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Published:  23 July, 2008

Earlier this year, Taylor-Fonseca bought Croft and Delaforce Port brands from Diageo. Susy Atkins considers the repercussions of the Douro's biggest acquisition in years

To a superstitious person, the signs weren't great. On 3 January this year, a landslide above the Fonseca Port lodge sent earth and rubble crashing down through the stores, destroying outer buildings, knocking out two huge vats, and sending 550,000 litres of Port flowing down through the Fonseca offices. The electricity was taken out and the computer system ruined. It was, to say the least, a sticky situation. Still, Adrian Bridge, managing director of the Taylor's group, is not one to dwell on strange quirks of nature. In the middle of a deal to secure the Croft and Delaforce Port brands at the time of the landslide, he didn't see it as a serious setback. We were up and running at Fonseca within 24 hours of the disaster,' he says, happy to show members of the press around the site on a sunny day in October. That showed we had a strong management team. Ironically, the landslide made me feel more confident about the acquisitions.' Bridge, a 38-year-old ex-Dragoon Guard, is a no-nonsense, positive kind of chap, one who prefers to see the bottle half-full rather than half-empty'. He may need such optimism: in a world teetering on the edge of recession, with luxury brands looking particularly precarious, he has just added two further Port houses to the Taylor's portfolio. I firmly believe in the future of special category Ports,' he says. We are witnessing huge growth in the quality sector: in the UK there is clear evidence of trading up, with LBV looking particularly strong. The developing markets are exciting, too.' He singles out the Far East, South Africa, Canada and Mexico. Mexico? Why not? If you are sitting in an air-conditioned restaurant in Mexico City, you might well want a glass of Port with your cheese.' The deal to purchase Croft and Delaforce from Diageo was signed just five days before the 2001 harvest began, but negotiations began back in 1998, when Bridge made tentative advances towards the Croft brand. More formal steps were taken in 2000, but Taylor's needed to find another purchaser for Croft Sherry. Gonzalez Byass had shown interest in Croft some years previously, so Bridge travelled to Madrid, in March 2000, to strike a deal with Maurizio Gonzalez Byass. The two companies became partners in an attempt to buy Croft, but negotiations were put on ice (Bridge says kept warm') when the Seagram drinks business was taken over by Diageo. This year the auction procedure began in earnest. The final sale price was e82.5 million: 28.5 million for Croft and Delaforce Ports, and e54 million for Croft Sherry. As a general principle, sharing a brand with another company would seem a potential minefield, primed to cause clashes over marketing and quality control. Bridge concedes it is an unusual arrangement, further complicated by the fact that Diageo has held on to the Croft brandy business (a leading brand in Portugal). But,' he counters, Gonzalez Byass and Taylor's chose each other carefully. We are both family-owned and run, with a new generation in place committed to the future and to developing the brand. It's important to have a common approach and we will be in consultation with each other constantly.' With the two Port brands, Taylor's has gained a 30-40% increase in vineyard holdings, making a new total of 1.1 million vines, including 320,000 planted on low, rolling hills at Croft's Quinta da Roda, which also has a winery. Down river, the company acquired lodge space and another bottling line. It's across the road from Taylor's,' explains Bridge, so we can work two locations with one set of lodge staff.' The winery at Roda, which currently looks very out of date, will be modernised, its old concrete vats replaced by stainless steel. Both modern piston pumps and traditional lagares will be in place by the harvest of 2002 (see Taylor's well-publicised recent research into man versus machine'). And the Taylor's group now supplies Marks & Spencer exclusive-label Ports, a contract inherited under the terms of the purchase. The acquisition is the Douro's highest-profile transaction in recent years. When big takeovers occur, such as Diageo/Seagram, it shakes out the general portfolio and gives smaller companies like ours an exciting opportunity,' says Bridge. The deal was driven by the fact that Taylor's and Fonseca command similar prices and have a similar (top-notch) reputation. The growth in special category Ports throughout the 90s means we need a fuller portfolio than ever before,' Bridge continues. Economies of scale come into it, but we have noted a new requirement to provide different price points and different styles.' So, a shift down-market for the whole portfolio, then? Taylor's and Fonseca are often categorised as first tier, with Croft falling into the third tier and Delaforce in the fourth,' Bridge says. Now we have room to improve the position of the new brands while maintaining the differences between them.' Taylor's will, he claims, try to stay true to the house styles' of the new brands. Importantly, Taylor's aims to streamline the range from each of the four brands, so that each will become better known for one style or another'. Bridge sees this as crucial to the development of the special category Port industry. Why should Delaforce have a full range of Ports?' he demands. Or Croft? In the longer run, the Port industry cannot sustain the number of brands it currently has, all running a full range of styles.' Specifically, this will mean a new focus on Croft's reputation for fine vintage and LBV in a rich, full-bodied, fruit-driven style, plus the vintage character and the Triple Crown Ruby'. But it's what's missing from this list that is interesting: in other words, don't expect to see much - or indeed any - aged Tawny or white Port from Croft in the future. Delaforce, on the other hand - which enjoys a strong market in Europe for its white Port and His Eminence's Choice Tawny - will fly the Taylor's group flag for these styles. The Delaforce Vintage Character and LBV may be phased out, Bridge suggests. So how will this affect the positioning of Taylor's and Fonseca? It won't make a huge impact in the highly developed UK market, apparently, but in countries where entry-level Ports are still supplied by these houses, such as the United States, they will be replaced by Croft and Delaforce brands, such as Triple Crown Ruby. It seems Taylor's and Fonseca will become even more rarefied brands. What is the timescale for all this? Our first task is to build a better distribution system,' explains Bridge, and the development of the brands will follow on.' Perhaps Taylor's is gearing up for more purchases, or a move into other drinks markets, under the gung-ho Bridge? It seems not. No doubt the Port industry will continue to consolidate, but our plate is pretty full right now. And we have no plans at this time to move into any other drinks category.' Not Douro table wine - Bridge believes there is an inherent conflict' between table wine and Port producers for the best grapes. Look out, though, for more innovative Port releases in the future. Bridge is quick to praise the success of Warre's Otima, and doesn't rule out a Port with contemporary styling' from his own stable at some point. We did a 50cl slimmed-down version of Fonseca aged Tawny a while back,' he says, but Otima looks radically different and it has built up into a strong brand very quickly. We can look at ideas like that now, with more Port brands on our hands. It's not a priority, but I wouldn't rule it out one day.'