3.4 Wine Law & Wine Business Flashcards
True or false?
Land ownership in the Douro is not fragmented.
False.
Land ownership in the Douro is very fragmented.
There are around 21,000 landowners with 43 per cent owning less than 0.5 ha and 92 per cent owning less than 5 ha. Most sell their grapes to one of the medium or large producers or to a cooperative. Cooperatives produce around 20 per cent of the wine in the region. Although they are permitted to sell wine under their own brands, the prominence of many shippers’ brands means that most cooperatives sell their wines to the producers. Brokers are often employed as part of the trading of grapes and wine.
True or false?
In Port, there are few producers - only 30 to 35 producing significant volumes.
True.
There are five main groups of producers that make up 80 per cent of sales by volume. Porto Cruz is the largest producer and owns the largest single brand (Gran Cruz), followed by Symington Family Estates which owns Cockburn’s, Dow’s, Graham’s and Warre’s amongst others. Sogrape, Portugal’s largest wine producer, is the third largest. It owns Sandeman, Offley and Ferreira, as well as many non-Port brands in Portugal and other countries. Next is The Fladgate Partnership that owns Taylor’s, Fonseca, Croft and Krohn, and fifth, Sogevinus that owns Burmester, Barros, Cálem and Kopke.
The IVDP (Instituto dos Vinhos do Porto e do Douro) was formed in _____, succeeding the earlier IVP, to govern and represent the interests of wine producers in the Douro.
The IVDP (Instituto dos Vinhos do Porto e do Douro) was formed in 2003 succeeding the earlier IVP, to govern and represent the interests of wine producers in the Douro.
What does the IVDP do?
This inter-professional body controls and supervises the production and trade of wines in the Douro (both unfortified wines and Port).
The IVDP has several responsibilities. Amongst these, it regulates the amount of Port that can be produced in any one year (the beneficio) and holds the register of vineyards as well as companies involved in wine production and shipping. It also controls the volume of Port that can be released onto the market in a year. This is set at a maximum of one third of a shipper’s total stocks. The IVDP also analyses and tastes Port wines to ensure they meet the specifications of the different legally defined Port styles and has a role in the promotion of Port and unfortified wines from the Douro Valley.
Define Beneficio as it is used in Port and how the system works.
The amount of Port must (i.e. grape juice designated for Port) that can be produced in a year is highly regulated in a system called the beneficio. (*Note that the term beneficio refers to both the amount of Port must that can produced and the system itself.)
Each vineyard parcel is classified in terms of its capacity to produce quality grapes for Port, considering factors such as location, altitude, aspect, soil and grape varieties planted. The vineyard parcel receives a numerical value for each one of these factors, and the final total is used to give the parcel a letter. This means that two vineyards in neighbouring locations but planted with different grape varieties would likely gain different scores and possibly different letters. The parcels are given the letters A to I and the letter awarded determines the amount of Port wine that can be made from the parcel; with ‘A’ denoting the vineyards of the highest quality and therefore those that can produce the most Port wine. Vineyards with a rating below F cannot make Port wine, but can be used to make un-fortified wine or distilled into spirits.
The amount of must that can be produced is different every year. It is agreed between the three main bodies: the growers, the producers and the IVDP, and takes into consideration the market demand as well as the current stocks available in the market. The aim of the beneficio system is to keep grape and wine prices stable through its influence on the balance of supply and demand.
Each owner of land is given a card or certificate for each parcel of land that they own. Vineyard owners are legally permitted to trade their beneficio cards, provided that the grapes from the parcel of land are traded alongside the card. In reality, this does not always happen – the grapes that are traded may not always come from that parcel of land.
The beneficio sets the prices of grapes used for Port, and these prices are relatively high (1.20-1.40€ for grapes within the beneficio system, 0.25-0.40€ for grapes outside the beneficio). As vineyard owners can be certain of a set high price for their beneficio grapes, there is much incentive to give lesser quality grapes within any trading of beneficio cards, retaining the best quality grapes for selling outside the beneficio system (without any controls on price, high quality grapes are likely to receive a higher price than lower quality grapes).
On the other side, sometimes Port producers will substitute the inferior grapes they have received from beneficio trading with high quality grapes sourced from their own vineyards (that are not part of their beneficio allocation) to raise the quality of their Port wines. The inferior grapes may be used or resold for un-fortified wines.
Many growers do not make their own Port and make their money purely through beneficio trading. This means that a large amount of beneficio trading is conducted each year. All transactions and payments must be recorded by and made through the IVDP, which monitors and controls the process.
True or false?
The beneficio system has been wildly successful in Port. A number of producers feel it benefits their industry.
False. The beneficio system is a subject of much debate, and a number of producers feel that it does not benefit the current industry.
As demand for Port has declined (see below) the volume of Port permitted to be produced has been reduced to avoid oversupply. At the same time, the total area of vineyards has been allowed to grow, leading to oversupply of grapes for unfortified Douro wines compared to market demand. As prices for these grapes are not fixed by the beneficio the oversupply has led to very low prices. A number of Port producers therefore feel that they are subsidising the industry for unfortified Douro wines by paying artificially high prices for Port grapes.
How are current Port sales in the market?
Port production in 2017 was nearly 82 million litres with sales reaching 75 million litres[i]. After three decades of growth at the end of the 20th century, sales peaked at the millennium and have been steadily declining since. However, there has been an increase in average price, due to increasing sales of premium wines such as age-indicated Tawny Ports, in turn thought to be attributed to increasing quality of production and effective marketing of premium products.
Around __% of Port by volume is exported.
Around 85% of Port by volume is exported.
Where is Port’s largest export market?
France is the largest market (the domestic Portuguese market is the second largest market) particularly for inexpensive styles of Port, which are drunk as an aperitif. The decline in sales volume of Port is mainly due to dropping demand for inexpensive Port in markets such as France and Holland, as other beverages are increasingly being drank as aperitifs.
The IVDP separates Port wines into standard Ruby, Tawny, White and Rosé, and ‘Special Categories.’ What are these Special Categories?
These are all Port wines above basic standard:
Reserve Ruby, Tawny and White, Tawny and White with an Indication of Age, Colheita, Garrafeira, Vintage, Single Quinta, Crusted and LBV.
Wines in the Special Categories make up approximately 23% of volume sales, but 45% of sales by value.
A number of Port producers have diversified into still, unfortified wines while others - like Taylor - have continued to focus solely on Port.
Name one producer who has diversified.
Examples: Symington, Quinta do Noval, Ramos Pinto and Niepoort.
It is hoped that the growing popularity of Douro wines, may introduce new consumers to Port wines particularly in countries which haven’t been traditional markets for Port.
What are some uses for Rosé and White Ports in the market?
Rosé and unaged White Ports also aim to bring new drinkers to the category. Rosé Port can be drunk as an aperitif but it is also marketed for use in cocktails. White Port is also sometimes used in cocktails, but is also often mixed with tonic as an aperitif; its lower alcohol concentration than many spirits and mixers (such as gin and tonic) may be a positive attribute for some consumers.
