For The Love Of Port

In the USA through the first half of 2007 the overall sales volume of Port is down just under 10% across all categories. But looking at the more important dynamic, which is sales of premium ports, it is evident that there is a subtle difference. A remarkable 64% of the total cases of Port sold in the USA so far this year, have been in the Premium Port categories, with a net decrease of about 8.7% (compared to the same period in 2006) for the Premium Categories alone (Vintage Port, Tawny with an indication of age, LBV, Colheita etc.). Given that the this is the area in which the Port trade derives the greatest margins and profitability, this is a significant decrease. But in the scheme of things, currently the USA only represents 4.4% of the total global market for all Port sales.

Let's have a look at the UK in comparison which is the fifth largest Port market in the world, by volume of cases sold (the USA is 7th). Overall, the UK is only down 8.3% of total cases sold, but its sales of Premium Category Ports (has declined nearly 18% from the same period in 2006. Only 38% of the UK Port sales are in the Special Categories, which means instead of the more expensive Ports like Vintage, the Brits are buying far more Port at the lower end of the spectrum. Of course this does not apply to the many FTLOPers in England who consistently drink only the finest in VPs! There are also significant price wars in the UK with battles being fought over LBV and BOB (buyer's own brand Ports) which if carefully shopped in the UK, can be found much more reasonably priced than in the USA.

Looking at a larger global perspective though, it should be noted that CANADA has the world's largest percentage of sales in the Premium Categories, at 71% of their total Port sales. This is followed by Norway which is in 2nd place at 64.9%. However the USA has the largest total number of cases of Ports sold in Special Categories at just under 117,000 cases, compared to others noted: Canada nearly 70,000 cases, Norway which is just over 4,200 cases and the UK which is almost at 92,000 cases.

The biggest surprise for me was learning that FRANCE of all countries (I know France sells the largest quantity of cases of Port in the world (33.6% market share!), but would anyone guess that they'd have sold almost as much Premium Category Port as the USA (considering their comparative populations) at a striking 114,259 cases which is ONLY 8.2% of all Ports sold. What is even more impressive though, is that France's increase in Special Category sales has amounted to nearly 47% this year over last. Wow! In total, France sold 1.37 million cases of all Ports from Jan. through June of this year, while the USA has only sold 182,000 total cases, the UK 240,000 cases, Holland with 17% of the world's market sold 709,000 total cases of Port (but only 8.3% of those cases were from the Special Categories (hereafter, S.C.) ... about 58,000 cases).

It should be noted that in Portugal, the Motherland ... they're the fourth largest Port market in the world (don't forget they only have about 10 million people there). They have sold 383,000 cases so far in 2007 a pretty impressive number to say the least, but the "tourism purchases" certainly skew their statistics, nonetheless, their S.C. which makes up only 14% of their total sales volume, is steadily growing by 6% and has reached almost 55,000 cases.

Although the numbers are small by comparison to most, New Zealand has seen remarkable growth in their S.C. sales which come to a very respectable 45% of total sales. The S.C. category has grown by almost 198% since 2006, with just under 3900 SC cases sold. Congratulations for a wonderful effort! Conversely, Brazil (Portugal's sister country) has seen a large decline in S.C. Port sales of 15.7%.

From this dizzying view of the numbers, global total case sales for Q1 & Q2 in 2007 have decreased only .4% to about 4,120,000 cases. Of that total, just under 15% represents the worldwide sales of S.C. Port with nearly 614,000 cases sold. The good news for the Port trade is that the S.C. category is growing around the world (so far this year) by 6.2% which is quite positive overall. The key will be to reverse the downward S.C. sales trend in some significant markets like the UK and USA which combine for over 1/3 of the world's S.C. Port sales. Fortunately, the increase in S.C. Port sales by the likes of France, Canada, Holland and Portugal make up for much of the aforementioned decline.

Now in evaluating the "other" key ingredient in the mix ... "Value of the sales" ... which provides a picture as to the dollar (actually Euro) weight of the quantities above ... based on Standard vs. S.C. Ports, I think a picture becomes more clear.

Now let us switch from case sales to "value of the sales of Port."

In the first half of 2007, Canada leads all countries in the world in terms of their percentage of sales value (measured in Euros not dollars) for their S.C. Ports at 82.1%. What does this mean? If you took all of the sales derived from the Standard Ports sold in Canada from Jan. 1 2007 - June 30th 2007, the total amount of sales (money not cases) Special Category Ports came out just above 82% which is remarkable. The fact that this category of sales has increased by 21.8% is telling and makes Canada a VERY important Port market for the Port trade to concentrate on. Maybe that is why their increase of over 20% is just that.

The UK shows an impressive 56.2% of their value of sales of S.C. Ports, albeit this number represents a year-over-year decrease of nearly 25% in the S.C. arena with a total value of approximately 5.7 million Euros. Here is where the disparity between the UK and US really shows up and why so much of the Port trade's attention is being paid to the USA these days: America's Port might shows here, leading the world in terms of the value of their S.C. Port sales with just over 9.5 million Euros. It must be pointed out that there is a decrease in the value of America's S.C. Port sales by 20.4%, however the 9.5 million Euros makes up nearly 80% of the value of all Port sold in the USA.

To put this into further perspective, although France has quadruple the Euro sales volume an all Ports vs. the USA, in terms of S.C. Ports France only shows 6.9 million Euros, albeit they have increased S.C. Port sales by 47%. Nonetheless, that great increase represents only 16% of the value of all Port they sell, which means that 84% is the inexpensive Port styles, much of which is used as aperitifs and for cooking.

I'll let you draw your own conclusions of what all this means. The next time I post in this thread, it will be to provide my view of where prices are going to head, based on this information and other factual market trends effecting Port prices and global sales of Port. I hope you were not drinking too much Port while reading this or it just might make some sense after all.

roy, i assume these statistics are based entirely on new port shipments?
it would be interesting to see what the auction stats are for vintage port for the same time frame, although if i'm not mistaken, ports at auction is mostly an english/us thing.
dave

These stats are directly derived Dave, from the http://www.ivdp.pt website. If you are looking for current auction information/pricing for Ports ... buy an issue of the Decanter Magazine and you shall find what you are looking for ... at least trends and pricing for the vast majority of very well know Port shippers/vintages. Obscure Ports won't be listed and only VPs are.

Given that the first two quarters of 2006 were probably still showing the aftermaths of the VP 2003 sales, it would be interesting to see the comparison of the next two quarters, where there circumstances were more equal (both having only SQVP to sell).

Not based on any statistic, but on personal experience: we noted difficult sales of port last winter, due to the warm weather. Shops were selling far less port during the christmas season, consumers were sticking more towards red and white wines.

To put the canadian numbers in perspective ; the province of Québec ( pop. 7.5 million ) has become the worlds 4th largest market for premium Port .
This , despite the fact , that all Port sold in the province must be sold by the Société des Alcohol du Québec . ( 1.6 billion $ in revenu all wines sold in the 1st trimester . )
Being the only game in town , th SAQ sells Premium Port at outrageous prices ( especialy VP ). The SAQ insists that It sells Port at market value , which is , to say the least , a bunch of crap !!
That being said , as long as québekers are willing to dish out the cash , the SAQ ,( being the profit maker It is ) will not significantly lower Its prices for VP . . .

At the risk of getting slammed over what represents a port, I wonder if these numbers are only Portuguese Ports. If these sales numbers are only Portuguese Ports, and the overall US fortified wine segment is up, it could mean the Portuguese houses are being out competed by Aussies and domestic producers. That would signal a price drop and / or more significant marketing was needed for the Portuguese houses selling in the American market.

On the other hand, if those numbers you cite represent all port-style fortified wines, it could mean tastes are changing. Any price changes would need to be affected by all producers, not just the Portuguese producers. It could also signal price drops, but they would probably be less drastic as the Portuguese producers could sit back and see what the rest of the market was doing.

These figures are only for Portuguese port. They are the official IVDP figures.

I had a feeling that was the case as I had remembered a recent article stating the exact opposite.

Wines & Vines Magazine – July ‘07
http://www.winesandvines.com/search/art ... tent=48458

With sales of American port growing, domestic wineries are perfecting their grape sources and cellar techniques for making it. We interviewed winemakers across the country to assemble tips on how to make high-quality port.

Because fortified wines are lumped into the general market category of "dessert wine," it is difficult to track the specific growth of domestic port-style wine production. However, recent U.S. wine sales indicate that dessert wines now account for 7.5% of all U. S. wine shipments. Dessert wine sales have increased 61% in the last five years.

Just curious: Do you have any idea of the profit margin on a VP versus a bottle of cheap Ruby? I would assume that the high end product is significantly more profitable, but I have been wrong before...

Leaving for Portugal tomorrow!

S

Bryan,

Normally when the folks on this website discuss Port, it is from Portugal ... as it should be. When we mention "port" with a small p, typically the wine is made in Australia, So. Africa, the USA etc. "Stickies" is a reference towards dessert wines from anywhere on the planet, yet I have never seen Port mentioned as such.


Steve,

Your assumption is correct, although the cost of a VP is significantly higher as well as Colheitas and Tawnies with an indication of age where the carrying costs must be absorbed, above and beyond costs typically related to production.

Have a great time in Portugal. Should you want to write up your trip and have it published as a FTLOP "Guest Corner" newsletter article, (and photos) .. I would be happy to assist you.

As this post was written and discussed while I was on holidays with the family, I missed the original discussion. Glad I found it and thanks Roy for an interesting (if not somewhat overwhelming with all the numbers!) read.

I am surprised that Canada is so high up the chain as far as consumption (or at least purchase) of Port goes, in particular the premium ports (SC as you relate to them) being that they are so feaskishly expensive here. As Luc pointed out though, so long as people continue to buy them (not just from the SAQ in Quebec, but all over Canada) there certainly is no reason to lower the price. I suspect that this very facy will continue to drive the price up, not just here but all over the world.

Sounds like France may be on the upswing for SC/premium Port consumption. I wonder if the stupid prices in Bordeaux 1st growth has anything to do with that? As has been mentioned in other posts, comparing 1st Growth Bordeaux vs Vintage Port makes VP look like a steal of a deal.

Todd