Estimating the concentration indicators and instability in the wine industry of Chile

Abstract:

The national production of wine from wine grapes increased from 238 million liters to 763 million liters from 1991 to 2005. This explosive growth has helped to modify the structure of the Chilean wine industry, where a massive entry of new wineries into the business is observed, with a proliferation of private brands and a great diversity of competitors regarding wine quality and the size of plantations. The objective of this research is to estimate the indicators for concentration in the local wine market and to estimate instability indices for this concentration, based in annual sales volume data for the period from 2001 to 2005. As measures of concentration, the concentration ratio for the k-enterprises (Ck), the Herfindahl-Hirschman index (H), the Theil entropy index and the dominance index (ID) were used, whereas as measure of stability, the instability index (II) was used. The principal results showed that H was less than 1 800, but greater than 1 000, up until the year 2003, and greater than 1 800 after that. It fluctuated between 0.02 and 0.05 during the studied period. The main conclusion suggests that the Chilean wine industry can be classified as «moderately concentrated» up until 2003 and «highly concentrated» («strong oligopoly») starting in 2004; in addition, the industry instability is close to zero and correlates negatively with H during the studied period.

Año de publicación:

2007

Keywords:

• Domestic market
• Oligopoly
• Herfindahl-Hirschman index
• Brand proliferation
• CHILE

Fuente:

scopus