The Fladgate Partnership and 2010

[DRT]

23-04-2012
Saint George’s Day Announcement

Saint George’s Day, 23rd April, is the date on which Taylor’s and other top Port houses traditionally announce the release of a new Vintage Port.   It has been eagerly awaited by Vintage Port enthusiasts seeking the verdict on the 2010 vintage.

The harvest of 2010 was a productive one in the Douro Valley and yields were relatively high.  The torrential rainfall of the preceding winter created plentiful reserves of ground water.  This meant that the vines, particularly those in well-established vineyards with their more developed root systems, were not deprived of water in spite of the hot, dry conditions which prevailed for much of the ripening season.   The crop was therefore uniformly healthy with full berries yielding plenty of juice.

As a result 2010 produced elegant, well balanced and relatively approachable Ports.  Although these very attractive and expressive wines do not have the tannic ‘grip’ and austerity required for a Vintage Port, they will make exceptionally good material for Late Bottled Vintage.   

Taylor’s has therefore made the decision not to bottle a classic or a single quinta Vintage Port from 2010 and allocate the top wines of the year to LBV.

[DRT]

23 April 2012: Saint Georges Day Announcement

Saint George’s Day, 23rd April, is an important date in the wine calendar. It is the day chosen by Fonseca and other leading Port houses to announce the release of a new Vintage Port from the harvest two years previously.

Throughout the Douro Valley, 2010 was a year of relatively high yields. During the hot, dry summer the vines were able to draw on the abundant reserves of ground water created by the heavy rainfall of the previous winter and were subjected to little stress. This was particularly true of the older vines on Fonseca’s estates of Cruzeiro and Panascal with their extensive root systems. By harvest time, the vines throughout the valley were laden with full bunches of healthy, juicy grapes.

The resulting Ports are expressive and approachable with excellent balance. Their attractive fruit character means that they will make an excellent contribution to the Bin 27 Finest Reserve bland.

Given that the 2010 wines are likely to be early maturing, Fonseca has decided not to bottle Fonseca, Guimaraens or Quinta do Panascal Vintage Ports from this year. The top wines of the year will be set aside for Bin 27 and LBV.

[DRT]

No information about the 2010 vintage is available on the Croft website, suggesting that the story will be the same as those above.

[uncle tom]

Am a little surprised that they're not declaring any SQs - the vintage wasn't great, but it wasn't a disaster either.

I got to try some of Oscar's 2010 juice last week, and whilst not a wine I would recommend for drinking young, it had sound tannins and a full body - good for the long haul IMO..

[Andy Velebil]

Am a little surprised that they're not declaring any SQs - the vintage wasn't great, but it wasn't a disaster either.

I think that part of their press releases really says it all about the actual conditions.

[Axel P]

Allistair told me once where this "tradition" came from. When he took over the company in the 60s he did the first announcement for declaration at this date and referred to this "as it is Taylor's tradition" and since then it is. This is how you build traditions.

Axel

[JacobH]

I know there is always a debate about the extent to which commercial pressures influence declarations (with the shippers always denying it) but, having declared 2009 and with the consensus being that 2011 is in the bag as a full declaration, I can see why they might be less keen to put anything out this year than normal.

I suppose one gap in the TFP’s range is the lack of a “declare-almost-every-year” Vintage Port like Vesuvio which would allow them to put a good Vintage Port even in secondary years in challenging economic circumstances. Perhaps a good use for Eira Velha?

[uncle tom]

One thing that comes to mind though, is that without any SQ's from 2010 to draw on, and assuming a 2011 declaration; the TFP could be a bit thin on SQ stock for the supermarkets going down the line.

It may be that they made generous quantities of the 2008 SQs (I hope so, as they are very good!), but they will then have a four year gap before the next SQ is available, or five years if 2012 fails to come right.

While such a gap is not unprecedented in the history of the Vargellas and Guimaraens bottlings, it has not previously occurred since late releases to supermarkets became routine.

[JacobH]

While such a gap is not unprecedented in the history of the Vargellas and Guimaraens bottlings, it has not previously occurred since late releases to supermarkets became routine.

That’s true. I suppose there was a gap between the 1991 and 1995 SQVPs but I think that was probably just before the big supermarket sales started. But this can’t be that an unusual problem for the Port industry--or any industry dependent on the weather; think of the gap between the 1985 vintage and 1991/2.

[Andy Velebil]

One thing that comes to mind though, is that without any SQ's from 2010 to draw on, and assuming a 2011 declaration; the TFP could be a bit thin on SQ stock for the supermarkets going down the line.

It may be that they made generous quantities of the 2008 SQs (I hope so, as they are very good!), but they will then have a four year gap before the next SQ is available, or five years if 2012 fails to come right.

While such a gap is not unprecedented in the history of the Vargellas and Guimaraens bottlings, it has not previously occurred since late releases to supermarkets became routine.

And/or with a reduced Beneficio those grapes would be better utilized putting them toward your more basic Ports that you sell far more of and is where most of your income is derived from.

[uncle tom]

And/or with a reduced Beneficio those grapes would be better utilized putting them toward your more basic Ports that you sell far more of and is where most of your income is derived from.

Income, possibly - profit, no.

Declared year VP is obviously the icing on the cake, but SQVP probably generates around three times as much profit per bottle than does LBV. LBV, on the other hand, given the volumes sold, is probably the most profitable class of port in the UK.

[Andy Velebil]

And/or with a reduced Beneficio those grapes would be better utilized putting them toward your more basic Ports that you sell far more of and is where most of your income is derived from.

Income, possibly - profit, no.

Declared year VP is obviously the icing on the cake, but SQVP probably generates around three times as much profit per bottle than does LBV. LBV, on the other hand, given the volumes sold, is probably the most profitable class of port in the UK.

But they sell Port in more places than the UK. Thinking globally here, and based off of other stats I know, most larger Port companies bread and butter for profits comes from their basic Ports.

So when the Benificio is reduced and since it wasn't a very good year, as a producer my main concern becomes the consistent large supply of inexpensive Ports I would need to continue to provide to all the markets in my world wide chain (via distributors, etc). That is a huge amount of inexpensive, yet very profitable, Ports I as a company would need to keep flowing.

Remember these inexpensive Ports have to be supplied year round, year in and year out. Anything with a vintage on it is produced in far smaller quantities and requires more "selling" and advertising to get outlets to carry them. Not to mention these upper end Ports also cost more to produce (all aspects from vine to the special capsules and labels ordered in far smaller quantities which drives up price).

Not sure where you're getting your figures of three times the amount of profit for SQVP's than for LBV's, so please do elaborate on how you came up with this amount?

[uncle tom]

There's a lot of fog in the stats - look at the price per litre quoted by the IVDP for any given category and market; and compare that with the actual trade prices, and you will find huge inconsistencies.

What I am pretty certain of, given the production costs; is that sales of standard ports, in their three guises; are essentially exercises in loss reduction, rather than profit creation..

[JacobH]

What I am pretty certain of, given the production costs; is that sales of standard ports, in their three guises; are essentially exercises in loss reduction, rather than profit creation..

I’m not sure I agree with this. If this were the case there just wouldn’t be any Port sold in France or Portugual and brands like Rozés or Ferreira would no longer exist. I don’t doubt the profit margins are tiny but there are lots of companies with established Port markets which are not based on the reputation of Vintage Port.

Remember these inexpensive Ports have to be supplied year round, year in and year out. Anything with a vintage on it is produced in far smaller quantities and requires more "selling" and advertising to get outlets to carry them. Not to mention these upper end Ports also cost more to produce (all aspects from vine to the special capsules and labels ordered in far smaller quantities which drives up price).

Not sure where you're getting your figures of three times the amount of profit for SQVP's than for LBV's, so please do elaborate on how you came up with this amount?

Again, I’m not sure I agree. Looking around at current prices, I see Taylor VP at about £45 a bottle (inc. tax), recent Vargellas at about £27, LBV at about £12 and Ruby Reserve at about £10. I don’t see how an SQVP can cost about £15 more to produce than an LBV; the different in cost of labels and capsules will be measured in pence, not pounds. There isn’t really any marketing for it and SQVP doesn’t have the elaborate set of on-release tastings that new full declarations go through. My understanding as to why Vintage Port was more expensive than normal Port is that mostly it is a numbers game. Only 1-2% of any given parcel of vineyard will be of Vintage quality in any given year so you need a big infrastructure to make it commercially.

I would have thought that the wines which are least economic to release are the very old tawnies which require lots work looking after the wines in the shippers’ cellars and then blending and bottling them in tiny quantities, but then they are compensated by huge prices.

[Glenn E.]

Again, I’m not sure I agree.

He's talking gross profit, not profit per bottle.

A generic ruby Port making $0.50 profit per bottle can still be more profitable for the company than a VP making $20 profit per bottle. (Numbers totally made up.) How? Because the industry sells 50 bottles of Ruby for every bottle of VP, which means that the company made $25 in profit selling rubies but only $20 selling VP.

I would guess that LBV is vastly more profitable (gross profit) than SQVP because so much more of it is sold every year.

[JacobH]

A generic ruby Port making $0.50 profit per bottle can still be more profitable for the company than a VP making $20 profit per bottle. (Numbers totally made up.) How? Because the industry sells 50 bottles of Ruby for every bottle of VP, which means that the company made $25 in profit selling rubies but only $20 selling VP.

I would guess that LBV is vastly more profitable (gross profit) than SQVP because so much more of it is sold every year.

Ah, yes, I completely agree with that; I though Andy was talking about profit per bottle...

[Andy Velebil]

Again, I’m not sure I agree.

He's talking gross profit, not profit per bottle.

A generic ruby Port making $0.50 profit per bottle can still be more profitable for the company than a VP making $20 profit per bottle. (Numbers totally made up.) How? Because the industry sells 50 bottles of Ruby for every bottle of VP, which means that the company made $25 in profit selling rubies but only $20 selling VP.

I would guess that LBV is vastly more profitable (gross profit) than SQVP because so much more of it is sold every year.

Glenn is spot on and understood what I was talking about.

[Andy Velebil]

Again, I’m not sure I agree. Looking around at current prices, I see Taylor VP at about £45 a bottle (inc. tax), recent Vargellas at about £27, LBV at about £12 and Ruby Reserve at about £10. I don’t see how an SQVP can cost about £15 more to produce than an LBV; the different in cost of labels and capsules will be measured in pence, not pounds. There isn’t really any marketing for it and SQVP doesn’t have the elaborate set of on-release tastings that new full declarations go through. My understanding as to why Vintage Port was more expensive than normal Port is that mostly it is a numbers game. Only 1-2% of any given parcel of vineyard will be of Vintage quality in any given year so you need a big infrastructure to make it commercially.

I would have thought that the wines which are least economic to release are the very old tawnies which require lots work looking after the wines in the shippers’ cellars and then blending and bottling them in tiny quantities, but then they are compensated by huge prices.

Actually the costs of corks can vary by more than "pence." I'll use dollars here, corks alone can vary in costs from roughly .25 cents to over $2 per cork depending on their quality rating. That price difference is huge when you're bottling say, 10,000 bottles of VP at $2 a cork versus 10,000 bottles of ruby at .25 cents a cork.

In any wine industry the top product costs infinity more expensive to produce than the basic inexpensive stuff. In fact these top products sometimes become a loss-leader. But they give the reputation a producer has and needs to help sell their other products.

Remember most middle to lower end Ports are not solely coming from the vineyards who's name is on the bottle. Many LBV grapes from larger producers are coming from grapes or fininshed Port they are buying from their suppliers. So their overhead is far cheaper as they don't have to maintain vineyards, labor costs, etc. That's a huge reduction in overhead costs.