes land ownership production distribu-tion and commercialisation of the product Withreference to Gereffirsquos (1994) dichotomous divi-sion of chains the driver in this chain is theproducer rather than the buyer Central Ameri-can and Ecuadorean banana plantationsowned by such fruit transnationals as Chiquitaprovide an example Nevertheless buyers (suchas North American or UK supermarkets) stillhave considerable power in negotiating suchkey issues as price and quality

At the other extreme of the governance con-tinuum is a system more closely related to theoperations of markets Vertical coordinationhere occurs in lsquoarmrsquos-lengthrsquo relations and useof spot markets ndash at the local (farm-gate mar-ket) national and global scales It is difficult toascertain here any clear rules as to producer orbuyer dominance One issue is that of thedemand for the agro-industrial or agriculturalproduct at a point in time In periods of rapidgrowth in demand for a product with possibleshortages occurring producers will have con-siderable negotiating power over price How-ever once the global supply and demand of aproduct are broadly matched it could beargued that a buyer-driven commodity chainprovides a more realistic framework This isbecause it is normally the powerful supermarketbuyers that have the greater power within thequasi-hierarchical network in setting the priceand quality standards (Dolan and Humphrey2000)

Within the continuum of governance thereare a number of other governance systems thatcan be distinguished often with coordinationachieved via contractual arrangements betweenproducing and buying firms Contract farming

for example refers to an arrangement in whichthe buying firm signs contracts with individualproducers normally before the agricultural sea-son begins These contracts specify differentissues including quantity prices qualityvarieties and time of delivery the system ofcoordination generally involves some kind ofassistance from the buying firm to the produc-ers as with the supply of credit and advice overthe application of new technologies Accordingto Key and Runsten (1999 382) contract farm-ing can be explained as lsquoan institutionalresponse to imperfections in markets for creditinsurance information factors of productionand raw productrsquo However the lsquoprofitablersquobuying firm positions itself in the chain segmentwhere it can create andor appropriate highreturns Meanwhile producers are constrainedby the terms set by the buying firm in the con-tracts that they sign In this way contract farm-ing systems within a global commodity chainoften provide a clear example of a quasi-hierar-chical system in which there is asymmetry ofpower in favour of the buying firm (Humphreyand Schmitz 2002 1018)

Firms within the global commodity chainhave to respond to what are termed lsquouser-drivenrsquo quality conventions Gibbon (2001 66)argues that these can take a variety of forms butcan be broadly divided into lsquodomesticrsquo (identi-fication by region or estate of origin) and lsquocivicrsquo(identification by the lsquofairnessrsquo of the transac-tion) conventions Furthermore these conven-tions are increasingly associated with buyersdemanding quality monitoring through proce-dures that involve process certification ratherthan product testing Consumers thus act as vitalagents in the commodity chain as firms gearedto consumers such as supermarkets set up pro-cedures to monitor welfare environmentalimpacts labour markets and other issues withinthe producing localities of the commoditychain

The emergence of more complex forms ofvertical coordination regulated through user-driven quality conventions provide both threatsand opportunities for export-oriented produc-ers The more successful producers identify theopportunities proceed to upgrade their activi-ties and develop more differentiated productsThis may be applied to the commodity understudy here namely wine

384


RN Gwynne

Being incorporated into a global commoditychain can provide some distinctive benefits forproducers (Humphrey and Schmitz 2001) Atleast two stand out First there is the issue ofmarket access For example Chilean and NewZealand wine grape growers and wineries needchains to effectively market their products incore economy markets ndash whether this bethrough supermarkets specialist wine ware-houses and retailers or mail-order firms Thedifferentiation of product may be important formarketing through these institutions New grapevarieties (such as the Carmenere in Chile) ornew wine technologies adapted to local condi-tions can produce distinctive new products forinternational consumers

Second chains provide a track to upgradingskills and production capabilities particularlyin terms of technology and moving into marketniches The demands for upgrading are made bythe global buyers even if they themselves arenot linked to the source of upgrading technolo-gies In the wine sector the structure surround-ing technological upgrading is different to thegovernance structures of supply demand andmarketing For example both New Zealand andChilean wineries have been strongly affected byAustralian technological innovation in wineproduction ndash but much less so in ownershippatterns and supply chains In New ZealandAustralian wine companies (such as Hardy)have owned vineyards and wineries Mean-while in Chile Australian-inspired technologi-cal innovation has mainly occurred through therole of Australian wine consultants (Duijker1999)

Giuliani

et al

(2005 552) define upgradingas innovating to increase value added and thishas particular resonance in wine sectors of theNew World Process upgrading can involveinvestment in new winery technologies (stain-less steel tanks able to rigorously control thetemperatures of the fermentation process beinga key example) improvements in communica-tion between vineyard management and wine-makers and transforming the inputs (winegrapes) more effectively into what internationalmarkets require Meanwhile product upgrad-ing refers to moving into more sophisticatedproduct lines in terms of increased valueadded such as the strategies of wineries tosteadily improve their portfolio of wines ndash for

example from blends to varietal to premiumand super-premium in the terminology of theinternational markets

Chains can therefore provide the context forupgrading but firms nevertheless remain cen-tral to this process Lewis

et al

(2002 439) dis-cuss the lsquodouble cognitive projectrsquo of the firmwithin networks On the one hand there is theexternal knowledge of products and markets onthe other the internal knowledge of costs tech-niques and organisations Lewis

et al

(2002439) links this to firms engaging in collectivelearning Keeble

et al

(1999) argues that thisdevelops from strategies deployed by firms toreduce uncertainty associated with rapid tech-nological change Thus in the wine sector therecan be both elements of collaboration and com-petition between firms Collaboration can takethe form of understanding new techniques ofvinestock management and vinification pro-cesses and developing local supply chains forinputs Meanwhile competition can take theform of competing in terms of product evolution(the acquisition of distinctive varietal wine char-acteristics) and market access (through negotia-tions along the chain with different agents incore economy markets)

Commodity chains and wine firms in New Zealand

Background

New Zealand has become more export-orientedsince the mid-1980s and more market-friendlyfor both national and international firms Interms of agricultural and agro-industrial produc-tion this became linked to the ending of NewZealandrsquos distinctive model of government mar-keting boards coordinating and strongly regulat-ing production and facilitating technologicalchange Most of these marketing boards havebeen privatized in one form or another How-ever the future of these privatised firms forthe success of New Zealandrsquos agro-industry ina global market place has been questionedHayward

et al

(2002) argue that contemporaryagricultural industries and firms (in HawkersquosBay) do not demonstrate the forms of investmentand sustained upgrading that Gereffi (1999)argues that lsquoembeddedrsquo manufacturing indus-tries need to achieve in order to expand their



385


trade networks internationally Does the winesector provide different perspectives

The New Zealand wine industry during the1980s was relatively small (at least compared tothat of Chile) partly because of New Zealandrsquossmall population (around three million) Fur-thermore one should note the cultural factorthat beer rather than wine constituted the alco-holic product of major domestic consumptionNevertheless in the 1970s the Wine Institutewas created and a Wine Industry DevelopmentPlan established in 1978 Such governmentintervention in the wine industry initiated tech-nological improvements in the sector whichhave continued despite the regulatory changeto more market-oriented conditions

In addition protectionism was linked to therise in foreign investment in the wine sector inNew Zealand with the transnational corpora-tion Seagram investing in Montana in the 1970sin order to gain access to the New Zealandmarket (Barker

et al

2001 209) There was asubsequent shift in the early 1980s to a moreoutward-oriented political economy Howeverinternal market liberalisation for wine (such asallowing supermarkets and other outlets to sellwine) was not completed until 1989 when mostof the controls imposed by the liquor licensinglaws were removed Quality wine exports ofNew Zealand have grown steadily since then(see Fig 1)

Case studies

Wine industry development and export growthhas been influenced by the strategies and devel-

opment paths of the key enterprises and theirrelationships with wider commodity chainsBecause of the tight control on wine sales inNew Zealand the wine industry was dominatedby the large brewery firms in the 1970s and1980s This has meant a strong concentration ofproduction and export in the hands of a smallnumber of firms At this point it is worth exam-ining the commodity chain relationships of twoof the wine firms interviewed by the authorbetween 2003 and 2005 The empirical materialhere is only indicative of wider processes ofcommodity chain relationships One of thefirms is the key export firm of Montana whereasthe second firm is a more recent entrant WitherHills but with a strong growth trajectory basedon technological upgrading and product differ-entiation in key export markets

Montana

The original Montana winery wasfounded in the 1960s The virtual duopoly oftwo large breweries lsquogained significant controlover the wine industry through the series ofacquisitions and mergers that led to the consol-idation of five of the six leading companies

circa

1984 into Montana (Barker

et al

2001 210)Montana however had had the investmentcapital to develop new wine regions and newgrape varieties Its decision to develop the Sau-vignon Blanc grape variety in a region with noprevious experience of growing wine grapesMarlborough in 1973 became a pivotal one inthe subsequent evolution of New Zealand as amajor wine exporter Since the 1970s it hasbeen New Zealandrsquos largest wine producingcompany particularly after 2000 when itbought up New Zealandrsquos third largest wineryCorbans In recent years it has been responsiblefor around 50 of New Zealand exports It hashowever been controlled by a series of corpo-rate interests in 2001 it was sold to AlliedDomecq and then became part of the PernodRicard group in 2005

Through Montanarsquos corporate links the com-pany has had good access to the key markets ofUSA and UK where it sells to a wide range ofsupermarkets and stockists in addition it hasachieved very competitive deals in terms ofshipping Montana owns or is supplied by vine-yards in New Zealandrsquos four main wine-growingareas ndash Marlborough Hawkes Bay Gisborneand North Canterbury (see Fig 2) The upstream

Figure 1

Quality wine exports from Chile and New Zealand 1988ndash2003 (US$ million)

The quality wine category refers to exports of bottled wineand does not include bulk exports of cheap wine

Sources

Chilean central bank New Zealandwinegrowers

2003200220012000199919981997199619951994199319921991199019891988

800

700

600

500

400

mill

ion

300

200

100

0

ChileNew Zealand

386


RN Gwynne

supply strategy is presently a mix between ver-tical integration and contract farming Howeverthe long-term strategy is to increase verticalcontrol (through direct vineyard ownership) anddecrease the proportion of grapes purchased bycontract from farmers Montana directly ownedabout 3000 hectares of vineyards in 2003 andthis supplied the wineries with the input for themedium- to top-quality wines (D Van Den Bergpers interview 10 July 2003) Montana relieson supply from external grape growers for thelower end of the market this range of external

suppliers controlled land of another 3000 hect-ares in 2003 These are serviced by viticultureservice managers who are instructed to rewardquality as opposed to quantity Montana has acautious but consistent policy of planting 150hectares of new vineyards per year with 90of plantings being high-quality Sauvignon Blancvines in the Marlborough area In this way thenumber of contract farmers will graduallydecline Those that remain need to producequality wine grapes andor be located in theMarlborough region

Figure 2

New Zealandrsquos main wine regions

Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles

0 50 100 150 Kilometres



387


Wither Hills

Brent Marriss a former wine-maker with Oyster Bay started the companyand the Wither Hills brand in 1994 The aimwas to produce wine at the top end of themarket and production has steadily increasedfrom 500 cases in 1995 to around 200 000cases in 2005 In 1999 Brentrsquos father joined thecompany which doubled the vineyard size(before that he had been a contract farmer forOyster Bay and Montana) In 2002 the com-pany was sold to the large Australian breweryand wine corporation Lion Nathan for aroundUS$50 million (B Marriss pers interview 15April 2005) Lion Nathan requested Brent Mar-riss to stay on as manager and winemaker Thetarget is to reach 300 000 cases per annum by2007 and then to stabilise production

Wither Hills is only supplied by wine grapesfrom the Marlborough region and has a strategyof maintaining strict quality control on winegrape supply In 2005 the Wither Hills wineryrelied for supply on 1000 acres of vineyards(some recently planted) but only 100 acresbelonged to contract growers This allows thecompany to maintain strong quality control onproduction in its three main grape varieties ndashSauvignon Blanc Chardonnay and Pinot NoirIn terms of its international marketing WitherHills has adopted the strategy of carefully tar-geting the best wine supermarkets and winestockists in each country and developing adiversified portfolio of buyers Hence in the UKin 2005 Wither Hills was dealing with Odd-bins Majestic Waitrose Marks and Spencersand another five smaller outlets FurthermoreWither Hills has developed a different brandname for many of these outlets ndash Fairleigh Estatefor Majestic and Shepherdrsquos Ridge for Marksand Spencers for example In this way WitherHills has not been dominated by any one globalbuyer and because of its policy of differentbrands for different outlets has managed todevelop some flexibility in supplying its inter-national markets

Commodity chain processes

Thus the New Zealand wine industry has devel-oped a range of interesting transnational corpo-rate structures not only in the large-scale firms(Montana ndash now owned by one of the two glo-bal drinks giants) but also in relatively medium-

sized companies (Wither Hills ndash now owned bya large Australian brewery company) The tran-snational character of the New Zealand wineindustry has further ramifications In 2002 Con-stellation Brands of the USA purchased thesecond largest wine-producing group in NewZealand Nobilo responsible for about 20 ofexports Meanwhile an Australian propertycompany Challenger Beston owned nearly 500hectares of planted vineyards in the Marlbor-ough and Hawkes Bay regions in 2004 andleased the land (via renewable 10-year con-tracts) to a New Zealand wine company Dele-gatrsquos Delegatrsquos was able to rapidly expandproduction (for example of some of its keybrands such as Oyster Bay) as a result of thisstrategic decision to increase planted vineyardsthrough land leasing and has now become thefourth largest winery in New Zealand

Around two-thirds of New Zealand wine pro-duction and exports (by quantity) has thus cometo be dominated by two large transnationals(presently Pernod Ricard from France and Con-stellation Brands of the USA) The links to globalmarkets provided by these transnationals hasundoubtedly helped in boosting export salesWhat has been the upstream supply strategy ofthese firms It is presently still a mix betweenvertical integration and contract farming A sig-nificant amount of grapes is still purchased bycontract from farm enterprises outside the glo-bal drinks companies However these farmersare likely to be facing a long-term and verygradual squeeze The major corporations havea slow but steady strategy of building up theirvineyards and slowly reducing their reliance onoutside farmers Thus there is evidence thatwine firms are demonstrating the forms ofinvestment and sustained upgrading that manu-facturing industries need to achieve in order toexpand their trade networks internationally

These corporate links complicate the natureof the commodity chain framework The major-ity of New Zealandrsquos 10 largest wine companiesare now controlled by transnational capitalMost focus on the premium and top-end ofinternational market supply Most rely for sup-ply on a significant number of contract growersAlthough this has not been a problem during aperiod of rapid export expansion and high prof-itability as has been the case since 1990 suchan insertion into corporate frameworks where

388


RN Gwynne

key strategic decisions are taken in Paris or othercore economy cities may make the sector morevulnerable to any crisis in global markets in thefuture

Commodity chains and wine firms in Chile

Background

The local structuring of export-oriented activi-ties has been partly framed by the relationshipsof firms to commodity chains that function atthe global level (Gwynne 1999 2003) In par-ticular exports have risen in agro-industrywhere firms have had to adapt to the demandsfor quality from foreign clients and to undergoan intensive learning process involving bothinnovation and technological change (Pietro-belli 1998 Perez-Aleman 2000) Agro-industrial firms have had greater freedom tooperate in terms of contracts and land andlabour markets than in most competitor coun-tries this includes well-defined property rightsas in New Zealand The lack of regulatory con-trol to enter the Chilean agro-industrial sectorhas given firms the opportunity to integrateupstream and purchase land from farmers orother companies in order to extend their verticalintegration in the sector The Chilean modelthus provides a clear case of the neoliberalmodel at work in agriculture and agro-industryMeanwhile the market-oriented nature of theChilean regulatory system has meant that for-eign investors have had significant freedom tooperate in Chile However relatively little for-eign investment has been forthcoming withmost of the key wine firms operating withChilean capital and Chilean managementThere are exceptions such as the Spanish com-pany Miguel Torres which began to invest in1979 with a strategy that relied on purchasingsmall wineries gradually expanding productionand improving quality

The democratic transition which started in1990 with the elected Patricio Aylwin comingto power had a favourable impact on wineexports (see Fig 1) as consumer groups in coreeconomies stopped boycotting Chilean prod-ucts in supermarkets and other retail outlets Thedemocratic transition of the 1990s also coin-cided with a technological revolution in a largenumber of wineries ndash strongly influenced by

Australian vinification techniques and theimport of European machinery and equipmentBetween 1992 and 1997 Chile was the biggestimporter of European wine equipment in theworld (Duijker 1999) The centre-left govern-ment of Frei subsequently introduced a modestform of regulation of the wine sector with theWine Law of 1995 One reason behind thislegislation was to facilitate access to the crucialmarket of the EU The legislation set up specifi-cations for quality control and decentralised itscontrol and monitoring to regions It establishedground rules for quality and grape varieties for13 sub-regions in terms of lsquo

denominacioacuten deorigen

rsquo ndash based loosely on the French system oflsquo

appellations controleacutees

rsquo Figure 3 demonstratesthe main eight valley regions of the AconcaguaCentral Valley and Bio-Bio regions

Case studies

In contrast to New Zealand Chile has a longhistory of enterprises being involved in the winesector Chilersquos largest wine company Concha yToro was originally set up in 1883 and until theearly 1990s relied on the Chilean market for thebulk of its sales Table 1 shows that of the 16largest wine-exporting companies in Chile in2004 10 were set up in the last half of thenineteenth century However since 1990 notonly these companies but also a wide range ofnew enterprises in Chile have become involvedin actively seeking out export markets anddeveloping downstream marketing links withdistributors supermarkets specialist winechains wine retailers and other actors in thecore economies Of the largest 16 wine-export-ing enterprises in Chile none are fully ownedby foreign investors and only one (Los Vascos)relied partly on foreign ownership (Los Vascosis half-owned by the French Rothschild group)These largest 16 enterprises account for virtu-ally 60 of Chilersquos wine exports by value Theyrange from wine producers known for theirmass brands (such as San Pedro with GatoNegro and an export price per litre of US$167)to wine producers that have received interna-tional renown for the quality of their wines(such as Montes with an export price per litreof US$535) ndash see Table 1 Thus in contrast tothe New Zealand industry there is little concen-tration of ownership The Concha y Toro com-



389


pany the key player in the Chilean wineindustry may also own Cono Sur and SantaEmiliana in the top 16 but together they stillonly accounted for 23 of wine exports in2004 As in the New Zealand case it is nowworth examining the commodity chain relation-ships of two of the wine firms interviewed bythe author during 2005 Again the empiricalmaterial here is only indicative of wider pro-cesses of commodity chain relationships Bothare relatively new firms but both have clearstrategic objectives in terms of inserting them-selves within the global commodity chain forwine

Cono Sur

Cono Sur was created by Concha yToro (Chilersquos largest wine corporation) in 1993in order to specifically seek out export markets(apart from the USA reserved for the Concha yToro parent group) Cono Sur started its exportstrategy by supplying supermarkets with theirown label brands but has subsequently devel-oped two significant brands ndash Cono Sur as thepremium and Isla Negra as the volume brandCono Sur has been aggressive in developingmarkets outside the USA Exports rose to 16million cases in 2004 at an average of US$20per case total export value was around US$33million

Figure 3

Chilersquos main wine regions

Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River

Borders of wineregions

Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne

Cono Sur is supplied by around 900 hectaresof vineyards which are spread geographicallythrough 10 valleys ndash from Elqui in the north toBio-Bio in the south although the ColchaguaValley (where the winery is located) providesaround 40 of the wine grapes used Theorganisational nature of the upstream chain canbe seen as having three pillars in 2005 ndash one-third of wine grapes comes from land owned byCono Sur another third from land controlled byholding companies within the wider Concha yToro business group and the final third fromexternal contract growers (C Padilla pers inter-view 6 September 2005) The strategy is tosteadily increase wine grape supply from ConoSurrsquos own properties where close control onquality of a wide range of wine grapes (pro-duced from a variety of cool and hot terroirs indifferent regions) can be achieved Monthlymeetings between the chief enologist and viti-culture manager with the respective technicaladvisers seek to improve the important connec-tion between the quality of wine grape and thequality of wine (at different price point levels)The source of external knowledge transfer intothe Cono Sur company comes mainly fromother companies within the Concha y Toro par-ent group

Downstream links are mainly organisedthrough the international marketing of the threemain export categories ndash production of own-label brands for supermarkets varietal wine

(under the Isla Negra brand) and premium wine(under that of Cono Sur) Cono Sur started offin the mid-1990s as specialising in providingwine for own-label brands in supermarkets incore economies mainly in the UK (S Downespers interview 12 August 2005) Howeverfrom the start a process of upgrading was set inplace in order to improve wine quality and pro-duce more varietal and premium-level wine By2004 (10 years after the first exports) the pro-cess of upgrading can be seen in the distributionof international sales figures only 100 000cases of own label-brand wine mainly for UKsupermarkets (6 by volume) 800 000 cases ofvarietal-level wine mainly under the Isla Negrabrand (50 by volume) and 700 000 cases ofpremium-level wine under the Cono Sur brand(44 by volume) In its downstream links withthe crucial UK market (receiving 55 of exportsales in 2004) Cono Sur deals with most majorsupermarkets and specialised retail chains buthas gradually left the low-profit area of own-label branding in order to rely increasingly onits own two distinctive brands

Montgras

The company was set up in 1992and its winery and vineyards (until 2004) weresolely concentrated in the Colchagua ValleyDespite being a much smaller company and notpart of a wider group it has had a downstreaminternational marketing strategy similar to thatof Cono Sur (see below) Since 2004 it has

Table 1

Chilersquos sixteen major wine companies by value of exports 2004

Wine company Year company started Export value (US$ million) Export volume (million litres) Price per litre

Concha y Toro 1883 1465 637 230San Pedro 1865 664 398 167Santa Rita 1880 461 118 390Cono Sur 1993 327 159 205Errazuriz 1870 216 76 286Santa Helena 1865 212 120 177Undurraga 1885 207 72 287Santa Carolina 1875 196 87 226Tarapaca 1874 179 60 295Valdivieso 1879 175 62 282Montes 1988 168 31 535Carmen 1850 167 44 377Santa Emiliana 1986 150 77 196Los Vascos 1975 147 34 429Caliterra 1989 139 48 287Montgras 1992 132 50 265

Source

Wines of Chile database Duijker (1999)



391


purchased a winery with vineyards in the MaipoValley (Linderos) and 500 hectares of land forplanting in the Leyda Valley It is a medium-sized export-oriented company with a clearvision of its position within a global commoditychain

Montgras provides an example of a firm thathas had a clear and changing set of strategies interms of downstream links with internationalmarkets Indeed it could be argued that it hashad at least three distinctive strategies in termsof supplying global commodity chains (PMiddleton pers interview 25 August 2005)1 Between 1992 and 1998 the emphasis was

on supplying wine for own-label brands forlarge supermarket chains in core economiesFor example it developed close links withUK supermarkets and negotiated own-labelcontracts with Tesco Sainsburys andWaitrose

2 Between 1998 and end-2004 the strategyfocus was to concentrate on massive own-brand (Montgras) promotions in order toestablish the brand in the marketplace Itdeveloped an innovative and potentiallyhigh-risk strategy with one UK supermarketin particular Sainsburyrsquos The strategy was tobecome involved in Sainsburyrsquos lsquokillerrsquoChristmas promotions in which prices arereported to be halved on the supermarketshelf Montgras engaged in four such promo-tions from 2001 to 2004 Merlot for exam-ple was reduced from pound599 to pound299 inSainsburyrsquos outlets in the period leading upto Christmas 2004 Given the small capacityof the Montgras winery at this time the rateof sales was five times that of bottling ndash30 000 bottles per hour throughout the Sains-buryrsquos chain Contracts between Montgrasand Sainsburyrsquos had to be signed sevenmonths in advance in May with the last con-tainer leaving Chile in September to preparefor the NovemberDecember promotions inthe UK During 2004 this Sainsburyrsquos promo-tion was alone responsible for nearly 50 ofsales ndash 250 000 cases (divided equallybetween Merlot and Chardonnay) out of atotal production figure of 600 000 cases

3 By early 2005 the decision was taken not tocontinue with own-brand promotions and toconcentrate on producing more premium-level wines As a result production was

due to decline in 2005 to 400 000 cases ndashbut with higher profit levels anticipated percase after the ending of the Sainsburyrsquospromotions

The upstream links of Montgras have alsochanged according to these three distinctivestrategic periods In the first two stages Mont-gras relied heavily on wine grapes purchasedfrom contract growers (particularly white winegrapes such as Chardonnay) and purchasingwine from smaller and non-export orientedwine producers In the third phase purchase ofwine from outside producers has declined con-siderably and only about 30 of grapes fer-mented in the Montgras winery come fromcontract growers ndash these are mainly grape pro-ducers for white wine (Chardonnay and Sau-vignon Blanc) from the cooler coastal valleyregion of Casablanca ndash away from Montgrasrsquobase in the Colchagua Valley (S Margozzinipers interview 25 August 2005) In their thirdstrategic phase Montgras have purchased 800hectares of land for planting ndash 500 hectares inthe cooler coastal region of Leyda where vine-stock for white wine production will be concen-trated In this way Montgras will in the futurebecome vertically integrated in terms of grapesupply with all wine grapes coming from theirown properties The advantage for the companyis that it can maximise quality control and forgethe close links between winemaker and vine-yard manager necessary for producing qualitywines


The Chilean wine industry has developed a var-ied firm structure and one in which foreigninvestment has had little significance in termsof ownership Chile has had a long history ofbeing a wine-drinking country and formerlywine production incorporated large numbers offirms that produced for the domestic marketWith the shift to higher-quality and moreexport-oriented production the required invest-ments were taken on by a large number of thesecompanies but a significant number of newenterprises also became involved intent onadopting strategies which required a sustainedprocess of technological upgrading Overall itis important to emphasise that the great majorityof Chilean wine production is still in the hands

392


RN Gwynne

of domestic firms with foreign-owned firms sofar restricted to owning medium-sized wineriesand exporting relatively modest amounts

In terms of upstream supply the Chilean wineindustry is steadily moving towards more verti-cal integration Cono Sur Montgras and a num-ber of other wineries intent on upgrading theirproduction have emphasised strategies of large-scale planting on their own land in order tobetter control quality As a result they are rap-idly reducing outsourcing links to growers ofwine grapes Wineries are therefore becomingmore powerful in the governance of local com-modity chains Linkages between export-oriented wineries and local farmers are beingreduced and even severed In this way the mul-tipliers from the expansion of export-orientedwine production may not be reaching down tothe local farmers who had previously special-ised in wine grape production albeit of oftenlow quality In March 2006 wine grape growerstook to the streets in protest at the low grapeprices being offered by the countryrsquos big winer-ies (Richards 2006) Wineries have been reduc-ing prices for bought-in grapes (particularlythose of average to low quality) partly becauseof the increases in their own planting and partlybecause the industryrsquos earnings in foreign cur-rency have been reduced by the high strengthof the Chilean peso hence squeezing profitsThus there is an increasing concentration ofland in spaces specialising in wine productionfor export Vineyards and other land are pur-chased by export-oriented wineries at the sametime as small and medium-sized farmers spe-cialising in wine grape production (but withoutaccess to wineries) sell up Land markets arethus changing in similar ways to that experi-enced in table grape and apple-growing regions(Carter

et al

1996 Murray 1997 2002)What is the downstream relationship of win-

eries to the global commodity chain in terms ofgovernance The key negotiating step in theChilean wine commodity chain comes betweenthe wineries and the agents for internationalmarkets normally based in core economiesThese agents are represented by supermarketsdistributors specialist wine retailers ware-houses and mail-order firms (Fattorini 1997)This is crucially different to the Chilean fruitsector where the key negotiating phase existsbetween transnational fruit companies and

local table grape producers (Murray 19972002 Gwynne 2003) giving the fruit trans-national corporations (TNCs) significant marketpower within the chain The location of the keynegotiating phase higher up the chain in thecase of Chilean wine means that the varioustypes of wine producers in Chile seem to havemore negotiating power within the chain

Overall conclusions

Global commodity chain research explores net-works that link actors in different places andthrough which flow ideas people products andmoney These flows contribute to the ongoingstructures of places In the context of NewZealandrsquos Marlborough region (and the mainservice town of Blenheim) and Chilersquos Col-chagua Valley region (and the main town ofSanta Cruz) insertion into global commoditychains of wine has radically changed the geog-raphies of enterprise in these localities

More specifically however this paper hasfocused on indicating commodity chain pro-cesses from interviews with managing directorswinemakers and commercial directors of keywine enterprises in these localities of the NewWorld The commodity chain approach may beproblematic but it does allow one to study theunequal power relations between firms and theconstraints these place on the way firms dobusiness ndash empowering some and disempower-ing others (Taylor 2000) Interviews with keyagents within export-oriented wine enterprisesdoes permit an analysis of how the wider com-modity chain is seen from their perspective ndasheffectively in the middle of a commodity chainbetween suppliers (wine grape farmers) andagents of international markets

To use the broad framework set by Gereffi(1994) one could ask the question as towhether the wine commodity chain is producer-or buyer-driven Those interviewed in thecase studies (as well as those interviewedmore widely) emphasised that sales trends ininternational markets strongly guided produc-tion trends In the Cono Sur winery a crucialmeeting is held every year in July between theinternational marketing director and the wine-makers and estate managers Discussions arenot just about the annual balance between pro-duction (two to four months after harvest) and



393


supply but also about the medium-trends in thekey global markets in terms of popular winegrape varieties and growing market segmentsIn this way it can be seen that the wine com-modity chain is driven by consumers and thesupermarkets (and retail outlets) that servicethem

This links into Gereffirsquos (1999 53) concept oforganisational succession a process by whichmanufacturers start producing for buyers cater-ing to the low end of the market and thenmove up to buyers targeting more sophisticatedmarket segments This definition was appropri-ate for the international clothing industry butthe concept can be applied to the wine sectorwith a little adaptation For export-orientedwine firms from New Zealand and Chileorganisational succession can be achieved notonly through changing buyers but also bydeveloping wines for higher quality marketsegments for the same buyer moving up fromvarietal to premium and to super-premium forexample The case of Montgras shows howrapid this process of organisational successioncan be as the company moved through threestages (supplying supermarket own-labelbrands relying on own brand varietal devel-oping a significant own brand premium) in amatter of a decade

Nevertheless the wine commodity chain isnot buyer-driven in the same way as the clothingindustry (Gereffi

et al

2002) with retail clothingchains specifying detailed designs Rather theemphasis is on how consumers in different mar-kets are changing the world demand for wineOne complicating factor here is the role of winewriters (such as Robert Parker in the USA orJancis Robinson in the UK) (Gade 2004) Suchwriters can be pivotal in lsquocreatingrsquo relationshipsof knowledge between supermarkets and con-sumers and have the function of making coreeconomy consumers aware (or not) of winesfrom lsquonewrsquo producers in such countries as Chileand New Zealand This may be one reason whythe international wine commodity chain couldbe seen as a benign escalator unlike the foot-wear sector (Schmitz and Knorringa 2000) Itcould be argued that in the wine chain core-economy supermarkets are the lead forms butthat they facilitate knowledge transfer ratherthan obstruct it Hence power relations withinthe global wine commodity chain are different

Thus it is clear that the wine commoditychain is not characterised by vertically inte-grated transnational production systems asGereffi (1994) has argued in terms of the worldautomobile industry Although transnationalinvestors have been significant in the NewZealand industry key players still have consid-erable room for manoeuvre in terms of devel-oping downstream networks of distribution andinternational marketing Meanwhile the Chil-ean industry is still dominated by national enter-prises Nevertheless Chilean wine companieshave managed to forge downstream relation-ships with international marketing agents thathave allowed the wineries to upgrade and addfurther value to their production and exports Itis worth emphasising that a significant upgrad-ing of both vineyards and wineries has been afeature of both New Zealand and Chilean wineenterprises as they have inserted themselvesinto global commodity chains

However as wine is in effect an agro-industryrelationships between firms and farmers are cru-cial to an understanding of the commodity chain(Gwynne 2004) In terms of upstream supplyboth the New Zealand and Chilean wine indus-tries are moving towards more vertical integra-tion Wineries interested in upgrading theirwines realise that they must also upgrade andclosely monitor the quality of vineyards This isfacilitated if they own the vineyards and hencethe strategies of large-scale planting thatcharacterise most Chilean and New Zealandwineries As a result the pattern in both NewZealand and Chile is of proportionally lowerlevels of contract farming to grape growersWineries are therefore becoming more powerfulin the governance of local commodity chainsand non-market forms of collaboration withcontract farmers Prices for wine grapes in NewZealand and Chile have either stabilised ordeclined Some grape producers in special

ter-roirs

have bargaining power (as with Chardon-nay vineyard owners in Chilersquos Casablancavalley) and can stipulate high prices at contractsigning or on the spot market however thesetend to be the exceptions in terms of negotiatingpower In this way export growth in the wineryis not necessarily reaching down to local pro-ducers who formerly supplied those wineriesGrape producers are suffering from what couldbe termed exclusionary collaboration ndash being

394


RN Gwynne

increasingly excluded from the supply chain onthe grounds of the previouspresent record ofwine grape quality Thus the quasi-hierarchicalrelationships examined in the introductionwould appear to be occurring more in terms ofthe relationship between winery firm and localgrape growers than between global buyers andwinery firms in New Zealand and Chile

References

Barker J N Lewis and W Moran (2001) Reregulation andthe development of the New Zealand wine industry

Journal of Wine Research

12(3) 199ndash221Carter MR BL Barham and D Mesbah (1996) Agricul-

tural export booms and the rural poor in Chile Gua-temala and Paraguay

Latin American Research Review

31(1) 33ndash65Dolan C and J Humphrey (2000) Governance and trade

in fresh vegetables The impact of UK supermarkets onthe African horticulture industry

Journal of Develop-ment Studies

37(2) 147ndash176Duijker H (1999)

The wines of Chile

Utrecht Spectrum Fattorini JE (1997)

Managing wine and wine sales

London Thomson Business Press

Friedland WH (1994) The global fresh fruit and vegetablesystem An industrial Organisation analysis in PMcMichael (ed)

The global restructuring of agro-foodsystems

pp 173ndash189 Ithaca New York Cornell Uni-versity Press

Gade DW (2004) Tradition territory and terroir in Frenchviticulture Cassis France and appelation controlee

Annals of the Association of American Geographers

94(4) 848ndash867Gereffi G (1994) The organization of buyer-driven glo-

bal commodity chains How US retailers shapeoverseas production networks in G Gereffi and MKorzeniewicz (eds)

Commodity chains and globalcapitalism

pp 67ndash92 Westport ConnecticutPraeger

Gereffi G (1999) International trade and industrial upgrad-ing in the apparel commodity chain

Journal of Inter-national Economics

48(1) 37ndash70Gereffi G J Humphrey R Kaplinsky and TJ Sturgeon

(2001) Introduction Globalisation value chains anddevelopment

IDS Bulletin

32(3) 1ndash8Gereffi G D Spener and J Bair (2002)

Free trade anduneven development The North American apparelindustry after NAFTA

Philadelphia Temple UniversityPress

Gibbon P (2001) Agro-commodity chains An introduction

IDS Bulletin

32(3) 60ndash68Giuliani E C Pietrobelli and R Rabellotti (2005)

Upgrading in global value chains Lessons from LatinAmerican clusters

World Development

33(4) 549ndash573

Gwynne RN (1999) Globalization commodity chains andfruit exporting regions in Chile

Tijdschrift voor Econ-omische en Sociale Geografie

90(2) 211ndash225

Gwynne RN (2003) Transnational capitalism and localtransformation in Chile

Tijdschrift voor Economischeen Sociale Geografie

94(3) 310ndash321Gwynne RN (2004) Clusters and commodity chains Firm

responses to neoliberalism in Latin America

LatinAmerican Research Review

39(3) 243ndash255Gwynne RN (2006) Export-orientation and enterprise

development A comparison of New Zealand andChilean wine production

Tijdschrift voor Econo-mische en Sociale Geografie

97(2) 138ndash156Gwynne RN T Klak and DJB Shaw (2003)

Alternativecapitalisms Geographies of emerging regions

LondonArnold

Hayward D C Singer and R Le Heron (2002) Goingplaces Reflections on embedding and disembeddingin agriculture and horticulture under neoliberalismThe example of Hawkersquos Bay New Zealand in MTaylor and S Leonard (eds)

Embedded enterprise andsocial capital international perspectives

pp 77ndash94Aldershot Ashgate

Humphrey J and H Schmitz (2001) Governance in globalvalue chains

IDS Bulletin

32(3) 19ndash29Humphrey J and H Schmitz (2002) How does insertion in

global value chains affect upgrading in industrial clus-ters

Regional Studies

36(9) 1017ndash1027Keeble D C Lawson B Moore and F Wilkinson (1999)

Collective learning processes networking and lsquoinstitu-tional thicknessrsquo in the Cambridge region

RegionalStudies

33 319ndash332Key N and D Runsten (1999) Contract farming smallhold-

ers and rural development in Latin America Theorganisation of agroprocessing firms and the scale ofoutgrower production

World Development

27(2)381ndash401

Le Heron R (1993)

Globalized agriculture Political choice

Oxford Pergamon

Lewis N W Moran P Perrier-Cornet and J Barker (2002)Territoriality enterprise and

reacuteglementation

in industrygovernance

Progress in Human Geography

26(4)433ndash462

McKenna MKL and WE Murray (2002) Jungle law in theorchard Comparing globalization in the New Zealandand Chilean apple industries

Economic Geography

78(4) 495ndash514Murray WE (1997) Competitive global fruit export

markets Marketing intermediaries and impacts onsmall-scale growers in Chile

Bulletin of the of LatinAmerican Research

16(1) 43ndash55Murray WE (2002) The neoliberal inheritance Agrarian

policy and rural differentiation in democratic Chile

Bulletin of the Latin American Research

21(3) 425ndash441

Murray WE (2005)

Geographies of globalization

LondonRoutledge

Murray WE and ERT Challies (2004) New Zealandand Chile Partnership for the Pacific Century

Australian Journal of International Affairs

58(1) 89ndash103

Perez-Aleman P (2000) Learning adjustment and eco-nomic development Transforming firms the state andassociations in Chile World Development 29(1) 41ndash55


copy 2006 The Author 395Journal compilation copy 2006 Victoria University of Wellington

Pietrobelli C (1998) Industry competitiveness and techno-logical capabilities in Chile A new tiger from LatinAmerica London MacMillan

Richards P (2006) Chilean wine growers in protestDecanter 21 March Available at httpwwwdecantercomnews81954html

Robinson G (2004) Geographies of agriculture Globaliza-tion restructuring and sustainability Harlow Pearson

Schmitz H and P Knorringa (2000) Learning from globalbuyers Journal of Development Studies 37(2) 177ndash205

Taylor M (2000) Enterprise power and embeddednessAn empirical exploration in E Vatne and M Taylor(eds) The networked firm in a global world Smallfirms in new environments pp 199ndash234 AldershotAshgate

382


RN Gwynne

continuum global trade can be organisedthrough networks of legally independent firmsusing a variety of transactional relationships(Humphrey and Schmitz 2001 20) Humphreyand Schmitz (2002 1018) argue that there aretwo particularly important types of coordina-tion First there are networks that bring togetherpartners with complementary competenciesSecond they refer to a quasi-hierarchy lsquoinwhich there is asymmetry of competence andpower in favour of one partyrsquo which is often theglobal lead-firm based in one of the coreeconomies

In this way the issue of governance can beintroduced and the systems of control whichunderlie the global commodity chain Gover-nance in its widest sense can be defined as thenon-market coordination of economic activity(Gereffi

et al

2001 4) A chain without gover-nance would just be a series of market relationsbetween firms The theme of governance is par-ticularly important for firms in the semi-periph-ery to understand as they develop transactionalrelationships with powerful global buyers fromthe core economies It can have positive ele-ments for these firms as in the generation trans-fer and diffusion of knowledge which can leadto innovation in the firm and hence improve itsperformance Innovation is the key to develop-ing farming and agro-industry in countries of thesemi-periphery as it allows localised techno-economic capabilities to develop providing thevital ingredient for sustaining economic growth(Robinson 2004) However a quasi-hierarchi-cal relationship can provide negative elementsas with the steady worsening of contract termsbetween global buyers and local firms orbetween local firms and contract farmers

In terms of economic activities in countriesof the semi-periphery (such as New Zealandand Chile) agents of transnational capital candirectly or indirectly influence the organisationof local production logistics and marketing sys-tems Through the governance structures thatthey create they make decisions that haveimportant consequences for how linked firms inthese countries become inserted into globalmarkets and the range of activities that they canspecialise in

This paper aims to compare global valuechains governance and firm structures relatedto wine production in two countries of the semi-

periphery New Zealand and Chile Chile andNew Zealand have evolved new patterns ofregulation over the last two decades and theirmode of insertion into the world economy(based partially on export specialisation in agri-cultural agro-industrial and forestry products)can be seen as increasingly similar (McKennaand Murray 2002) The similarities (as well asthe differences) between these two countrieshave been detailed elsewhere (Murray andChallies 2004 Gwynne 2006) as a responseto moves by both governments for closer eco-nomic and strategic partnerships between thesetwo lsquoPacific rim playersrsquo More specifically thepaper will1 Explore the theme of governance as it relates

to the evolution of global commodity chainsin agro-industry and their incorporation offirms in countries of the semi-periphery Thiswill be based on an eclectic mix of literaturesfrom development studies and economicgeography

2 Examine the upstream and downstream rela-tionships of selected New Zealand wine firmsto the wider commodity chains in which theyare involved

3 Examine the upstream and downstream rela-tionships of selected Chilean wine firms tothe wider commodity chains in which theyare involved

These latter two sections will use brief casestudies derived from the authorrsquos interviewingof key wine firms in both New Zealand andChile between 2003 and 2005 The case studiesare all formatted on the basis of an analysis ofdownstream and upstream links to the com-modity chain following a brief description of thewinery firm under review In both New Zealandand Chile a large and medium-scale companyhave been selected Such cases provide indi-cative evidence of the underlying processes ofthe commodity chain which are constantlychanging

Governance structures and agro-industry in the semi-periphery

As Gereffi (1994 97) pointed out governancestructures in global chains are important toassess as authority and power relationshipslsquodetermine how financial material and humanresources are allocated and flow within a



383









384


RN Gwynne



Giuliani

et al




et al


et al


et al



Background


et al




385





et al


Case studies



Montana


circa


et al



Figure 1



Sources


2003200220012000199919981997199619951994199319921991199019891988

800

700

600

500

400

mill

ion

300

200

100

0

ChileNew Zealand

386


RN Gwynne



Figure 2


Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles




387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











383









384


RN Gwynne



Giuliani

et al




et al


et al


et al



Background


et al




385





et al


Case studies



Montana


circa


et al



Figure 1



Sources


2003200220012000199919981997199619951994199319921991199019891988

800

700

600

500

400

mill

ion

300

200

100

0

ChileNew Zealand

386


RN Gwynne



Figure 2


Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles




387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









384


RN Gwynne



Giuliani

et al




et al


et al


et al



Background


et al




385





et al


Case studies



Montana


circa


et al



Figure 1



Sources


2003200220012000199919981997199619951994199319921991199019891988

800

700

600

500

400

mill

ion

300

200

100

0

ChileNew Zealand

386


RN Gwynne



Figure 2


Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles




387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











385





et al


Case studies



Montana


circa


et al



Figure 1



Sources


2003200220012000199919981997199619951994199319921991199019891988

800

700

600

500

400

mill

ion

300

200

100

0

ChileNew Zealand

386


RN Gwynne



Figure 2


Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles




387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









386


RN Gwynne



Figure 2


Napier

Gisborne

Auckland

Dunedin

Wellington

Cook Strait

Hawkes Bay

Poverty Bay

Blenheim

Christchurch

Nelson

Mt Ruapehu

Queenstown

Auckland

Gisborne

Hawkes Bay

Wairarapa

Nelson

Marlborough

Canterbury

Central Otago

0 50 100 150 Miles




387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











387


Wither Hills








388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









388


RN Gwynne



Background








Case studies




389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











389



Cono Sur


Figure 3


Cachapoal

Mataquito

Laja

0 100 200 km

Region Sub-region

Maipo

Rapel

Curico

Maule

Itata

Bio-Bio

Regional border

National frontier

River


Wine towns

Aconcagua

Casablanca

Santiago

San Felipe

Casablanca

Rancagua

San Fernando

CuricoMolina

Talca

San Javier

Cauquenes

Santa Cruz

390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









390


RN Gwynne




Montgras


Table 1




Source




391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











391











392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









392


RN Gwynne



et al




Overall conclusions






393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103











393





et al




ter-roirs


394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103









394


RN Gwynne


References









37(2) 147ndash176Duijker H (1999)

The wines of Chile

















IDS Bulletin





IDS Bulletin



World Development

33(4) 549ndash573



90(2) 211ndash225











LondonArnold





IDS Bulletin



Regional Studies



RegionalStudies



World Development

27(2)381ndash401

Le Heron R (1993)


Oxford Pergamon


reacuteglementation



26(4)433ndash462


Economic Geography







21(3) 425ndash441

Murray WE (2005)


LondonRoutledge



58(1) 89ndash103
















Documents

Governance and the wine commodity chain: Upstream and downstream strategies in New Zealand and Chilean wine firms