Boutique Wineries.

Hi-tech spurs Chilean wine industry to go upscale.

FORGET PUNTO-COMS. THE TRULY HIP NEW HIGH-TECH BIZ IN Chile is wine.

Once comfortably conservative, the family-run Chilean wine industry is being swept into modernity by a new generation of vineyards, many hiring winemakers only a tad older than a good Bordeaux. Spurred by this youthful generation, industry paradigms have shifted from mass-scale production to chic start-ups. Some 85 wineries are now in business, many of them hot boutique operations that have upped the ante on an industry once characterized by centuries-old technology and only the most basic varieties of reds, like hearty Cabernet Sauvignon and Chile's famous fruity Merlots.

Once, say the start-ups, Chile's wine barons simply ripped rice paddies out of valley floors and planted a hodgepodge of grapes. They coasted on ideal climate and soil conditions and the absence of Phylloxera, the voracious, root-eating louse that has long devastated European vineyards.

"Before, the business was like a dairy. Everyone figured if they produced enough milk they would automatically get cream," asserts Pilar Miranda, 29, a winemaker for the Undurraga winery, located 20 miles outside Santiago in the Maipo Valley. "Today, winemaking in Chile is art and science."

At Santiago's University of Chile, agronomists learn in modern laboratories. They are trying to combine precise soil characteristics with Europe's time-tested recipes to transform the taste of Chilean wine.

Now, all of Chile's wineries use the latest hi-tech machinery. Vintners say they are well aware that the best equipment is key to staying competitive.

"For the past two years, the focus has been on exact science and smaller production zones, which is new for Chile," explains Alvaro Peria, a professor of winemaking at the Universidad de Chile. "Now we are focusing not on the later stages of winemaking but on growing the fruit. This has changed the geography of production and led to huge investments."

In faded blue jeans, a Patagonia fleece jacket and hiking boots, Cecilia Guzman, 27, is typical of modern Chilean winemakers leading the youthful charge in the vineyards. She leans against a row of 15-foot-high oak barrels. The massive containers are the pride of Haras del Pirque, yet another new winery, located some 15 miles south of Santiago in the town of Pirque.

"Technology has its place in winemaking in that it allows you to do the right thing at the right time," says Guzman, pointing out a wall full of digital temperature gauges.

New world boom. Chile is already among the leaders of the so-called "new world wine" club that includes competitors like Australia, South Africa and Argentina. In 1998, Chile produced 3.4% of the world's wine, a production level expected to double by 2002. Exports have soared nearly 5,000% since 1985, when they totaled US$10.9 million, and the market has expanded to 97 countries from 40.

Last year, wines accounted for 5.4%, or $525.74 million, of Chile's $9.73 billion in non-copper exports. That figure is expected to rise to $580 million this year.

The most expensive new boutique wines in Chile are produced by established wine companies either in partnerships or in new premium corporate divisions. The combination of building a modern winery from scratch and using mature grape fields has allowed Chilean wineries to upgrade their position in international markets.

Take Almaviva, a $75-a-bottle wine produced by a joint venture between Chile's best-known winery. Concha y Toro, and Bordeaux's Chateau Mouton-Rothschild. Almaviva is one of the most high-profile of the projects pushing Chilean wine into a higher market bracket.

"Projects like this are the future of Chilean winemaking," says Felipe Larrain, public relations manager for Almaviva, on a tour of the firm's $3.9 million facility. "This strategy has to be the strategy of Chile. We cannot compete on volume, thus our future is to keep improving the quality."

Adorned with colossal tasting rooms and precisely placed exhibits of work by local artists, the facilities are tailored to welcome tourists and VIP guests, a marketing move some traditional winemakers consider distasteful. Almaviva's label, meanwhile, has Old World style but features a spiritual symbol of Chile's indigenous Mapuche.

Young and hip. At the Cono Sur winery in Chimbarongo, some 10 miles south of Santiago, the focus is on high-tech infrastructure, huge plantations and a savvy marketing team. Using slick sales campaigns that would be at home in any New York ad agency, Cono Sur is gunning for younger wine consumers who are often less respectful of vintner traditions. Their slogan: "No family tree, no dusty bottles, just fruit."

"It is all part of searching for a different position within the market. The strategy here had always been about family, family and family," says Isabel Guilisasti, marketing director for Cono Sur.

Analysts say Cono Sur's aggressive marketing techniques will undoubtedly be copied by its competitors as the battle for buyers intensifies. Scientific research has also helped vintners in unexpected ways.

Over the years, Chile's Merlot has been known for its distinctive quality. Most recently, researchers discovered that some of the grapes thought to be Merlot were from a nearly forgotten variety called Carmenere.

Carmenere is known as the lost grape of Bordeaux. It was widely planted in France until the Phylloxera epidemic wiped it out in the 19th century. The red grape was transplanted to Chile 150 years ago and its rediscovery placed winemakers in a quandary over what to tell the public. "In the beginning, no one said anything because the Merlot sells very well abroad," notes Professor Pena. "But now Chileans are beginning to capitalize on the uniqueness of Carmenere by presenting it as the signature wine."

Chile's vintners are well aware, however, that modernization and foreign investment do not guarantee success.

With production focused on small plots of land and sometimes on a single variety of wine, the risks are high for the new boutique vineyards. An entire year can be lost because of a single mistake. The larger, more diverse wineries like Concha y Toro or Santa Carolina can afford to make low quality bulk wines that sell in 5-liter jugs or to the urban beer drinker, who thinks nothing of sipping fruity wine out of a cardboard box.

The Wine Spectator recently reviewed 191 newly released wines from Chile online and ranked 57 of them less than "good." The report concludes that although the best wines are "impressive, there are still far too many ... disappointing wines." Still, getting even a partial thumbs up from the wine press is a good thing for a new world wine--and sure to keep the pressure on to perform.