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Long Read: What to do about fortified wines' straitened market?

Published:  23 September, 2021

Jacopo Mazzeo looks at what regions such as the Douro and Jerez are doing to survive in a market increasingly hostile to fortified wines and explores whether these efforts are effective. Port, for instance, is heading in two diametrically opposed directions: simplification and (extra) premiumisation, with new categories that span from youth-friendly RTDs to Tawny 50yo and White 50yo. Sherry meanwhile, has just changed a number of its regulations and now embraces unfortified wine.

Alcohol moderation was already firmly in motion prior to the Covid outbreak. Health concerns have become an even greater focus for British consumers as a result of the pandemic however, and are now paramount issues for businesses, according to the latest Mintel British Lifestyle report. For the drinks industry, the trend translates into an increasing demand for lower-abv and lower-sugar products. Clocking in at a higher abv and often with a higher residual sugar than their unfortified counterparts, the likes of Port and Sherry have long suffered the consequences of this tendency.

“It’s a fast-growing trend, albeit from a very small base,” says Benedetto Renda, CEO at Cantine Pellegrino, a leading player within Sicily’s sweet and fortified wine industry. Not only does Pellegrino boast some of the world’s best selling Marsalas, it is also responsible for about 80% of all the grapes grown on Pantelleria island, globally renowned for its sweet and fortified Muscats.

Going dry

So what can the fortified wine world do about this sharp sales volume decline, and have their efforts so far been effective?

For many fortified wine producers, the answer is to take spirit and sugar out of the equation. Pellegrino is purposing increasing amounts of its Marsala and Pantelleria grapes to the production of dry, unfortified wines, which Renda claims have been growing steadily over the past five years. In 2017, Pantelleria dry white accounted for a mere 5.3% of the island’s production; three years later the figure had spiked to 8.5% and Renda believes that Pantelleria’s table wine will reach 30% or 40% in a matter of years.

“We are experiencing the same trend that’s been seen in the Douro,” he says.

With the legendary Barca Velha’s first vintage dating back nearly 70 years, the Douro pioneered table wine production in fortified wine country, yet the success of the region’s dry reds is a much more recent story.

“There has been an extraordinary explosion of quality of these red wines in the last few years,” says Christian Seely of leading Port house, Quinta do Noval. “When I first arrived in the Douro [27 years ago] we were just producing Port. Then, during the nineties we started making experiments with unfortified wine.”

In 2020, the region’s table wine sales were up 130% compared to 15 years ago and in just a decade, the number of companies involved in table winemaking has nearly doubled. This is a remarkable achievement that partially offsets Port’s declining business, down by a whooping 26% since 2006.

Sherry bodegas see in table winemaking a profit opportunity, too. The Consejo Regulador has recently granted producers the right to commercialise unfortified Sherry as part of a wider regulatory revamp that the Consejo itself describes as “a key factor for propelling our designations into the future”.

“Today’s consumers are embracing lower alcohol drinks, so fortifying for the sake of it seems out of step with their needs,” comments Alison Easton, UK marketing director at leading bodega Gonzalez Byass. Once the new regulations will come into play in 2022 (they are still pending regional, national, and EU approval), producers will be allowed to bottle unfortified Sherry, provided that wines reach naturally the required abv, 15% for Finos and Manzanillas, 17% for Olorosos, and other oxidative styles.

“The extension to unfortified wines is the consequence of a number of experiences by local winemakers who are running quality practices in the vineyards aimed to obtain wines at natural strength. If these wines comply with the required minimum strength, then why fortify?” says Consejo president, Cesar Saldaña, adding that the modifications could even lead to welcoming unfortified wines below 15% abv as part of future regulatory revisions.

From premium to RTD

While the overall fortified category might seem to be losing appeal, its premium end is experiencing an opposite trend. “The lower-end has had some difficulties for quite some time, [but] commercially, premium Port is very dynamic,” argues Seely. Last month, the Instituto do Vinhos do Douro e Porto (IVDP) offered producers further opportunities to up their premium game by creating new categories such as 50yo Tawny; 50yo White Port; and the very old Tawny category, destined for wines older than 80 years of age.

Sherry too, has looked at the upper end of the market as part of its recent regulatory modifications, with the launch of new labellings such as single-pago, made with grapes from specific “viticultural districts”; Jerez Superior, produced with fruit from higher-quality vineyards; and Fino Viejo, for finos that are 7yo or older.

Sherry and Port’s new premium categories are designed for an affluent, older audience, yet the fortified universe’s innovation efforts look at the younger segment of the market as well. With its 2018 Marsala Revolution range for instance, Pellegrino explicitly targeted the world of mixology, an avenue that’s long been pursued by Sherry’s Consejo Regulador. “Mixing different styles of Sherry with refreshing drinks such as soda, lime, or tea is a very common practice in the local market,” says Saldaña. “Cocktails are a key part of our business in markets like the US and I believe that it will definitely be a critical factor to help us enroll younger audiences in the UK as well.”

In 2017, Gonzalez Byass’ quest to recruit younger generations led to the launch of Croft Twist, a ready-to-drink (RTD) take on Andalusia’s classic Rebujito, a simple Fino and lemonade highball.

“RTDs are a great new avenue to explore and reach new consumers who previously have not been engaged with the fortified world at all,” says Easton.

“We originally launched Croft Twist in a 75cl bottle, but quickly learned that it was a challenge to find the right place for it on the shelves. The fortified fixture didn’t reach the new target consumers, and the bottle was too big to fit on the RTD fixture which is dominated by single serve offerings. We changed to a 25cl can, and that has opened up a host of new opportunities.”

Port was the latest to enter the RTD category when, last May, the IVDP gave producers the green light for the commercialisation of bottled versions of Port’s classic cocktail, Port & Tonic. Dubbed as Portonic, the opportunity is being swiftly seized by a growing number of houses including Sogrape-owned Offley and Sandeman, Symington’s Cockburn and The Fladgate Partnership’s Taylor, whose CEO Adrian Bridge was instrumental to bringing the RTD project to life.

“There are a number of Port styles that can be mixed with tonic and that are very different to white port, so it’s logical that there is a trial opportunity in other areas,” says Bridge. From more premiumisation and new RTDs, he adds that Port won’t cease innovating any time soon. “You’re likely to see continued developments.”