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IVDP sets out strategy for divergent Douro

As sales of Douro wine soar, the president of the Port and Douro Wine Institute has stressed a need for Port to focus on raising value over volume, arguing that the category’s controversial production quota is an important consideration in this mission.

Manuel de Novaes Cabral, president of the IVDP
Manuel de Novaes Cabral, president of the IVDP

IVDP figures for 2014 show that the Port category achieved €366 million in sales compared to €114m for Douro wine. However, IVDP president Manuel de Novaes Cabral noted that the latter, much younger sector was “rising very quickly”, predicting: “If the Angolan market doesn’t have any huge problems this year then in 2015 we expect that Douro wine will rise to one third of the Port wine figure.”

In contrast to Douro DOC wines, Port remains subject to volume restrictions, both in terms of an annual production quota – beneficio – and a second law stating that a house can sell no more than one third of its stock in a single year.

While the beneficio measure in particular is strongly criticised in some quarters as unfairly restrictive, especially since the rise of Douro DOC wine in the last 25 years, Cabral stressed that the quota had an important role to play in supporting value sales, which the IVDP is now prioritising ahead of volume growth.

“The market for fortified wine is not a huge market so if you have a lot of production then the price will fall,” he told the drinks business. “I am not in favour or against; it is the sector that has to decide but we can’t do anything on impulse.”

Against this backdrop, Cabral noted that Port’s special category tiers, which include styles such as LBV, aged tawny and vintage, account for just 20% of total volume sales but 40% of the Port trade’s value as he positioned this upper part of the hierarchy at the heart of the IVDP’s current global strategy.

“Our main purpose is to raise the price of special category Port wine,” commented Cabral, highlighting the UK, US and Canada as particularly key to this mission thanks to these markets’ already relatively high average price for Port.

In stylistic terms, Cabral pointed to the success of recent releases such as Taylor’s Scion and Graham’s Ne Oublie, remarking: “Now there is a movement to increase the old tawny projection, from 10, 20, 30 and 40 year olds to very old tawnies from the 19th century.”

Alongside these rare 19th century releases priced in thousands of euros, Cabral also welcomed the rise of mature examples at high-end but slightly more accessible prices such as Sandeman’s Cask 33, which went on sale this year for around £500, or the £240 Graham’s 1969 Single Harvest Tawny. “In the last two or three years there have been a lot of these projects – more than 15,” he observed.

Turning his attention to the performance and outlook for the Douro DOC category, Cabral remarked: “In the last 10 years it’s been incredible the way that Douro wines have grown. There are interesting projects with interesting new people. Today we have hundreds of oenologists with not only a very good education but also international experience.”

While noting that “the fame of Port wine will always be important for the wines of the region,” Cabral observed: “The main markets for Port and Douro wine are different.”

For Douro wine, Cabral confirmed that the biggest market in 2014 was Angola, followed by Canada, the US and Brazil. By contrast, the Port category is led by France, although this market commands a very low average export price of just €3.63 per litre.

The UK, currently Port’s fourth largest market, accounted for €45m in exports last year with a significantly higher average export value of €5,21 per litre. Sales of Douro wine to the UK remain considerably smaller at €2.5m.

There also remains a considerable distinction between the distribution balance of Port and Douro wine. At the moment Port is exported to around 120 markets, with exports accounting for about 85% of the category’s total sales. By contrast, Douro wine is currently available in around 100 countries, while exports make up just over 40% of total business.

“The first 10 markets for Port wine represent 93% of all sales,” reported Cabral. “For Douro wines it’s almost the opposite, not so concentrated, and the first 10 markets are nearly all outside Europe.”

Presenting these differences as an opportunity for both category, he suggested: “We can open more doors for Douro wine in the main Port markets and we can open more markets for Port in the first markets for Douro wine.”

However, in order to achieve this longer term goal of balancing distribution, Cabral stressed the distinct strategies being employed for each category. “For Port wine our objective is not to grow volume but to grow the median price, to grow special category and the line of value,” he concluded. “Our strategy for Douro wines is to grow both lines, quantity and price.”

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