Grapes Growers in non vintage years

[Al B.]

I was reading Roy's most recent newsletter this morning (I am a slow reader!) and started to wonder what happens to the grapes grown by the contracted growers in non vintage years. Roy made the comment in the introduction of hte newsletter that more of the independent growers are using their own grapes to make their own single Quinta wines rather than supply them to the large firms.

I think that the port industry is going through an odd time. There is more consolidation than ever with Taylor, Fladgate and the Symingtons and others acquiring large names and properties and yet, in parallel to all of this consolidation we - the consumer - are being presented with more and more choice from small scale producers. If you like, consolidation and fragmentation are happening at the same time. This sort of development is probably unique in the history of the Douro.

So, my thoughts were with these small growers who produce their grapes and sell them on to the large firms. Are these farmers still able to make a living from their work? What happens to their grapes in years when vintage ports are not made - do they get paid the same price for their grapes in non-vintage years as they do in vintage years? Is their price based on the quality of their grapes every year or does it depend on what the shipper decides to make with them? Does the fact that more independent ports are being made also mean that less quality juice is available to the blenders of the big firms? In the days of more second label ports, what happens to the quality juice sold to the larger firms who don't issue second label blended ports?

Any thoughts or answers to these idle wonderings would be appreciated.

Alex

[Frederick Blais]

One thing is sure, big names needs juice to make tawnys and colheitas. So they still buy the grapes/juices to make this type of Port. I have seen and tasted some colheitas made from off-years by owners who keeps a small plot of very successful berries for their own drinking. Such colheita are often very good. From what I've heard, small land owners do try to sell their grapes every year.

When no one whants to buy, they do arguadente or table wine from it.

[Roy Hersh]

I am itching to respond to this thread, but don't want it to be a two way conversation, so I will wait until others have had their say. Great topic with very fine questions raised by Alex. I hope others will take a stab at this as it is really intriguing and goes beyond what is in front of our noses here. Thanks Alex!

[Bill Crann]

I'll take a stab at it. I would think that there probably is a secondary port grape / wine market that the producers can access to top off everthing from basic ruby thru LBV and tawny's. I'm guessing that this secondary market can't be used for their SQVP or VP, but all other ports probably use the commodity juice, depending on quality.

BC

[Moses Botbol]

Aren't aged tawny a blend of different years that average the age indication on the bottle? If this is the case, juice of all years would be used accordingly. There's plenty of use for juice of any year.

[Roy Hersh]

Alex has raised a great topic and one that I think can shed lots of light for new Forum members so I ask you to consider putting some serious thought to Alex's question and respond when you have a moment.

Thanks!

I'll wait another two days before adding my own two cents to this outstanding thread.

[Roy Hersh]

If you like, consolidation and fragmentation are happening at the same time. This sort of development is probably unique in the history of the Douro.
Alex,

An interesting and insightful perspective and it speaks to what Jamie Goode and I have called the Renaissance in the Douro. Reminds me of the song lyrics: "nobody ever told me there'd be days like these. Strange days indeed."

So, my thoughts were with these small growers who produce their grapes and sell them on to the large firms. Are these farmers still able to make a living from their work? What happens to their grapes in years when vintage ports are not made - do they get paid the same price for their grapes in non-vintage years as they do in vintage years? Is their price based on the quality of their grapes every year or does it depend on what the shipper decides to make with them? Does the fact that more independent ports are being made also mean that less quality juice is available to the blenders of the big firms? In the days of more second label ports, what happens to the quality juice sold to the larger firms who don't issue second label blended ports?

Well done Alex. It seems folks have been reluctant to tackle this tangled web of tough questions you have neatly woven. Some random thoughts:

* Are these farmers still able to make a living from their work? There is no simple answer. I think that if there was a more equitable system in place that allowed laissez-faire to occur naturally, instead of the antiquated Beneficio system, farmers would have an even better chance to succeed by being forced by competitor pressure to improve the quality of grapes they yield for production. There are other factors such as bank loans for the Douro growers and the rates of interest they pay, weather conditions (rain at harvest can dramatically reduce yields/ha or wipe out the entire crop. How do you pay the bank back when you have nothing to sell for a whole year. Drought and hail and other weather conditions can wreak havoc too. As I mentioned, there is no easy answer to this one.

* What happens to their grapes in years when vintage ports are not made? Typically if they are quality grapes, someone will buy them. They may wind up at a local co-op, but more likely they will wind up in Toneis (the huge casks) and be used for LBV, Ruby Reserve or even Tawny production.

* Do they get paid the same price for their grapes in non-vintage years as they do in vintage years? I will be gentle and say, think about this. When the grapes are picked, does anybody know what is going to happen 24-30 months down the road? :hello: Some companies stick to the prices that were set by the IVDP and Casa do Douro for Port grapes. There is a lot more flexibility in what is paid for grapes that wind up heading towards table wine production. More progressive companies actually pay the growers a premium or "bonus" money above the price set by the powers that be, for Port grapes which exceed specific phenolic ripeness levels. In actuality, the year/vintage has no direct bearing whatsoever, unless there were yield issues from the previous vintage which affect either the "set" price, or quotas granted by the IVP & Casa do Douro to a quinta/grower.

* Is their price based on the quality of their grapes every year or does it depend on what the shipper decides to make with them? Only in terms of whether the grapes will be made into Port or Douro wines. Regardless of what category of Port they wind up going towards, the buyer has a set minimum that they must pay for grapes. There is a difference in price for grapes based on whether they come from a Grade A or B rated vineyard site versus if they come from a Grade C or D, E or F rated vineyard site. These vineyard grades also directly affect the Beneficio rights that quinta/grower receives. I hope this part is clear, as it is sometimes difficult to explain simply.

* Does the fact that more independent ports are being made also mean that less quality juice is available to the blenders of the big firms? It is difficult to give a definitive yes or no, so I will say maybe. The reason is complex. The grapes may be diverted based on their price, to table wine production, the grapes of which cost 1/5th the same as grapes would if they were slated for Port production ... this is what some call: "The subsidy." I strongly believe that there is a far greater concern in the industry that grapes that were typically used for Port are now being diverted for table wine production. One controversial thought is that some independents, view table grape production as "their poison pill strategy" from having their company or quinta bought by one of the majors. It is a fascinating dynamic actually. Nonetheless, the majors own plenty of A&B rated vineyard sites which garner the largest "production rights" (Beneficio). You've heard of "follow the money" in business circles. The economics in the Port trade is not only a game of cash flow, but quality real estate ownership. It is why we see vineyard and Quinta acquisition being the REAL KEY in a lot of what we think of as "consolidation" and not the importance in stocks of Port. Rights to produce larger stocks are what some Port companies are pushing for and like you've read in the thread about TFP, finding a way to get rid of the broken Beneficio system. From my extensive conversations in Portugal on this exact topic, it is apparent to me that NO ONE believes the system could possibly be fixed, nobody!


In the days of more second label ports, what happens to the quality juice sold to the larger firms who don't issue second label blended ports?
Simple, they use it in Ruby Reserve, LBV or Tawny Port production.

Alex, I have a feeling that you are not alone in having questions like this. Please feel free to continue the discussion or ask more questions if you'd like. This is a reat and thought provoking "Port post of the year" so far.

[Al B.]

Roy,

Thanks for the response - some very interesting comments that you have provided. The most interesting point that you have raised from my view is the difference in price between port grapes and table wine grapes - I just didn't realise that the difference is this large.

I first state clearly here that I do not understand the role of the Casa do Douro (so I am reading posts on the forum with interest and will read some of my books over the next few weeks to also learn more) but do have a reasonable understanding of the beneficio system. However, the price setting mechanism for the grapes sounds very interesting. I need to learn more about this as the perception that I have in my mind from the little reading I have done so far makes me wonder how the price-setting mechanism can be seen to comply with the Competition Rules of the European Union. (Boy, that was worded carefully!) However, I am sure that it does because otherwise it would have been challenged in an EU Court by now. Especially if there is an artificially maintained price difference between grapes used for port production and grapes used for table wine production.

So, when port grapes are bought, who are they bought from? Are all grapes from a particular grade of vineyard bought at the same price regardless of the actual vineyard dynamics? Does the grower sell direct to the port shipper or does he sell to the Casa do Douro who then sells on to the shipper?

My question about whether the grape price varied depending on the final product that the grapes were used to produce, was not as daft as it sounds. I absolutely accept that when the grapes are picked and crushed then no-one knows if this is going to be a vintage year or not. However, there is a business model that I have seen in other industries where people all along the supply chain are rewarded in a way that is directly linked to the margin / price achieved by the end product at the time it is sold or completed. I could have seen a situation where a grape farmer receives a substantial proportion of his revenue on delivery of his grapes to the shipper, but also receives a "product bonus" 2-3 years later when his grapes have been used in a premium product of some kind. This sort of a business model would financially reward those growers who have prime sites and grow grapes that are consistently good enough to be used in, say, a vintage port of some type.

I have also seen arrangements of this type where revenues are smoothed over a 2-3 year period to take into account differences in weather and production volumes so that even in a year where the weather totally destroys a farmers crop, he still receives a payment based on his production in the previous 2 years.

I've seen statistics, including in your post on the recent TFP acquisition of some of the Casa do Douro stocks, which emphasise just how many people work the land, but I would be very interested to find out how much of the beneficio is in the hands of the big firms and what proportion is in the hands of individual farmers. Any idea where I can look for an English language source?

Thanks for replying. One of the things that I have always been very interested in when it comes to Port, is the impact the industry has on the local social fabric and vice versa (for example, the phenomenon of economic emigration perhaps causing a lack of indigenous labour at certain times of the year). I find these questions about the grape growers very revealing about the local people who work the land but are not on the scale of the big firms.

Alex

[Roy Hersh]

Alex,

Don't give up on me. I just need to find an hour where I can sit down and type up a cohesive response. Will be back to do so when I get a chance.

[Andy Velebil]

In my duties here at FTLOP I often am digging around the back pages and I occassionally find a thread that I find very interesting....this is one of them. I think this slid to "page 2" a little too quickly and was forgotten about, so I have returned it to "page 1." I really would like to hear from more people....so please add your thoughs or ask your questions.

[Tom Archer]

There is, perhaps, a little too much focus on vintage port.

Of all the port made, only about 5% is set aside as 'potential' VP, and only half of that makes the grade.

The great majority of the vintage port lots come from A grade vineyards, most of which are owned by the big names.

The grapes grown by the little guys (mostly farming lower grade vineyards) rarely find their way into the top products, and if they do, it is not the grower who scoops the dividend.

Until 1986, the small growers were compelled to sell to the big name shippers, who, with a little collusion at the Factory House, were able to fix prices at a minimal level.

Since 1986, the growers have had a freer hand, and many now vinify and bottle their own wines profitably.

Tom

[Roy Hersh]

Until 1986, the small growers were compelled to sell to the big name shippers, who, with a little collusion at the Factory House, were able to fix prices at a minimal level.

This is plain and simply a wrong assumption and fallacious information, Tom. The minimum prices that farmers are paid by the Shippers have been "fixed" by the Casa do Douro, (a Portuguese not British entity) and IVDP and IVP before that for decades. There was no "collusion" at the Factory House unless you are going back more than 250 years, which is not what you have alluded to!

[Andy Velebil]

But what about now that the Casa do Douro has been sold? Alex brings up a good point regarding the EU and their Competition Rules (Which admittedly I know nothing about) and how do they get around that.

It also interests me that from what I've learned and heard, most deals between big producers and small growers were "hand shake" deals with no formal contracts. Now that more and more big firms are going after the land grab, to increase their Beneficio, are they starting to forgo that old time tradition in favor of paper contracts to ensure that they are still able to buy what they need from their sources. To ensure their sources don't sell to someone else that is willing to pay a "bonus" or a higher price.

The Douro may still be rustic, but it is making its way into the 21st century at a blistering pace the past few years.

[Roy Hersh]

Actually, the momentum really began in the 1980s, with changes in viticulture as well as regulations that allowed shipping and marketing from the Douro and other dynamics as well.

It also interests me that from what I've learned and heard, most deals between big producers and small growers were "hand shake" deals with no formal contracts.

Yes but these were about who was going to sell to whom. Minimum prices were always controled by the CdD/IVP, since the Real Companhia Velha's full control was lost towards the later quarter of the 18th century (Pombal's downfall). Hand shake deals have always been the norm with few ever put in writing. The overage or bonus for having grapes which reached certain levels of baume (brix) often were decided late in the growing season or during the harvest itself. Refractometers and nowadays the hand held digital Palm Abbe refractometers that can instantly show grape ripeness and also grape must concentration, make this easier than in years past. To my knowledge there was nothing that ever stopped a Shipper from paying a higher price than what was mandated by the CdD that year. This was how growers were moved from being a long term loyal grower, but even then it was rare, as they knew that during the hard times, the Shipper would be there for them when there was a string of bad growing seasons in a row.

Today of course, with the advent of Douro wines and their prominent role in the big scheme of the Douro ... there is less dependence on grapes being used solely for Port. However, when grapes are not good enough to be used for Port, rarely are they good enough to make good table wines.

[Tom Archer]

The overage or bonus for having grapes which reached certain levels of baume (brix) often were decided late in the growing season or during the harvest itself

For the growers, a vital component of their remuneration. Do you honestly believe that the rates for this were never discussed at the Factory House?

To my knowledge there was nothing that ever stopped a Shipper from paying a higher price than what was mandated by the CdD that year.

Except the wrath of his mates at the FH...

I know you hate to see a word of criticism written about the shippers Roy, but the history of the industry is not one of un-blemished glory. The system used to be horribly feudal, with the growers kept firmly in their place. You only have to look at some old photos to see the abject poverty the growers had to endure.

We should celebrate the reforms of the last couple of decades, not defend the past.

Tom

[Tom Archer]

Roy,

Virtually every trade body across the planet indulges in some degree of collusion - indeed I struggle to think of one that doesn't. It is not in itself a heinous crime. Surely you must accept that one of the purposes of the Factory House lunches is to compare notes and present a united front? - that is collusion.

You express concerns about credibility, but I have not questioned that. While the Port Shippers have been immensely successful over the generations, they are also businessman. Business people do not often wear untarnished halos!

In 2007, the weather (at macro level) did not follow a pattern that was conducive to a declaration. When some shippers rushed to anoint the vintage with indecent haste, I smelt a rat. My recent visit left me with little doubt that the rat is there. If a vintage is declared, I fear the wines will be dominated by vine varieties that have little reputation for standing the test of time (not unlike '75) - but we shall see!

In 2006 the hail storm seriously damaged some important quintas, while leaving many unscathed. The weather otherwise was fairly benign, although uneven ripening was reported. I would not be surprised if some of the larger quintas away from the epicentre of the hail damaged zone produce some very good wines - Vargellas and Vesuvio come to mind.

I hope we can agree that it is better to look forward than back. So far, 2008 seems to have got off to a reasonable start with an early budburst. While the valley looked well watered, the flow levels in the river seemed a bit lean.

Hopefully 2008 will be a vintage to remember and savour!

Tom

[Andy Velebil]

Surely you must accept that one of the purposes of the Factory House lunches is to compare notes and present a united front? - that is collusion

I wouldn't call that collusion, as collusion is defined as "a secret and illegal cooperation or conspiracy." The FH is neither secret nor illegal, its a known fact that they meet and discuss their business (and strategies I may guess). Also, because the government sets the minimum price to pay anyways, how would there be collusion if they agreed to pay more than the government set minimum? If they tried to secretly undercut the government by all agreeing to under pay, then yes collusion would exist. Or if there was no pre-set minimum and the FH members agreed to a "set" price they would all offer, then maybe they would be guilty...but only if they were violating the law in Portugal (which I have no idea about).

Business people do not often wear untarnished halos!

i agree...then again, none of us have untarnished halos either.

In 2007, the weather (at macro level) did not follow a pattern that was conducive to a declaration.

Actually, for growing grapes it was a text book year. A nice even growing season, not too hot nor too cold. The only issue was if a property didn't spray for odium after that summer rain. Having talked to owners during the harvest, those that sprayed were very happy as they generally had a great looking grapes with nice even ripeness. Something not seen in the Douro in a long time, as the summers usually get scorching hot. However, those that didn't spray basically lost a good portion or all of their grapes to odium...one owner told me personally that he lost almost everything because he gambled and didn't spray after the rain. As for the rain during the harvest...most had already picked all their top grapes before that rain hit. Those left to still pick during/after the rain will most likely end up in lesser Ports or table wines. I can tell you that they were much happier and way more optimistic about 2007 than 2006. I can also personally say that the 2007 grapes had far darker color and better extraction than what I saw in 2006.

As for 2008, its WAY to early to even speculate yet. To much could happen between now and then....the agonizing part is the wait!

[Tom Archer]

The legality of collusion depends on the laws prevalent in the country concerned. Wiki defines it as:

In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit.

That concurs with my understanding of the word.

for growing grapes it was a text book year

For vines such as Touriga Franca and Tinta Barroca it was, but they do not making lasting wines. The varieties that normally dominate vintage ports fared less well.

An oenologist working for one the largest shippers told me with some enthusiasm that the Franca and Barroca can be blended to create wines 'of great structure and perfume' This sounded promising at the time, however...

Of Touriga Franca, Mayson writes:

"It tends to mature fairly rapidly, losing colour and taking on a dusty, earthy character with age"

and of Tinta Barroca

"The wines lose a considerable amount of colour after about fifteen years in bottle"

Early loss of colour and earthiness? - sounds horribly like a '75

Tom

[Roy Hersh]

For vines such as Touriga Franca and Tinta Barroca it was, but they do not making lasting wines. The varieties that normally dominate vintage ports fared less well.

This you will admit came from one source, (according to another post of yours) and regardless of how respected this ONE individual is, it surely is not the majority view. As Andy will attest, we heard quite the opposite from over a dozen prominent Port trade people. We tasted many grapes from various properties and quite a few times, Touriga Nacional along with others, before and after the rain. Your nod to a '75 comparison, will not hold water, albeit you are certainly entitled to your opinion on this, having recently visited Oporto at least you did get to speak to folks who lived the harvest.

It is also apparent that there is a distinct difference in the way Americans view "collusion" as it has a far more nefarious, underhanded and illegal ring to the word here. It seems that was not your intent for the context in which it was applied. I removed my last post because of this new understanding. Here collusion is what the owners of Major League Baseball teams did a few years back, to make sure that not a single "free agent" player was hired during the off-season by any team. This was quite the scandal when the news broke. I now realize this is not at all what you were alluding to.

[Andy Velebil]

Tom,

I see there is bit of a difference between our definitions. As Roy mentioned collusion in the US carries a much more illegal connotation to it, so now I also see where you are coming from. Using your definition I would agree with you.

however, I'm sticking to my guns on the overall quality of the 2007 vintage