Silly Port pricing in the UK

[David Spriggs]

It's sad for me to see some great ports be priced so low. As an example, the 1994 Graham's VP offered at 350 GBP per case. That's $44 per bottle. It's a super wine and is now almost 20 years old. If it were a Bordeaux, given that it comes from a great year and famous pedigree, it would be in the hundreds of dollars per bottle. Sad to see that little respect paid to it, but great for those who are buying.

Another thing I noticed is that appears to be a lot of 1994 VP in stock at the usual wholesalers. One merchant has 25 cases of the Graham's and 14 cases of Taylor, and another has 8 cases of Graham's and 5 of Taylor. That's certainly more than I'm used to seeing, in fact I can't remember seeing so much available. Is this possibly ex-cellars? Are stocks being increased in anticipation of 2014? Maybe the volume has caused prices to retreat just a bit?

[Jeff G.]

It's sad for me to see some great ports be priced so low. As an example, the 1994 Graham's VP offered at 350 GBP per case. That's $44 per bottle. It's a super wine and is now almost 20 years old. If it were a Bordeaux, given that it comes from a great year and famous pedigree, it would be in the hundreds of dollars per bottle. Sad to see that little respect paid to it, but great for those who are buying.

Another thing I noticed is that appears to be a lot of 1994 VP in stock at the usual wholesalers. One merchant has 25 cases of the Graham's and 14 cases of Taylor, and another has 8 cases of Graham's and 5 of Taylor. That's certainly more than I'm used to seeing, in fact I can't remember seeing so much available. Is this possibly ex-cellars? Are stocks being increased in anticipation of 2014? Maybe the volume has caused prices to retreat just a bit?

you forget to tack on the duty and the vat

so 350 GBP per case after duty is 380.4 gbp * 20% or 456.48 GBP for the case assuming 1.6 GBP to USD is 60.864$/btl which can be had at European wine resource at 65$ which also have 12-14 cases of the stuff in stock.

[David Spriggs]

True if I were in the UK. But for export you pay no VAT or duty. With importation fees to the US it would come out to around $55. Still that's so inexpensive compared to other wines. I believe the last time I purchased 1994 Graham's in the UK it was $52, which I though was a good deal, but it seems that prices have continued to drop. GPB is 1.51 today.

That price at EWR is very good (I'd have to add tax / shipping on to that) and they do have a ton of it! Seems like a lot of 1994 Graham's floating around.

[John M.]

Where do you see this on the web? I've looked and cannot find.

Here's and odd one, just this week we bid on a case of 1994 Grahams plus a case of 1994 Grahams in half bottles (effectively 18 bottles) which went for $1,000 + 23%, that's $1,230 or $68/bottle before shipping.

[David Spriggs]

http://www.morganclassicwines.com/

For a little more:
http://www.wilkinsonvintners.com/

I should have made clear that these are case prices and not available on single bottles.

[David Spriggs]

Morgan and J&B also have good prices on the 2000 Graham's. That's one of my favorites!

[Jeff G.]

True if I were in the UK. But for export you pay no VAT or duty. With importation fees to the US it would come out to around $55. Still that's so inexpensive compared to other wines. I believe the last time I purchased 1994 Graham's in the UK it was $52, which I though was a good deal, but it seems that prices have continued to drop. GPB is 1.51 today.

That price at EWR is very good (I'd have to add tax / shipping on to that) and they do have a ton of it! Seems like a lot of 1994 Graham's floating around.

heh you forgot to add the cost of airfare

[David Spriggs]

heh you forgot to add the cost of airfare

LOL!

[Mahmoud Ali]

It's sad for me to see some great ports be priced so low. As an example, the 1994 Graham's VP offered at 350 GBP per case. That's $44 per bottle. It's a super wine and is now almost 20 years old. If it were a Bordeaux, given that it comes from a great year and famous pedigree, it would be in the hundreds of dollars per bottle. Sad to see that little respect paid to it, but great for those who are buying.?

I think you've got it backwards, it's the Bordeaux that has a silly price.

And so I come to my next point, is pricing really a sign of respect? If so, then in many cases, people seem to respect younger ports and Bordeaux better than older, mature one.

Mahmoud

[Moses Botbol]

In general older wines take a hit in the retail market. Locally to me, the older wines end up in the sale bin along with the torn label bottles.

[Al B.]

The interesting question is whether this is a short lived phenomenon or a long term structural issue. The volumes of vintage port which are made and sold in recent years (1994-2009) are much smaller than some of the vintages which are now mature and being drunk (1970-1985). Will we see port prices in general continue to firm as the mature vintages are drunk up and the next generation of mature vintages are available in smaller quantities. 1970 prices have risen considerably in the last few years, will we see something similar happening to 1994 in 10 years?

Is now the time that we should be taking advantage of current pricing for the middle aged ports? In 10 years time, will we look back at this opportunity and wish how much more we had bought?

[Miguel Simoes]

You mentioned below how volumes are now much lower that in the 70-85 period.
Do you have a sense how much lower?
I remember reading that 10.000 cases of T94 were produced, not sure what that would have been in 70-85.
I was doing some v crude estimates of VP price as a function of age and score a couple of weeks back.
Did it for Fonseca and Taylor's and it always seemed like 1970 and 1977 were the lowest priced relative to what the model would have guessed. Am wondering if it is just a issue w the much greater production volumes...

[David Spriggs]

I think you've got it backwards, it's the Bordeaux that has a silly price.

Agreed! I don't buy Bordeaux any more

And so I come to my next point, is pricing really a sign of respect

Well.. now that you bring it up... probably not . Pricing more likely a sign of collectability.

Is now the time that we should be taking advantage of current pricing for the middle aged ports? In 10 years time, will we look back at this opportunity and wish how much more we had bought?

For this wine, I believe so. I can't see the price going down from here, but I don't see it rising much in the near term either. In 10-15 years, I'm sure that it will be drinking significantly better than it is now, and that's typically when the price will start to significantly rise.

[Tom Archer]

But what is a 'silly' price?

Look at the production quantities for the various types of port, and try comparing that with retail prices. That shows that as the price of port doubles, so the amount sold drops by a factor of between four and five fold - quite dramatic.

Consider the producer making and promoting a VP. There are major one-off costs involved in such an exercise, but once they are dealt with, the actual cost of producing a bottle, or an extra bottle, is somewhere in the region of five euros.

So consider the producer who sets out to market 1000 cases at 40 euros per bottle, with one-off costs of 100,000 euros to blend, promote and market the product.

- Total revenue 480,000 (1000 x 12 x 40 euros)

- Less one-off costs 100,000

- Less production cost 60,000 (1000 x 12 x 5 euros)

= Profit of 320,000 euros

Now, given the ratio above, it should be easier to sell 3000 cases at half the price, so:

- Total revenue 720,000 (3000 x 12 x 20 euros)

- Less one-off costs 100,000

- Less production costs 180,000 (3000 x 12 x 5 euros)

= Profit of 440,000 euros

So high release prices for VP not only cost the consumer more, but also damage the producers' profits.

What's a silly price then?

[Bradley Bogdan]

Tom, just asking as a healthy skeptic, where have you gathered your data? I'd be curious to read further into the economics of pricing port/vino in general.

[Tom Archer]

where have you gathered your data?

The IVDP publishes sales volume data for each type of port and the countries to which it is exported. You can then use winesearcher to look up retail prices in the respective markets. There's not enough detail in the IVDP data to make an exact calculation, but you can see that there's a steep fall off in demand as price rises.

Try comparing the IVDP price and volume data for standard ports and reserves - the average export price for reserves is 4.13 euros per bottle, 62% more than for standard ports (2.55 euros). Shipping costs and alcohol taxes narrow the difference to less than 50% in most retail markets, yet globally, standard ports outsell reserves at the ratio of 9.6 to 1

[Bradley Bogdan]

Thanks Tom!