Pipe dream?

[Miguel Simoes]

Do you know if it is possible to buy a share in a pipe destined for aged tawnies?

Was thinking about how I appreciate the collectibility (and improvemente w age) of Vintage Port and realized that the same doesnt hold true for aged Tawnies. For the most part, you pay for the time that the wine spent in cask, not for how old it is...

One way to get around that would be to be able to buy into a pipe destined for aged tawnies. You could have some bottled and shipped to you whenever you felt like it (or according to some pre-arranged schedule). Would be something that you could leave for your kids/grand-kids.

You would pay some $$, but likely much less than what the aged wine would eventually go for when the time came... Producers would likely value having the cash at hand sooner rather than later, along w the considerable volume they would be selling in one go.

We would love calling it ours, tracking its evolution over time, and hopefully in a few decades being able to drink a fantastic aged tawny without having to suffer the $$ pain... just like we do when buying younger VP looking to cellar it for the long run.

Is this a pipe dream?

[Glenn E.]

You would probably have to pay storage costs over the years as well, which is part of why 40-yr old Tawnies are so expensive. It's not just because they're rare, but because of the time value of money (compounded for 40+ years) and the costs of storing and maintaining the pipe. Plus there's the 1-3% loss per year to the "angel's share" of evaporation.

That said, it does sound like a fun idea!

[Moses Botbol]

Could be doable. I bet a full pipe (550 L) would be about $10,000.00 US. I am sure there would be some Quinta willing to sell, store, and bottle. Even better would be shipping it to the USA

[Glenn E.]

I bet a full pipe (550 L) would be about $10,000.00 US.

In full-pipe quantities? I hope not. That works out to $13.65 per bottle, which is pretty close to full retail for a Ruby Reserve, LBV, or 10-yr old Tawny depending on where you live. And we've all (probably) found VPs in the $20-$25 range before.

I'd expect a full pipe to be no more than about $4/bottle, or around $3000 for the Port itself. Then a bottling charge each time you want some bottled to cover the cost of the bottle (at time-of-bottling current costs) and labor.

But I'm just guessing based on retail prices I see in the market.

[Moses Botbol]

I bet a full pipe (550 L) would be about $10,000.00 US.

In full-pipe quantities? I hope not. That works out to $13.65 per bottle, which is pretty close to full retail for a Ruby Reserve, LBV, or 10-yr old Tawny depending on where you live. And we've all (probably) found VPs in the $20-$25 range before.

I'd expect a full pipe to be no more than about $4/bottle, or around $3000 for the Port itself. Then a bottling charge each time you want some bottled to cover the cost of the bottle (at time-of-bottling current costs) and labor.

But I'm just guessing based on retail prices I see in the market.

Hopefully someone "in the know" will chime in. Been curious on this for a while. I'd think even if an Angel's Share is gone, they would charge on the basis of it being full (unless they were using wine from it already for blending).

[Glenn E.]

I bet a full pipe (550 L) would be about $10,000.00 US.

In full-pipe quantities? I hope not. That works out to $13.65 per bottle, which is pretty close to full retail for a Ruby Reserve, LBV, or 10-yr old Tawny depending on where you live. And we've all (probably) found VPs in the $20-$25 range before.

I'd expect a full pipe to be no more than about $4/bottle, or around $3000 for the Port itself. Then a bottling charge each time you want some bottled to cover the cost of the bottle (at time-of-bottling current costs) and labor.

But I'm just guessing based on retail prices I see in the market.

Hopefully someone "in the know" will chime in. Been curious on this for a while. I'd think even if an Angel's Share is gone, they would charge on the basis of it being full (unless they were using wine from it already for blending).

I was assuming purchase of a "fresh" pipe, so the Angel's Share loss would be our loss.

Purchasing a pipe that is already aged would certainly be more expensive, in which case Moses' $10k guess is probably much closer depending on exactly how much age we're talking about.

[Peter W. Meek]

One issue: what would be the effect of drawing off bottles from this "owned" pipe over the years? Would the increasing air space over the wine be a problem?

I assume that in ordinary circumstances the pipes are used entirely, topped up, or blended in such a way that there is little or no air space.

[Eric Menchen]

Even better would be shipping it to the USA

Do you mean shipping the pipe? That would be against the IVDP rules for shipping Port. But having them do the bottling each time allows them to ship bottles, which is allowed. Of course, if this weren't sold as Port, but just a pipe which happened to have some contents (an eBay trick) ...

[Moses Botbol]

Even better would be shipping it to the USA

Do you mean shipping the pipe? That would be against the IVDP rules for shipping Port. But having them do the bottling each time allows them to ship bottles, which is allowed. Of course, if this weren't sold as Port, but just a pipe which happened to have some contents (an eBay trick) ...

Yup, I meant shipping the pipe. Certainly it can be done when money is being flashed around.

[Miguel Simoes]

Yup, I meant shipping the pipe. Certainly it can be done when money is being flashed around.

Not sure I would want to be the one in charge of taking care of a pipe over decades... am sure that there is plenty of maintenance that goes into it over time. Maybe best to just have the bottles shipped as time goes by...

One issue: what would be the effect of drawing off bottles from this "owned" pipe over the years? Would the increasing air space over the wine be a problem? I assume that in ordinary circumstances the pipes are used entirely, topped up, or blended in such a way that there is little or no air space.

Am not sure about this one... My understanding is that even wo any of it being bottled, as the years go by and the angel's take their share, that more and more of the wine is exposed to air.

As an example, dont think that the pipes of Scion that TFP bottled a few years back had any of that maintenance performed on them. Instead it sounded like the wine was just left alone sitting in the same pipes over many many generations until bottled...

[Andy Velebil]

A pipe of port is roughly 55 cases (12-bottle cases). So from that you could estimate per bottle cost.

Iirc, royal Oporto does or did sell pipes. They will bottle and send it to you when you request it.

[Eric Menchen]

Not sure I would want to be the one in charge of taking care of a pipe over decades... am sure that there is plenty of maintenance that goes into it over time.

I have the tools

[Derek T.]

Certainly it can be done when money is being flashed around.

I don't think you will find any shipper willing to breach the IVDP regulations and send you un-bottled Port no matter how much money you offer them.

Hundreds (possibly thousands) of Douro farmers do exactly what is being suggested by maintaining casks of Port for their own use. That is why we have things like Scion. It is certainly possible, and the oxidation problems referred to by Peter can be overcome by racking the wine into smaller pipes/casks as it evaporates or is bottled. I think the biggest hurdle is finding a shipper who is willing to accept the overhead cost and hassle of keeping separate stocks of wine for themselves and individuals who have bought individual pipes.

This is something that happens with Malt Whisky but is quite a risk to the buyer. You are effectively laying a bet that the cask with your name on it will develop into wonderful juice. In doing that you eliminate the thing that is the primary skill of any wood-aged Port or Whisky maker, the opportunity to blend different casks into the best they can make. Not every cask ends up great, and some will end up being bad. I wouldn't want that to be the outcome after laying a bet on a single cask.

[Moses Botbol]

Hundreds (possibly thousands) of Douro farmers do exactly what is being suggested by maintaining casks of Port for their own use. That is why we have things like Scion.

The farmer be the one that sells it initially?.

[Andy Velebil]

Hundreds (possibly thousands) of Douro farmers do exactly what is being suggested by maintaining casks of Port for their own use. That is why we have things like Scion.

The farmer be the one that sells it initially?.

The farmer, if he is properly licensed, can make Port and later sell it. However, like ALL wine regions in the world, a producer is allowed to make some for personal consumption/use. There is a difference between the two. As anything wanting to be sold later would have to be registered and maintained within the current regulations (or regulations at the time) it was produced.

This gets into a little grey area for the really old stuff from what I've gathered. As the regulations back then were quite a bit different than they are now. Remember the IVP (Now IVDP) is less than 100 years old. And in reality it wasn't until post WW2 where the rules were more standardized as we know them today.

[Miguel Simoes]

Not sure how to quote it, but back in 2009 Adrian Bridge wrote the below on a thread reg the Beneficio system:

"The reason that this all matters is that a bunch of grapes from a Grade A vineyard which has beneficio (i.e. the right to be made into Port) is worth Euro 1,200 per pipe. The same grapes without the licence will be worth Euro 250 per pipe"

Now that the benefício system is over, $1200 should be a high end estimate of what a pipe would cost a shipper...

And another quote from Adrian from a thread that touched on Scion:

"The question over evaporation is interesting, but the posts that have been made assume that evaporation is a linear function that can simply be compounded. This is not the case. Ports will evaporate more in early years and then will reach a level of stabilization where the evaporation will drop to a very low level. This is particularly so of Ports that are not moved."

It seems that the 2-3% tapers off pretty quickly. That is a blessing, otherwise aged tawnies would have to be significantly more expensive...

You are effectively laying a bet that the cask with your name on it will develop into wonderful juice. In doing that you eliminate the thing that is the primary skill of any wood-aged Port or Whisky maker, the opportunity to blend different casks into the best they can make. Not every cask ends up great, and some will end up being bad. I wouldn't want that to be the outcome after laying a bet on a single cask.

But this is what has me concerned the most... it is v relevant and a definite issue w the idea i put forth.

There is definitely an opportunity to be had here though.

As consumers, we would happily put away $$ at 4-6%/year real return whereas a producer has a cost of capital that is much much higher (8-15%?). With such a long time horizon in mind, that compounds really quickly and opens up a big arbitrage to be had if the right structure can be identified. Will have to do some more thinking on this... and would love to hear more from everyone else!

[Andy Velebil]

Now that the benefício system is over, $1200 should be a high end estimate of what a pipe would cost a shipper...

I assure you the beneficio system is alive and well.

What he was referring to was what the rough cost of grapes to make a pipe of Port vs the cost of grapes used to make a pipe of Douro dry wine.

[Rob C.]

Certainly it can be done when money is being flashed around.

I don't think you will find any shipper willing to breach the IVDP regulations and send you un-bottled Port no matter how much money you offer them.

No reason why it should have to be "port"....presumably there is no rule that prevents unbottled fortified wine that happens to be made from grapes grown in the Douro being sold?

[Miguel Simoes]

Now that the benefício system is over, $1200 should be a high end estimate of what a pipe would cost a shipper...

I assure you the beneficio system is alive and well.

You're right, somehow had it in my mind that it had finally been done with... and Adrian's piece on it from a few years back seemed to make such a compelling case for ending it that it just made sense that it would be over by now...

What he was referring to was what the rough cost of grapes to make a pipe of Port vs the cost of grapes used to make a pipe of Douro dry wine.

I didn't read it that way. Seemed to me that he was making the case that the grapes were the same (and similar also the work going into them).

The difference in price was supposedly driven by some vineyards being able to qualify into Port production (less volume than the market could absorb, hence pricing higher than cost) vs others being in excess for Port and fetching whatever the table wine market was willing to pay for them. He was making the case that Port was effectively cross-subsidizing table wine through the Beneficio system.

[Roy Hersh]

I have focused more than one entire Port harvest tour on this exact topic, which is near and dear to my understanding of Douro, grape farming and Duriense alike.

Beneficio may be an outdated system in great need of renovation, but politically, this is a hot potato that nobody is willing to touch. While the system continues to exist to this day, despite the downfall of the Casa do Douro's power, I hope while we are still on this planet, the system does receive a broad overhaul. It would be difficult to do unless some leader is willing to take a stand and create a collaborative think tank or action group that would include regulators, Port shippers as well as Douro farmers -- to tackle this sticky wicket. Getting those 3 groups to agree to a new system is less likely than getting the US Congress' House of Representatives and Senate to agree on nearly anything. But I digress, jokingly.

Adrian did mean that the identical grapes used for Port or DOC Douro wine, had dissimlar pricing and at the time the ratio was about 5:1 (Port vs. DOC) for grapes. His belief that this type of subsidizing is a systemic failure of Beneficio and in need of being fixed, is closely tied to TFP's stance to solely commercialize Port. That being said, it is fascinating to hear Adrian's broader views on this topic. Then again, I have spent entire evenings with some Port producers in recent times, solely focused on this critical matter. The differences in opinion from producers to farmers is stark and I enjoy listening to all views, to learn more about what is a fascinating hallmark that controls so much of what consumers never have to worry about.