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Global Port Volume Slips, But Premiumization Well Underway In U.S.

June 5, 2014

The global Port market continues to see a long-term slide in volume, as consumption declines in key European nations and producers look to expand the category’s high end. In 2013, global Port shipments fell 3.6% to 8.7 million cases, according to Impact Databank and the Port and Douro Wines Institute, capping a period in which volume has eroded by 16% since 2005. Until recently, the global value of Port shipments had also been heading downward, shrinking by more than €50 million ($68m), or 12%, from 2005-2011 before gaining back a bit of ground each of the past two years, including a 2.4% bump to €365 million ($499m) in 2013.

“Markets continue to polarize with quality Ports in demand and cheaper, commodity Ports in decline,” says Adrian Bridge, CEO of the Fladgate Partnership, which controls around 14% of the global Port market by volume and 17% by value across its Fonseca, Taylor Fladgate and Croft brands.

“The price of alcohol used to fortify Ports has more than doubled over the past two or three years, causing Port prices to rise in the volume markets and creating some sticker shock,” adds Rupert Symington, joint managing director of Symington Family Estates. “On the other hand, premium Ports, which account for 20%-25% of the global market, have seen healthy growth. There isn’t as much price sensitivity at the premium end of the market.”

With value progress in mind, producers have been focusing on the higher-margin aged tawny, reserve and vintage Port categories. Taylor Fladgate is a leader in aged tawny, with a 59% share of the 40-year-old segment in the U.S., a 29% share of 30-year-old and a 37% share of 20-year-old (overall, Fladgate Partnership controls around 28% of the U.S. Port market, where Kobrand handles its wines). In recent days, the company unveiled Taylor Fladgate 1863 Single Harvest Tawny Port (retailing at $3,700), which follows other luxury Taylor Fladgate tawnies like Scion 1855 (launched in 2010 at $3,200 a bottle) and 1964 Single Harvest Tawny, which debuted this spring at $300.

“Aged tawnies are still a relatively small category, but they’re showing double-digit growth in premium markets like the U.S.,” Symington says. “When I started selling in the U.S. 20 years ago, about one bottle in 10 was old tawny. Now it’s about one bottle in four.”

Reserve Ports like Graham’s Six Grapes, Cockburn’s Special Reserve, Warre’s Warrior are also doing well, Symington says, particularly in the U.S., where premium Port holds a vastly higher share than it does globally, at 60%-70%. Meanwhile, vintage Ports—which have lost some share to tawnies on-premise because of their shorter shelf life once opened—are seeing renewed interest owing to the acclaimed 2011 vintage, released last year. The 2011 vintage has been rated at 99 points by Wine Spectator, making it the highest-scoring vintage since 1994.

At the standard end of the market, producers have sought to extend Port into new audiences and occasions, but progress has been mixed. Fladgate’s Croft Pink, marketed in cocktails, enjoyed a fast start in recent years, but Bridge says that while it’s making further gains in markets like Canada, Brazil and Poland, it’s become a challenge in the U.S. Another key brand eyeing the cocktail segment is Sogrape-owned Sandeman, marketed by Pernod Ricard USA, which has looked to tap the mixology scene with its Founder’s Reserve offering ($20).

For a full report on the U.S. and global Port markets, see Impact’s June 1&15.

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