How to turn around Port sales into the black again?

[Andy Velebil]

I've got issues with this. Please point out a definitive study in the USA on alcohol consumption levels.

There are no definitive studies on anything, Andy. There's always some questions that remain. I'm sure that there are many studies out there, but I don't care enough about it to search for them. You and Tom don't like being told that your favorite tipple just might be bad for you, so you deny the obvious.

I don't need a scientist to tell me that alcohol impairs motor function and decision-making ability. All I need to do is drink a few glasses of Port in a short period of time and I can see the effects for myself. As a cop, I would think this would be very obvious to you too.

You guys sound like climate change deniers to me.

Tom pretty well summed up what I was getting at. But yes, of course alcohol in large amounts over a long period isn't great for someone, neither is drinking large amounts of soda either. The question no one knows is how much is too much, as each person is different.

[Andy Velebil]

one thing i'd LOVE to learn is the per bottle cost of making Port.

The more that I think about it, the more I'm inclined to vote for Initiative 1183 here in WA. That's the one sponsored (and heavily funded) by Costco because they want to be able to buy liquor directly from producers at volume discount. That's the real reason for the initiative, anyway. There's a bunch of other provisions in it designed to make it appeal to more people, but it's written and paid for by Costco so the bottom line is the real issue.

My concern is that if Costco is negotiating bulk prices, smaller shops with more diverse offerings might be driven out of business. TFP might like the result because Costco only seems to buy Fonseca Port, but the rest of us enjoy a broader selection so we might not be too happy a couple of years down the road.

Glenn, Costco is here and sells beer, wine, and booze. At no time have I seen what price they sell alcohol for effect what a regular wine, liquor, of other store does business wise. Costco's wine department is ok, but think of a your local market and Costco's is usually smaller than that. Generally, and barring sales, their wines tend to be about what I can get them for at other places around town or looking online. Sometimes a dollar or two less. What they do sell for generally good prices is large size bottles of harder alcohol.

[Moses Botbol]

Generally, and barring sales, their wines tend to be about what I can get them for at other places around town or looking online. Sometimes a dollar or two less. What they do sell for generally good prices is large size bottles of harder alcohol.

Depends what wine or liquor we are talking about. Costco gets national kick backs from some producers I am told. Where in the world could anyone buy:

2005 Dow LBV for $13
2007 Pio Cesare Barolo for $41
2007 Vietti Castiglione Barolo for $31

Those are just a few off the top of my head that are probably cheaper than most liquor stores are paying wholesale. They recently raised the price on the Dow to I think $15 and have 2006 in stock. If I didn't go throuh 3 cases of 2005 Dow LBV this year, I'd consider getting more, but I am all LBV'd out! Costco 10 year tawny is back in stock.

[Rob C.]

Where in the world could anyone buy:

2005 Dow LBV for $13

I didn't ever see the 2005 in the UK, but the 2006 Dow LBV is currently on sale for £7.15 at a large supermarket here (Tesco), and the 500ml bottles of the 2004 Dow LBV were regularly on sale for an equivalent price before.

But i cannot imagine there is profit in it for the supermarket, or much for the producer either...especially considering that £1.20 of that price is VAT and £2.14 is Duty...

That means £3.81 per bottle w/out taxes...

I do think this causes an issue for producers - if it is well known that lbv from a big name is regularly available at these prices in supermarket offers, people are going to think twice before spending £15-20 on a bottle - why pay more when you can wait for the next offer and stock up...?

That said, i don't see the shelves emptying...even at those prices...so i agree with Roy, it is not just price.

One thing that does confuse me though - Vargellas 2001 on the supermarket shelves at the moment as a "ready to drink" bottle - I think they might have more success (in terms of repeat buyers) if current supermarket releases for the "masses" were ports that are actually "ready to drink" (this complaint not just about SQVPs, but also holds true for unfiltered LBVs - Croft 2005 being a recent example that i thought was far too young to enjoyably drink now).

A second thing - as we are seeing with Bdx now - people are questioning why you would pay £xxx for a new release when you can pick up a well stored case from an older vintage on the secondary market for the same amount (or less even). In terms of VP sales, I think this is a real challenge facing producers.

[Rob C.]

Jeff,

Even if you knew EXACTLY what it costs for cork/capsule/label, the labor cost and even the juice itself ... that would not equate to the actual cost. There are other factors which go into ANY product, like fixed costs of the operation and some variable costs as well. That does not even get into some esoterica which would bore most, like the carrying costs absorbed in covering the lei de terco issues. That said, even if we knew the answer ... that is not what translates to our pricing as consumers. The markups by importers/distributors/retailers is what has the greatest impact on what we pay.

I would have thought it was absolutely essential for producers to have a good idea about what their "per bottle" cost is (and how it differs across their line up), and that those "per bottle" costs would include the producer's allocation of fixed costs and all the other factors you allude to - i don't think Jeff was restricting his question to the cork/capsule/label and labor cost.

[Jeff G.]

I realize in the states we have a 3 tier system and having a friend that is a distributor, I see the high mark ups that potentially could get involved.

That being said it still would be interesting to hear the per bottle cost of making a port which would include everything from the crushing/bottling/labeling/advertisement/distributing and retail mark ups.



Tie supply/demand/price in with the bottle cost and the winery should know how much to hold back vs how much to release every year (like the bordelais do. Matter of fact Lafite makes over 30k cases of it's first growth but on good years only releases 50-70% of its stock) It creates an illusion of scarce supply, tied in with a known quantity of demand, allows them to raise prices. So, old time bordeaux lovers are out of the loop and the new money chases the labels.

The same thing can happen to port, you have a product that has a 95+ rating, you hold back supply purposely and the next year you jack up the price.
The dow 2000 is a perfect example that if the symingtons really wanted to, they could hold back their stock of dow 07s to only 50% of production. The secondary market would have went through the roof as people were swooping in to buy at ~140$/btl. However supply kept coming and now I see some stores offering it back at the 70$ release. Cut that supply, create that false sense of low supply, demand will always be around for a 100 pt port, and then in 2011, set the dow release price at 110$ before the wines get rated.



Now if you want to keep your loyal port lovers, I believe in our case, price is the greatest equalizer. I am only willing to pay XXX for something and if i see it run away from me, I'm happy to let it go. (I have not bought fonseca in the past 3 years even though I've bought previously all releases before then)

[Rob C.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

Is there a way that the Symingtons/TFP, or any other producer with a huge stable of vineyards that are likely to be able to yield at least 1 vintage port per year, could cash in on this market? I don't know, but an idea...

[Jeff G.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

Is there a way that the Symingtons/TFP, or any other producer with a huge stable of vineyards that are likely to be able to yield at least 1 vintage port per year, could cash in on this market? I don't know, but an idea...

by definition you'd break the minimum requirements of what would be considered a vintage port.

[Rob C.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

Is there a way that the Symingtons/TFP, or any other producer with a huge stable of vineyards that are likely to be able to yield at least 1 vintage port per year, could cash in on this market? I don't know, but an idea...

by definition you'd break the minimum requirements of what would be considered a vintage port.

What i mean is...if, in everything but the worst vintages, a producer is confident that they will be able to harvest enough grapes from across their vineyards to get a passable VP approved, they could sell what is essentially a promise to provide a bottle of VP in due course, subject to a whole host of clear disclaimers that would allow money to be returned if there's a disaster and none is produced.

The gift itself could be as simple as a voucher or eg: some kind of empty presentation bottle in a fancy Vesuvio-style box that can be handed over at the baptism and later exchanged for a bottle of the real thing...

[Tom Archer]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

This is a huge missed opportunity that the industry would be stupid to ignore.

Yes, it needs a rule change, and the ground beneath vintage may be too hallowed to tinker with; but there could easily be a regulatory change to permit either Crusted or single vintage reserves to be released with their bottling date or vintage date prominently displayed, soon after the event.

The alternative is to authorise properties with a proven track record of excellence (such as Vesuvio) to make a vintage port every year, even when the harvest proves disastrous.

That would enable the proprietors to sell cases of vintage port for christenings, weddings etc. at the time of the event, for delivery later. Exchangeable vouchers could be printed perhaps, to serve as a gift on the day.

The authorisation might stipulate that if the harvest was badly compromised, bottling would be limited to cover their forward obligations only.

Tom

[Glenn E.]

It is not accurate to say that Costco only buys/sells Fonseca.

Yeah, that's why I didn't say that. I said it seems like that's all they buy. I know ours has been carrying Warre's Otima 10 for a while now, too. They also had Quinta do Infantado at one point as I recall. But they carry Fonseca all the time, and I believe that Kirkland Signature is also Fonseca. They even had Fonseca Terra Bella at one point. (Which is known as Terra Prima in Europe and possibly elsewhere.)

[Glenn E.]

But yes, of course alcohol in large amounts over a long period isn't great for someone, neither is drinking large amounts of soda either. The question no one knows is how much is too much, as each person is different.

The point is that "large amounts" of alcohol is dramatically less than "large amounts" of soda, fruit juice, milk, or water. Not only that, but drinking soda doesn't inhibit your thought processes in a way that increases the likelihood that you'll drink more in short order, thus compounding the problem.

Part of the reason that there can't be a good guideline for alcohol is, as you said above and I said before, each person's limit is different. Also, you can build up a resistance to alcohol poisoning over time which is why a relatively heavy drinker like Tom who has a third of a century of practice can easily handle an amount of Port that would put me under the table or possibly even require a hospital visit. (I'm a relative lightweight, as you know.)

None of that means that alcohol is generically safe and possibly beneficial, and to suggest as much is unethical to me. This is a case of "better safe than sorry" - I'd rather be conservative with official recommendations while research is undertaken to prove safe and/or beneficial consumption levels than not offer any guidelines and watch the incidence of alcohol abuse and alcoholism grow.

And even if safe consumption levels can be proven, there's still the spectre of abuse hanging over official guidelines. They'll still have to be conservative, because what is safe and/or beneficial for you or Tom might be dangerous for me. The guidelines will have to be written to the least common denominator, as it were, and that number is going to be far less than what is safe for you or Tom.

[Glenn E.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

This is a huge missed opportunity that the industry would be stupid to ignore.

Yes, it needs a rule change, and the ground beneath vintage may be too hallowed to tinker with; but there could easily be a regulatory change to permit either Crusted or single vintage reserves to be released with their bottling date or vintage date prominently displayed, soon after the event.

The alternative is to authorise properties with a proven track record of excellence (such as Vesuvio) to make a vintage port every year, even when the harvest proves disastrous.

That would enable the proprietors to sell cases of vintage port for christenings, weddings etc. at the time of the event, for delivery later. Exchangeable vouchers could be printed perhaps, to serve as a gift on the day.

The authorisation might stipulate that if the harvest was badly compromised, bottling would be limited to cover their forward obligations only.

All good suggestions.

How is this done in France? I could swear that you can buy "futures" or whatever they're called for each new greatest vintage of the century in Bordeaux every year. Is that because Bordeaux doesn't have the 2-year wait and approval process that Port has?

[Jeff G.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

This is a huge missed opportunity that the industry would be stupid to ignore.

Yes, it needs a rule change, and the ground beneath vintage may be too hallowed to tinker with; but there could easily be a regulatory change to permit either Crusted or single vintage reserves to be released with their bottling date or vintage date prominently displayed, soon after the event.

The alternative is to authorise properties with a proven track record of excellence (such as Vesuvio) to make a vintage port every year, even when the harvest proves disastrous.

That would enable the proprietors to sell cases of vintage port for christenings, weddings etc. at the time of the event, for delivery later. Exchangeable vouchers could be printed perhaps, to serve as a gift on the day.

The authorisation might stipulate that if the harvest was badly compromised, bottling would be limited to cover their forward obligations only.

Tom

very true

and goes back to another thread about vintage declarations and its merit.

Bordeaux declares every year good or bad, and when people buy for marriages/birth years, they simply buy a 2 year future and lock it away and one day it gets delivered.

I would acutally love to have a port en primeur market,as my child is goign to be born in 2011, it'd be great to acutally "buy" something now for delivery later as i know I wouldn't be drinking it anyway immediately.

[Jeff G.]

One further thing that occurs to me - it is now a weekly occurence that someone emails me asking for a good recommendation of a 2010/2011 port for a baptism/wedding/other significant event...to which i have to say "there is nothing released yet"... and then the moment passes and they buy something else.

This is a huge missed opportunity that the industry would be stupid to ignore.

Yes, it needs a rule change, and the ground beneath vintage may be too hallowed to tinker with; but there could easily be a regulatory change to permit either Crusted or single vintage reserves to be released with their bottling date or vintage date prominently displayed, soon after the event.

The alternative is to authorise properties with a proven track record of excellence (such as Vesuvio) to make a vintage port every year, even when the harvest proves disastrous.

That would enable the proprietors to sell cases of vintage port for christenings, weddings etc. at the time of the event, for delivery later. Exchangeable vouchers could be printed perhaps, to serve as a gift on the day.

The authorisation might stipulate that if the harvest was badly compromised, bottling would be limited to cover their forward obligations only.

All good suggestions.

How is this done in France? I could swear that you can buy "futures" or whatever they're called for each new greatest vintage of the century in Bordeaux every year. Is that because Bordeaux doesn't have the 2-year wait and approval process that Port has?

it does

it's a min 2 year wait period much like portugal.

so you can buy 2011 bordeaux futures in april I believe, for delivery in 2013.

So for example in 2002 december I bought a case of laftie 2002 that got delivered in 2004 because it was still in barrel and not bottled yet.

The en primeur systems works like this.

The negociant will goto the bordelais and say I'll be XXX barrels from you now. Then the negociant acts as the distributor to the retail shops with their mark up. The retail shops add their mark up to the futures and you've just locked in your money for 2 years.

[Roy Hersh]

Sauternes and Burgundy also have successful en primeur campaigns in place.

I see NO good reason to change the entire way that Vintage Port has been made, just for the sake of having bottles available earlier for these special occasions. However, the suggestion for an en primeur effort for VP is a far better way to achieve the same goal.

Sadly, a VP en primeur campaign could only be successful IF prices were to increase the way they do when the aforementioned wine types are actually released at higher prices than what they sell for at first or second tranch levels. Given Port pricing dynamics in today's marketplace, I can't see this happening anytime soon, meaning not in this decade and likely not in the next one either.

The closest we get here in the USA, is pre-release pricing and in recent years that's gone by the wayside. From 1992 vintage through 2000, I bought all of my bottles on pre-release, although with 2000 I bought from a UK retailer ... literally, "en primeur." I don't know if that practice continues in the UK today, given the lessons learned by retailers w/ 2000 prices dropping well below first tranch, some years later. That kind of destroyed the campaign for future vintages, imho ... and I don't know that I'd ever go out on a limb that way again with VP.

[Tom Archer]

Sadly, a VP en primeur campaign could only be successful IF prices were to increase the way they do when the aforementioned wine types are actually released at higher prices than what they sell for at first or second tranch levels.

Cash flow is the Achilles heel of the port trade, and the introduction of an advance sale system (call it en primeur or futures if you like) offers very clear benefits for the trade.

Two things need to be in place for this to work however:

1) The acceptance by the IVDP that either some or all properties can produce a vintage port every year, irrespective of harvest conditions.

2) The acceptance by the trade that those investing at an early stage have the right to expect a return on their investment, and that pricing must reflect realisable prices in the secondary market.

In the UK, vintage port release prices have not been supported by the secondary market for thirty years now, in part due to major brewers and others over-investing in VP during the sixties and seventies. However, as that stock clears the system, it is clear from auction prices that there is still a painful gulf between release prices and those at auction.

Unattractive returns have seen corporate investment virtually disappear, and the production volumes of the big names have also fallen, in some cases by 90% over the last 40 years.

The profitability gulf (per bottle) between vintage port and other rubies is immense, and the maths suggests that it would be more profitable to treble VP production volumes and halve the price. Such pricing would bring back the corporate investor who is willing and able to buy by the pallet load - the stock would sell.

That might be a rather big pill to swallow for the producers, and in an era of moderate inflation it is awkward to ask less in cash terms for one declaration than one did for the preceding one.

A forward sale market would provide a legitimate vehicle for discounting, and the investor would also have the fun of gambling on the quality of an upcoming vintage.

Tom

[Jeff G.]

i agree with Tom on this one treble the production, halve the price.

As a forward contract for purchase, the price should also be discounted from expected actual sales in 2 years time.

If a vp went en primeur 2 years earlier at say 40$ a bottle, I would easily be buying 3-4 cases every year of my favorite houses.

instead they get prearrivaled at 70$ and hit the retails at 75-80$, I'm get picky about what I want.

The 09s for instance only had me buying 2 - 6packs because of such pricing.

[Andrew E]

Being a newbie in the port world, it's price that's killing me. This past decade has had "good" harvests and highly rated vintages. So buying brand new bottles of VP at $40-$100 that aren't going to have the taste profile I prefer for at least 20-30 years (the time variable - they might get corked, a power outage causing them to overheat and get ruined, etc) isn't going to make me want to run out and drop my cash. Their are old VP's already in existence, but $200 a bottle isn't any easier than $40-$100, lol.

Tawny is the easiest to handle, but the value proposition changes a ton past a 20 year old, heck even within the 20 year old range. It's hard to find a great value for the money tawny for $40-$50. Some 20 year old tanwies flirt with 30 year old prices.

[Glenn E.]

Being a newbie in the port world, it's price that's killing me. This past decade has had "good" harvests and highly rated vintages. So buying brand new bottles of VP at $40-$100 that aren't going to have the taste profile I prefer for at least 20-30 years (the time variable - they might get corked, a power outage causing them to overheat and get ruined, etc) isn't going to make me want to run out and drop my cash. Their are old VP's already in existence, but $200 a bottle isn't any easier than $40-$100, lol.

Tawny is the easiest to handle, but the value proposition changes a ton past a 20 year old, heck even within the 20 year old range. It's hard to find a great value for the money tawny for $40-$50. Some 20 year old tanwies flirt with 30 year old prices.

Sounds like you're shopping at the wrong stores!

It's pretty easy to find 1980-1985 VPs in the $80-$100 range. No, they're not as mature as a 1970, but many of them are "early mature" and even some that aren't are still drinking very well already. None of those vintages is as good as 1970... but then again you're not paying 1970 prices either.

In the 20-yr old tawny range... there are great ones available in the $40-$50 range! And if you go just a little higher (around $55 usually) you can get some of the finest 20-yr old tawnies available. It's really tough to beat the QPR of a 20-yr old... you just have to know what you like and find the producer who makes it. I've seen Sandeman right around $40, and that's one of the best 20-yr olds available (though not a style I prefer). I've seen Fonseca and Taylor around $45. Porto Rocha is good and routinely in the $48-$50 range. But even Ferreira's Duque de Braganca can be found online in the $55 range, and my personal favorite Ramos Pinto is usually in the $50-$55 range.

At retail, an 30-yr old will normally be closer to $80-$90. A 40-yr old will typically be $120 or more. (Up to $140 for Kopke sometimes.) So the 20-yr olds are still great values, and you can splurge once in a while for a 30- or 40-yr old.

The great thing for us as consumers is that tawnies are even sturdier than VPs, so buying over the internet is just about as foolproof as it can get. No fear involved - look for what you want on WineSearcher.com and order away. Sure, you'll have to pay for shipping, but you probably won't have to pay sales tax so it works out in the end.