THE PERCEPTION, AT LEAST, is that Portugal is one of the beleaguered states of Europe. It is a nation that couldn’t slow its speed of spending ahead of the big financial crash and became a graveyard of white elephants and ghostly city centres. The newly lain but little-used motorways that stretch arterially – and sometimes arbitrarily – through its rugged landscape seem symbolically to only serve the great exodus.  

It’s surprising then, to see Portugal is port’s only top-five market to be currently showing both volume and value growth. In fact, the latest data from the Instituto dos Vinhos do Douro e Porto (January-September 2013) shows Portugal was up an impressive 7.3% by value for the period. 

So, despite Portugal’s apparent economic weakness, its port sales are fighting fit – and are one of the driving forces of 4.2% total value sales this year. It’s warming to see there are good news stories nestled in the wider gloomy narrative. 

France, with its huge appetite for entry-level tawnies, is the category’s frozen giant. Here, port is a numbers game, with brands jousting over big volumes and small margins. Bottle sales are plugged at a rock-bottom average of €23.57 and volume growth was something talked about before the recession. But in second spot in the value chart for the period is Portugal, where port sells for a respectable €5.02, and where 30% more money was generated for its producers than Holland (traditionally a destination for low-price ruby) and more than half more again of Belgium (another low-price ruby market), the US (ruby, tawny, LBV and vintage) and the UK (ruby, LBV and vintage). 

For some years port producers have been accepting of overall volume decline in favour of value rises. So, for the domestic market to increase output too, even by 2.3%, was impressive. (The keen of eye may note these results do not include Christmas – a key buying time for the category – but looking at 2012’s results, the overall picture is very similar, and there is little to support a view that the trends will change in Q4.)  

So why this renewed optimism in Portugal, and why now? The IVDP’s sales figures discriminate by country, but within that they do not check passports. Tourism is certainly distorting the picture, but to what degree? According to Porto Tourismo, cruise ship passengers have increased 275% to 75,000 in three years and a record six million visitors now pass through Porto airport.  

Low-cost airlines are pilloried for their approach to comfort and service but too little is said for the profound effect they can have on tourism, a city and its industries. 

Indeed there is a feeling in Porto that the spike in tourism is one of the only positives of the recession. With demand for bars and restaurants, optimism in the city is renewed, particularly among Porto’s young, who are now starting to repopulate the city centre. 

“It is natural that the increase of tourism in Porto, and in the region, has caused an increase of port sales,” says Manuel Cabral, IVDP president. “In the past 10 years, the traffic in Francisco Sá Carneiro airport has trebled. The port wine cellars, situated in Gaia, receive approximately 1 million tourists per year. The tourists are not only from abroad but also national tourists.”

Sogevinus ought to know what’s happening locally. Portugal is the group’s top market and makes up a massive 40% of its revenue – which is a lot for a port house. Of that 40%, the Spanish-owned, Portuguese-run group estimates 5% arrives through tourism – in fact Stefano Marello, its international business manager, says tourist sales are fast becoming a significant revenue stream. 

Sogevinus does check passports and reports that, of the 210,000 visitors to its cellars, French, Spanish, Italian and British tourists are the most numerous – perhaps pertinently, all have low-cost, direct airline connections. 

“Cálem is the most visited cellar in Porto and we had a 20%-25% increase this year,” said Marello of Sogevinus. “We also have our Burmester tourist cellars which are open from May to October, the Kopke store and Sogevinus Wine House.” 

Over at Sogrape there are similar reports. Commercial manager Júlio Martins says in Portugal “there is a noticeable growth of premium port sales, no doubt also driven by visitors”. 

He adds: “In our port wine cellars, together with Quinta do Seixo, we welcome around 300,000 guests every year – wine tourism is definitely an important business for Sogrape.” 

The Fladgate partnership’s (Taylor’s, Croft and Fonseca Ports) CEO Adrian Bridge says: “We are reaping great rewards from our investment in wine tourism with The Yeatman producing 34% growth over 2012 figures. These visitors are also looking for port when they go home.”

The domestic trend

Compelling evidence indeed, but let’s not forget the Portuguese. Jorge Dias, president of Gran Cruz, which is owned by French group La Martiniquaise and operates the category’s largest brand, Porto Cruz, says it has increased sales 20% in Portugal this year and is now the third largest domestic brand. “This is a good year for port in Portugal,” he says. “Wine is in fashion for young people. So it is now our opportunity to put port wine back in fashion. Port producers have increased the quality and decreased quantity over the years.

 “Supermarket brands represent 33% of sales worldwide but in Portugal it is 40.5%, which shows that consumers have a connection with port.”

In Portugal, Sogevinus has the Portuguese leader in Cálem, a brand that sells 2.6 million bottles annually in Portugal and recorded volume growth of 9%. But the group’s marketing director, Joana Gonçalves, says there is more to its offering than Cálem: “It is the company’s strategy to work on a continuous improvement in the sales mix, with sales more focused on value than volume, as evidenced by the continued growth over recent years of our brands Kopke and Burmester, in the premium and super-premium segments. ”

Gonçalves reports a “sales recovery” in the domestic market. “We feel more consumers prefer to buy less but in higher quality so the expenditure stays the same but the quality improves. 

“The ‘wine fashion’ is slowly seeping into port, with the Portuguese consumer following the worldwide trend to be more interested in new styles of wine. This is clearly a special product, but there is still a lot to do to change the traditional image of port into something more appealing, interesting and desired by young consumers and also turn it into a product for frequent drinking rather than being only associated with special occasions.” 

Around Porto’s bars and restaurants, cocktails have seen a big push by producers. “We invested a lot in Port & Tonic promotion – mostly with white port but also with rosé,” says Gonçalves. One of the group’s recipes sees Kopke rosé mixed with tonic, lemon, ice mint and Gonçalves says the 50/50 tonic and port ratio means it is a lower-alcohol alternative to a Gin & Tonic –  a drink that is bang on fashion in Porto and Lisbon.

At Porto Cruz’s Terrace Lounge Restaurant & Bar, Dias reports that more port is sold in cocktails than by glass – a sign, he says, that port cocktails are catching on. The brand is heavily tied into cocktail marketing, works with Portugal’s Cocktail Academy on recipes, and has introduced neck collars to advertise cocktail ideas for white and rosé port in his major markets such as France. He says that, while rosé port was only invented in 2009, Porto Cruz now makes 68% of the style’s production.

Portuguese diasporas

The most recent and ongoing ‘brain drain’ of Portugal has added to almost 4-5 million nationals living outside the country. This means there are half as many Portuguese living outside of Portugal as there are in.  

Allied to that, waves of emigration stretching back centuries to the likes of Brazil, Venezuela, France and Luxembourg make it easy to imagine there is a huge, though disparate, group of port loyalists around the world. 

The Symington Group and Sogrape say these communities are important but their group strategies are more broad than specifically tailored towards Portuguese communities. 

But Sogevinus’s Marello certainly believes in targeting Portuguese communities – almost to illustrate the point, he says the second largest city of Portugal is not Porto but Paris.

“There is a part of Newark, New Jersey, that has a lot of Portuguese,” he informs. “We have set up our own export operation there for the East Coast of the US. There are close to half a million diasporas in the US alone, and between the East Coast and wine-producing states of the West Coast and the likes of Texas – which has huge spending power – we feel the US has an enormous potential for growth in the short term.”

Major markets

Marello is not wrong, though a smaller market than Portugal or France, the US is the category’s other star performer for 2013. It is sixth in terms of volume and fifth by value, with a high average bottle price of Ä8.34. The market continues to request higher value Ports and increased a massive 27% by value and 13.5% by volume. “The US at 600,000 cases and the UK at 1 million 9-litre cases are quality-driven markets, but the US has a population of 317 million to the UK’s 70 million so there is so much more potential,” says Marello.

For now, and perhaps ever more, France will be king of volume and, almost consequently, value. “France needs to grow through quality, not volume, which will be a hard transition,” says Marello. “For way too long port has been low price and low margin. It’s a challenge. Even if you increase prices to reflect the costs, it’s not enough. You have to make port a premium product. It’s not associated as a luxury item on the whole. 

“The shift must be achieved through education first of all. Once people understand the price they have to have premium at that price.”

Certainly the signs are that port is growing out of its volume period into an era where value sales are the priority. The average price of a bottle today is €4.57, which is up from €4.37 in 2012 and Ä4.23 in 2009 (IVDP). 

Paul Symington sums up the situation quite neatly: “I believe the days of cheap port excessively discounted are numbered. The companies that specialised in this area are nearly all gone. Even more important, trade stocks are hugely reduced. Cheap port is unaffordable for farmers and producers.”

But there is another view worthy of mention. “We must see the reality of the market. We try to move consumers to the reserve and special categories but we also have the quantity that the market needs,” says Porto Cruz’s Dias. 

“Volumes provide the cash flow for winemakers, which is very important. So it’s not just a question of value it’s a question of volume too. 

“There is only a 15% difference between the highest and lowest price for about 95% of port volumes across all the brands. 

“Supermarket brands are important for the cash flow of all the companies. For the sustainability of the market we must see the volume of port wine. We depend on the wine growers and they depend on the volume.”

Both arguments seem plausible enough and, while Porto Cruz deals in volumes in France, its over-arching strategy is “to give each market what it wants”. So flanking its core offering of entry-level ports is the on-trade brand Dalva and a push in travel retail with higher-end vintages, bottled-matured LBVs and Colheitas. 

The temptation is to say that port cannot continue to operate with two images – especially if it wants to still be seen as a luxury wine. But this is nothing new – look at Bordeaux, an exemplar, if ever there was one, of the quality/quantity tightrope act.  

So for the time being port will take its divergent paths, all the way knowing that the volume course will continue to narrow. All the way hoping that the revenue stream will widen.