What is it about Concha y Toro?

Concha y Toro (the name translates as either “shell and bull” or “bullhorn”), is the largest Chilean producer and exporter of wines.

Along with its subsidiaries, Concha y Toro produces, distributes, and exports wine in Chile, Europe, the United States, South America, Asia, Canada, Central America, Africa, and internationally. The company has two segments, Wines and Other. The company sells premium wines (premium wines usually are defined as wines anywhere from $13-19); varietal wines (wines that come from a single specific grape); bi-varietal wines (wines that blend two grapes); and popular wines (popular wines are wines made from one of the six most popular grapes). Concha yToro also distributes spirits and premium beers in wine bars and tours; and sells fruits, energy drinks, and mineral water.

As of December 31, 2016, the company owned or leased 64 vineyards in Chile; 8 vineyards in Argentina; and 15 vineyards in in California. Vi?a Concha y Toro S.A. was founded in 1883 and is headquartered in Las Condes, Chile. This is a small-cap firm with a market cap of around $1.5 billion. The stock (VCO) rose 13% on the NY stock exchange in 2017.

The factors behind Vi?a Concha y Toro’s success are Chile’s unique geography, a succession of strong visionary leaders, and extremely innovative marketing.

History - Deep Roots in the Chilean Wine Industry

Wine making in Chile began with the Spanish Conquistadors who arrived in Chile in the 16th Century and found that the climate and soil composition of Chile were capable of supporting quality grape varieties from the Bordeaux region in France. The story of Concha Y Toro begins with a local politician and businessman named Don Melchor Concha y Toro living in Santiago.

Being an astute businessman, Don Melchor hired a French oenologist (wine expert) to plant new vines yielding the traditional varieties of the French Bordeaux region--cabernet sauvignon, merlot, sauvignon blanc, and semillon. As fate would have it, the vines Don Melchor planted had been brought to Chile before the plant louse phylloxera devastated French vineyards in the 1860s. Phylloxera is a microscopic sap-sucking insect that feeds on grapevine roots and has widely infested vineyards outside of Chile. The pest generally renders a vine unproductive within a few years following initial infestation. Since no pesticide has been proven effective in killing phylloxera, the only known solution is replanting infested vineyards with naturally resistant root stock. The Concha y Toro vineyards still use the original phylloxera-free French root varieties and methodically screens all cuttings before planting.

Concha y Toro remained a family business until 1921, when the family converted its vineyards into a limited liability stock company. During the 1940s Concha y Toro attempted to diversify by distributing Coca-Cola in Chile but gave up the franchise after some years because it was not profitable. The family owned nearly one-third of the stock in 1947 while Chilean banks held over 20 percent; most of the remaining shares had been purchased by an enterprising entrepreneur named Eduardo Giulisasti Tagle.

Growth Beyond Chile - New Market Expansion

Beginning in 1957 Concha y Toro invested heavily in new vineyards and restructured its management to expand beyond its almost exclusive domestic market. Although Concha y Toro accounted for one-third of all exports of Chilean wine, Chile's wine exports constituted only about 2 percent of production. In 1965 Concha y Toro introduced its first wine for the international market. The new wine “Casillero del Diablo” was made from selected grapes and aged two years longer than the standard Chilean cabernet sauvignon. Casillero del Diablo became the wine that vaulted Concha Y Toro to international success. Marketing was based upon a legend involving Don Melchor de Concha y Toro who supposedly discovered that his best wines were being pilfered from the “casillero” (cellar) beneath his family home. To discourage pilferage, the clever Don spread a rumor that his deepest, darkest cellars were haunted by the devil.

Historically, Chilean wines were considered inferior due to a heavy oxidized flavor. With the economy in recession during the 1970s, many wine enterprises failed, and the survivors began seeking income from exports for the first time. After introducing Casillero del Diablo to the international market, Eduardo Giulisasti Tagle considered the U.S. market but realized that Concha y Toro's output would have to be altered to sell there. He began replacing the old cement vats used to ferment wines with automatically cooled stainless steel tanks. For better aging of its premium wines, Concha y Toro began importing French oak casks and California oak barrels. In 1987 the company introduced “Don Melchor” a world-class wine intended to compete in the premium category and convince consumers abroad that Chile was capable of producing premium wine. This top-of-the-line cabernet sauvignon came from Concha y Toro's flagship Puente Alto estate which Eduardo Giulisasti Tagle had purchased in 1970.

Strategy for the 21st Century - Technology and Brand Development

In 2000, Concha y Toro launched three limited-edition premium wines under the Terrunyo label. In this year Eduardo Giulisasti Gana negotiated the famous alliance with the Manchester United “Red Devils”, one of the world’s premier soccer clubs. As the story goes, a black ball with the club shield of the red devils arrived at the offices of the Chilean winery; a note that arrived with the ball said the English soccer team wanted Casillero del Diablo among its global sponsors. The effect of the alliance, signed for the Bicentennial of Chile, significantly increased the exposure of Concha y Toro's most global brand in Asian, African, and Latin American markets.

Today, the company's corporate strategy is to improve its bottom line by focusing on premium wines, strong brands, and, most importantly, improving the reputation of Chilean wines.

In 2014 Concha y Toro built The Centro de Investigation e Innovation (CII) a research center focused on developing and sharing technologies pertaining to viticulture and oenology. All CII projects are scientifically based and meet specific criteria before they are launched. To-date major CII projects include:

1. A phone application that manages leaf removal in the field; this vineyard management application is available to all growers.
2. Artificial intelligence software that automates specific cellar activities and eliminates human error inconsistencies.
3. Improved energy use related to rootstock and irrigation issues.
4. New products based on marketing data that match or anticipate consumer trends.

The idea behind Concha y Toro’s CII investment is to raise the profile of Chile as a premier wine producing country.

"The idea is for us to be a link. We want to make Chile one of the most important countries in the wine industry," says CII’s director Gerard Casaubon.

“We wanted to bring in people from around the world and have a transfer of knowledge. It is not just for Concha y Toro. As a country we need to use education to continue to make improvements in quality,” says Marketing Director Isabel Guilisasti. 

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Sandhya Johnson, PhD is a leader in HR optimization, leadership development, team performance, and organization effectiveness. She has a proven track record of developing innovative talent management strategies for a diverse group of leading organizations. Sandhya is the founder and Managing Director at Ingenium Global, a Dallas-based consulting firm that is committed to co-creating talent-driven organizations. Connect with her on Twitter @IngeniumGlobal