Graham Port Bond

[Mads Barnkob]

Hi all

What are your thoughts on the Port Bond offered by Graham?

I have seen it offered at £390 in UK, same price for both 2014 and 2015.

We risk buying a port too expensive prior to knowing its quality, the price is however also low enough so it could be a bargain for some years. Surely a collectors chance of getting 6 bottles at each declaration without the hassle of hunting it down.

Grahams has launched a bond to buy vintage port in the year it was harvested.

You can buy a port bond which can be redeemed 18 months later. In the meantime you will received a personalised certificate to mark the occasion until the vintage port is made.

If the Vintage is not declared the bond holder will receive two cases of Quinta dos Malvedos. In the unlikely event that no Vintage port is made at all during the the year due to extraordinary weather then a full refund or an alternative will be given.

Vintage Port is the ultimate gift for making special family occasions particularly the birth of a child. Port has an extraordinary ability to age gracefully for 75 years and more, developing from a structured, powerful and robust young wine into a sophisticated and elegant wine in middle age and then on to a delicate and ethereal beauty that will continue for decades

It has long been a tradition for special occasions to be marked by the laying down of Vintage Port from the year of the event. Problematically, due to the fact that a ÒVintage yearÓ is normally only declared in the second year after the harvest, the recipient of the gift often has to remain empty handed until sometime after the celebration.

In order to overcome this problem, GrahamÕs are now the first Port company to provide a Vintage Port bond which is available for purchase in the year of harvest. Allowing the purchase of Vintage Port while the wine is still on the vine guarantees that a certain quantity of the wine produced will be reserved for the holder of the bond.

[Tom Archer]

I love the concept of this, but unless the retailers who are taking this up are wrong on the detail, this is £390 for just six bottles.

To my mind that is way over the odds for a blind purchase of vintage, and the alternative of two x 6 Malvedos for the majority of years that are not declared is even worse value. Bearing in mind that late released Malvedos sells for around £20/btl when bought by the case, and a purchase made a decade ahead of time should be a good deal cheaper, we are looking at a package that for non-declared years is worth around £180, and not a huge amount more if the year is declared.

So, sorry guys, but I think you've pitched this a bridge too far. Double the quantities and this bird will fly..

[Mike Meehan]

This is a no-lose proposition for SFE. If nobody buys them, they have lost little - perhaps a tiny fraction of a marketing budget. On the upside, there are a fair few people who know nothing and just want a nice present to gift to someone. I can see various outcomes down the line: people getting calls to say "your port has arrived, do you want it delivered or stored by us in our purpose built facilities for another 19 years (at a cost...)". For those that take delivery, some years later, various cases of their Graham's hitting the secondary market having been stored for those years next to the boiler.

This is not really something designed to offer advanced purchase of a scarce product,so for anyone who knows their port, they will wait until release, try it, and buy if so inclined. And for those that want a convenient wedding or birth gift, they'll add the bond to the "cart", complete their web purchase and get a pretty piece of paper.

[Tom Archer]

This is a no-lose proposition for SFE

Not sure..

If the product being marketed was ephemeral, then pulling a marketing stunt to lure the unwary is all part of life's rich tapestry.

But a top brand of vintage port is about as un-ephemeral as a consumable product can be, where reputations are built up over generations.

It's hard to guess how many people who buy these will subsequently realise just how much over the odds they paid, but I can't help feeling that those who do are not going to be very good ambassadors for Graham's, vintage port in general, or indeed the merchant who sold them the bond..

[Mike Meehan]

It's hard to guess how many people who buy these will subsequently realise just how much over the odds they paid, but I can't help feeling that those who do are not going to be very good ambassadors for Graham's, vintage port in general, or indeed the merchant who sold them the bond..

For sure.

[Roger L.]

A week ago I wrote to Grahams, in Portuguese (perhaps that was my mistake), asking if this offer was available in Portugal and, if so, how much it cost and how I might go about buying it.

No response.

Way to inspire confidence!

[Al B.]

This is a no-lose proposition for SFE

Not sure..

If the product being marketed was ephemeral, then pulling a marketing stunt to lure the unwary is all part of life's rich tapestry.

But a top brand of vintage port is about as un-ephemeral as a consumable product can be, where reputations are built up over generations.

It's hard to guess how many people who buy these will subsequently realise just how much over the odds they paid, but I can't help feeling that those who do are not going to be very good ambassadors for Graham's, vintage port in general, or indeed the merchant who sold them the bond..

Tom,

I have a different view. I'm often asked by friends and colleagues what vinous gift they can buy a god-child, child or grand-child who was born earlier in the year. They know I like port and expect me to be able to say "Oh, the 2015 Quinta do XXX is marvellous, buy him/her 12 bottles of that." When I explain that we won't know until spring 2017 which wines (if any) will be declared their faces drop and they go off and buy the child something else - £1,000 of premium bonds, for example.

With the port bond, it is not the port which is being sold to the consumer that is important but the gift being given to the child and their parents. The fact that port bought in this manner ends up being more expensive than if bought 6 years later at auction when the price dips is irrelevant. What is important is that a gift has been given to commemorate an important date. If the Port Bond was not available the money would be spent either elsewhere or perhaps on port but in two or three years.

I've told one person about the port bond after seeing his face drop when I explained about the delay before knowing whether any vintage port was available. I don't know whether he bought one but I did put him in touch with some of the organisations offering it in the UK.

I like the port bond. I don't think it is intended as a futures hedge for vintage port but is fulfilling a different role in the marketplace. However, I do really like the suggestion above that the merchants who offer the bond could also offer 20 years storage rolled into the up front cost so as to avoid parents from being tempted by little Johnny's case of port lying in the cellar...

Alex

[Roy Hersh]

I have to say, Alex has poignantly put into words exactly how I've felt about this since first seeing this "Bond" launched. Additionally, I never read this as a future's hedge on VP.

[Roger L.]

Aside from Graham's not replying to me, I have a couple of "issues" with this...

First - in theory this sounds like a fine idea, but...
1) I've seen nothing about where all this bond money is to be held for the few years before the bottles are, hopefully, delivered - has anyone seen the fine print? Hopefully it really is a "bond" and the money is held by a third party. They said Enron couldn't fail.
2) I worry a little about declaration time. Sure, if the vintage is duff they won't declare. Sure, if it's excellent, they will declare. But is there no potential for the declare line to get a bit fluffy? "We can declare something and keep the 10 million quid, or not declare anything and have to give it all back". Perhaps that's just me thinking, but the history of the world is littered with decisions made with too much of an eye on the financial, and less of an eye on the quality.
3) This seems to be a "pre-en primeur" deal, but not very well reflected in the price.

I understand the idea of giving wanting to give this certificate, but, perhaps the "quality" wine shops could step up with a "gift certificate" deal of their own - you put the money down, get the certificate which you can trade within, say, 5 years for something that is known really good - perhaps wine, perhaps port, perhaps.....

[Andy Velebil]

Aside from Graham's not replying to me, I have a couple of "issues" with this...

First - in theory this sounds like a fine idea, but...
1) I've seen nothing about where all this bond money is to be held for the few years before the bottles are, hopefully, delivered - has anyone seen the fine print? Hopefully it really is a "bond" and the money is held by a third party. They said Enron couldn't fail.
2) I worry a little about declaration time. Sure, if the vintage is duff they won't declare. Sure, if it's excellent, they will declare. But is there no potential for the declare line to get a bit fluffy? "We can declare something and keep the 10 million quid, or not declare anything and have to give it all back". Perhaps that's just me thinking, but the history of the world is littered with decisions made with too much of an eye on the financial, and less of an eye on the quality.
3) This seems to be a "pre-en primeur" deal, but not very well reflected in the price.

I understand the idea of giving wanting to give this certificate, but, perhaps the "quality" wine shops could step up with a "gift certificate" deal of their own - you put the money down, get the certificate which you can trade within, say, 5 years for something that is known really good - perhaps wine, perhaps port, perhaps.....

I don't see any issues with this program. The Symington Family is a privately held company that has a very long track record. It is also one of the largest companies in the region who are very savvy business people. In other words I don't see them going anywhere in our life time.

This is only being offered in the UK, as far as I know. That means there is likely going to be a very small amount of money at stake from people who chose to do this. It would cost more for the Sym's to make a cheap product in a bad year, in addition to product reputation harm, than it would be to refund the money if it's a year like 1993 where virtually no one declared anything. So there is no worry about getting a poor product.

The problem is, with wine, there is no guarantee that what you buy on futures today will be outstanding 12-36 months later when harvest is over, the wines been make, and the quality assessed. Yet people do this every year with Bordeaux. So why not do something similar for Port?

While I understand your worry, especially given how our news only reports negative things, I believe it's misplaced.

[Al B.]

Aside from Graham's not replying to me, I have a couple of "issues" with this...

First - in theory this sounds like a fine idea, but...
1) I've seen nothing about where all this bond money is to be held for the few years before the bottles are, hopefully, delivered - has anyone seen the fine print? Hopefully it really is a "bond" and the money is held by a third party. They said Enron couldn't fail.
2) I worry a little about declaration time. Sure, if the vintage is duff they won't declare. Sure, if it's excellent, they will declare. But is there no potential for the declare line to get a bit fluffy? "We can declare something and keep the 10 million quid, or not declare anything and have to give it all back". Perhaps that's just me thinking, but the history of the world is littered with decisions made with too much of an eye on the financial, and less of an eye on the quality.
3) This seems to be a "pre-en primeur" deal, but not very well reflected in the price.

I understand the idea of giving wanting to give this certificate, but, perhaps the "quality" wine shops could step up with a "gift certificate" deal of their own - you put the money down, get the certificate which you can trade within, say, 5 years for something that is known really good - perhaps wine, perhaps port, perhaps.....

I too think that this is being offered only in the UK at the moment. I believe that there is a limit on the number of cases which can be "sold" via the bond and that the limit is intended to be small (but I don't know how small). If I scale up the part of the market that I know to the UK volumes as a whole I would guess that fewer than 50 cases per year will be sold as bonds. The bond is an up front payment to Symington Family Estates and there is no third party escrow account. Should SFE fail then your money would be lost. The person buying the bond will have to undertake their own due diligence to decide whether this is a good risk or not. Personally, I would be happy to risk a relatively small amount of money over a three year horizon but that is just my view.

With such a small number of cases sold as bonds, the decision whether or not to declare will not be affected. The decision will still be taken on the quality of the vintage and not for other reasons. There is just too much reputation at stake to make bad declarations. We're reasonably forgiving of an occasional, isolated mistake (why 1991 and not 1992??) but develop a poor track record (Noval 1980-1991) and we'll punish the brand and it will take a long time to rehabilitate it. That's a much more costly mistake than refunding a few bonds.

Plus there are very, very few years where the grape quality has not been sufficient to declare Malvedos. And if I was the donor (or recipient) of a port bond and was told that the vintage I had been bonded was a washout and no vintage port was possible, I would be delighted to accept an offer of port that was two years older and which had been bottled in my year of birth.

I may be being too gung-ho, but I feel that you're worrying unnecessarily. If you are interested in the bonds and want to find out more, why not contact one of the merchants mentioned in the press release (or Seckford Wines, who the UK based members use a lot and can recommend) and ask them? They are geared up to sell the bonds with an active sales force. Graham's aren't really organised to sell via retail channels except for the shop at the Lodge.

[Tom Archer]

I have a different view. I'm often asked by friends and colleagues what vinous gift they can buy a god-child, child or grand-child who was born earlier in the year. They know I like port and expect me to be able to say "Oh, the 2015 Quinta do XXX is marvellous, buy him/her 12 bottles of that." When I explain that we won't know until spring 2017 which wines (if any) will be declared their faces drop and they go off and buy the child something else - £1,000 of premium bonds, for example.

However, I do really like the suggestion above that the merchants who offer the bond could also offer 20 years storage rolled into the up front cost so as to avoid parents from being tempted by little Johnny's case of port lying in the cellar...

I don't argue with the concept, but charging a substantial premium for something that enhances their cash flow seems odd at best..

If the bond included free storage and delivery on the 18th birthday of the child concerned, the deal would look much more attractive..