High production costs and tough regulation hitting Portuguese wine industry hard

Portugal’s wine industry is being decimated by high costs of production and regulation and “something’s gotta give”, says leading Douro producer Paul Symington.

Douro farmers are having to pay costly fees to make Port, although that market is performing well. However producing Douro DOC wines, which aren’t governed by the same regulation or fees, is proving uneconomic as prices achieved don’t cover production costs, Symington said.

Paul Symington

Paul Symington

Paul Symington, joint managing director at Symington Family Estates, called for the industry to ‘wake up and smell the coffee’ in order to protect the Douro region from burdensome regulations and high production costs.

“No-one is speaking up”, Symington told Harpers.co.uk yesterday at London Wine Fair. “The system is really bust – there’s a lot of vested interests and people don’t want to face up to it,” he added, referring to the burdensome and expensive regulations governing Port production. He said that Symington Family Estates, which owns Cockburns, Graham’s and Dow’s among others, had to pay the “fabulously expensive” tariff of almost €2 million to the Port Wine Institute in order to make its Port wines. 

He said the current situation means it is likely that some of the region’s vineyards would be abandoned and revert to scrub. The Douro has a population of 141,000, with 34,000 of those famers, 26,000 of those farm under 1 ha, while 8,000 farm between 1 and 10 ha, making it very difficult for farmers to make a living.

“We’re not talking about the commercial [at Symington] – we’re really doing well, but I care about this. Farmers and wine producers need to make a profit or there will be no Douro,” he warned.

While there is a premium paid for Port grapes, grapes destined for Douro DOC wines are not governed by any kind of regulation, and prices achieved are less than what it costs to grow them.  Recent figures showed Port grapes sell for around €1.25 per kg; while Douro DOC grapes sell at €0.40 per kg. It costs €0.89 per kg to grow the grapes. “It’s not making money, and people have an ostrich mentality about it,” Symington said.

“I believe strongly in the Douro DOC, but it’s not a kid anymore and it should pay its own way.”

Port wine has an average selling price of €4.63 per litre, while DOC wines are at €4.04.

“Within the bizarre and dysfunctional Douro regulatory structure, we’re actually doing really well. There is a great future for Port, but we have inherited this system from 1933,” he said, adding that it was no longer fit for purpose.

He stressed that retailers were responsible for making margin for shareholders and offering customers value, but “are not responsible for the social fabric of an ancient region. We’re idiots if we think they are. It’s up to us.”

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