http://www.reuters.co.uk/newsArticle.jhtml;jsessionid=C3H4C3TIRYMQGCRBAE0CFEY?type=reutersEdgeNews&storyID=700906
By Ian Simpson VILA NOVA DE GAIA, Portugal (Reuters) - Portugal's River of Gold has lived up to its name for port makers over the centuries, but the lustre is fading for one of the world's most celebrated wines. Sales are down and costs are up in one of the toughest wine-growing environments anywhere. Big supermarkets are squeezing margins for the potent wine from the oldest demarcated region in the world. With the drop in sherry sales in recent years a warning of what can happen to a niche market wine, port makers confess to some worries about the centuries-old trade. "There is definitely a levelling out (in sales) and that is a concern," said Paul Symington, a managing director at family-run Symington, the biggest port wine group. The ruggedness of port's Douro river region "has hit us bang slap in the face, and we suddenly realised we are farming some of the most difficult vineyard terrain in the world", he said. Port houses are looking forward to declaring the wines from the drought-hit 2003 harvest a vintage year in coming weeks. That would be a rare upbeat note for a year when sales fell 4.1 percent, to 411 million euros, reversing an uptrend, according to the government-run Douro and Port Wine Institute. The downturn deepened in 2004, with sales through September off almost 6 percent. PREMIUM STANDS OUT One of the few standouts have been top-quality ports with their fatter margins. They have widened their niche since the early 1990s and expanded a bit to 17 percent of sales in 2003. "The top end ... will continue to grow but it probably won't grow fast enough to overcome perhaps some of the volume reductions in the (cheaper) commodity end," said Adrian Bridge, managing director of Taylor Fladgate. Port differs from table wine in that alcohol is added to halt fermentation after grapes are pressed. It is about 20 percent alcohol, well above the 12 or 13 percent for table wine. Port's image is firmly one of a British drink, lingering on in such names as Sandeman, Churchill Graham and Cockburn. But France is the biggest market, making up almost a third of sales. It consumes mostly cheaper versions drunk as aperitifs, and sales there slumped 5 percent in 2003. The growing role of supermarkets in key markets such as France, Belgium, Portugal and the Netherlands have squeezed margins for cheaper ports that rely on volume for profit, industry executives said. "If you take that 80 percent (of sales) in those four markets, that is where the pressure is," Bridge said. "Margins are tight at that end and are probably going to get tighter." Port grapes are grown in one of the most dramatic wine landscapes in the world, but the breath-taking views of steep terraced hillsides on the winding Douro River in northern Portugal come at a high price. THREE MONTHS OF HELL "Nine months of winter and three months of hell" is the shorthand description for the harsh climate on the Douro, which means "Golden River" in Portuguese. Labour costs have more than doubled in the last five years as wages began to rise to European levels, Symington said. "When Portugal was more of a Third World country, it (wages) was not an undue problem. But now, it (Portugal) is not," he said. Mechanisation is hard in the uneven terrain. Growers are turning to immigrant labour as native workers seek jobs elsewhere. The industry also is worrying about being flooded by 20 million litres of port, equivalent to about four Olympic-sized swimming pools, held by the cash-strapped Casa de Douro. The one-time regulator and union, restructured in February as a registrar for the 30,000 grape growers, wants to sell the wine to help clear its 68 million euros of debt. Port houses fear sales could leave the market awash for years. For Robert Homans, a lanky U.S. pensioner, the clouds were far away as he exclaimed over a three-glass sampling at Vila Nova de Gaia on the mouth of the Douro, where the wine is aged before sale. "Fabulous! It's just like drinking dessert," said Homans, after sampling a tulip-shaped glass of premium port. Question: Was Port ever a big drink in Goa, was it a premium drink - for celebrations etc? -- Cheers, Gabe Menezes. London, England
