Port Caught Short

[Roy Hersh]

A provocative article. This is definitely worth of discussion. Lots of it. I find some of this pretty controversial. What do you think?

http://www.thedrinksbusiness.com/index. ... &Itemid=66

[Andy Velebil]

A friend sent this to me the other day, but he didn't know the link so I didn't post it. But yeah, I was like WOW! Some hard hitting things in that article for sure. But it's also one of the best written short articles I've read.

[Andy Velebil]

One question is how long can high Port grape prices continue to subsidize Douro wines? At some point something will have to give, it's only a matter of time.

[Peter W. Meek]

What is BOB? I couldn't find a place where they expanded this term. Buyers Own Brand, maybe?

[Andy Velebil]

What is BOB? I couldn't find a place where they expanded this term. Buyers Own Brand, maybe?

Yes, Buyers Own Brand. While you don't see it much here in the states, it's a big thing in Europe. Mostly it's the middle to lower end stuff, but there is also some BOB VP's as well.

[Andy Velebil]

The dumping of Port prices in Europe, while good for the consumer's pocketbook, really hurts the overall sales of Port. When prices go up even a little bit people get upset and stop buying. Companies that sell a commodity for less than what they paid (referred to as a "Loss leader") just to get people in to buy other goods creates a negative image of a certain product IMO, and that is happening with Port over there. When you can buy a bottle of Port with the spare change jingling in your pocket something is wrong. Lets face it, if your used to a store discounting a bottle of Ruby or Tawny to $3-4/bottle, would you ever buy another bottle of Ruby or Tawny at it's normal price range of $10-13? Most people would balk and walk away only to wait for the next sale to come along.

[Brian C.]

That was a very interesting article. Being somewhat uninitiated in the inner workings of the Port trade, I probably don't understand everything said in the article. Given that, anyone please feel free to correct me where I go astray in my assessments. It's an interesting dynamic that the port premium is what keeps Douro farmers in business, and that table wine on its own does very little to keep them in business. I think part of this is due to the fact that Douro DOC wines are relatively new, and they do not have an established presence in the worldwide market for table wines. Those who enjoy the Douro table wines know well enough that a $20 bottle from the Douro is generally a much better value than a $20 bottle from other premium regions. It would seem to me that as time goes on, the premium Douro DOC wines have the potential to become priced at a greater premium as they become better recognized and better understood. Port may pay the bills today, but tomorrow, who's to say that Douro DOC wines won't be paying a fair share of the bills? How much does a given producer have to debate whether to commit grapes to port versus table wine, and how might that change over time? And if there is too much port being produced for the market, a better established Douro DOC market would be able to pick up the slack. Anyway, I'd think that if Douro DOC can build up a real following, the other problems should be able to take care of themselves.

I tried to read up on the Beneficio and the quinta classification. I'd think that A-rated quintas should be able to leverage the designation into something akin to the growth classifications of Bordeaux. Does this classification system extend to table wines? If not, should there be one for table wines as well?

I kind of gathered that there is a glut, just because I can go to Trader Joe's and get something very basic for a pretty low price. Doesn't mean that it's going to be great stuff, and I don't think it's going to threaten the better brands, even their basic offerings. Consider that I saw a CdP at Trader Joe's for $10. I bought it. I thought for $10, bargain. For the $20 it was offered at prior to markdown, I'd be indifferent. There has to be some kind of glut in CdP for there to be one offered at $10 anywhere. People who are buying their CdP's for $40-50 a bottle aren't going to care as much about the TJ's offering. It seems as though there are gluts developing in a lot of wine markets, though. It's not just Douro. Places in California are shutting down, too. The economy isn't so great right now, and that means people aren't going to want to pay as much for wine. This will put undue pressure on a lot of players in a given market.

[Jim R.]

Roy, thanks for the interesting article. Unfortunately it doesn't sound like the the high quality vintage port prices will drop soon.

[Eric Menchen]

There has to be some kind of glut in CdP for there to be one offered at $10 anywhere. People who are buying their CdP's for $40-50 a bottle aren't going to care as much about the TJ's offering. It seems as though there are gluts developing in a lot of wine markets, though. It's not just Douro.

There is a huge glut in Europe. Here's a very brief Wikipedia entry that notes, quoting The Wine Spectator from 2007:

For the past several vintages, European countries have been producing 1.7 billion more bottles of wine than they sell.

Google "wine lake surplus" for more. Australia had a huge surplus in the mid 2000s, although some bad harvests after that reduced it.

[Michael T]

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[Edward J]

The article is dated 2010 at the end so it is over 5 years old, what has changed since then?

For the Port trade? I would say the 2011 was a game changer for them. Beyond that it really is marketing.