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Port houses stung further by increased costs in brandy says Symington Family Estates

Published:  22 November, 2013

Port producers continue to struggle with the large increases in wine brandy used in the port making that is putting serious pressure on their cost base, according to Symington Family Estatesone of the biggest players in the sector.

Port producers continue to struggle with the large increases in wine brandy used in the port making that is putting serious pressure on their cost base, according to Symington Family Estates one of the biggest players in the sector.

It said the cost of brandy which had already increased by €2.60 per litre in 2012 had "sky rocketed" further to reach €3.50 per litre in 2013. This price hike has a knock on effect of adding around €0.15 to each bottle of Port produced. Symington Family Estates said Port producers collectively had to pay €20.8 million more for brandy in 2012 than in 2011.  The sector requires around 16 million litres of quality brandy at each year's harvest.

The rising cost of brandy is the direct consequence of the removal of a European Union subsidy for the distillation of excess wine stocks used by the Port industry. This has been exacerbated by the poor harvests across Europe over the last two years which has meant there are less grapes available for distillation.

In a statement the Symingtons said: "These staggering cost increases have caused immense difficulties in the Douro region where 141,000 people live and work, the vast majority of whom are entirely dependent on Port and wine for their livelihood. They have also placed tremendous strain on Port companies, already facing the major challenges posed by the Europe-wide recession."

Port stock levels, it added, are now at a "historic low" after five consecutive years where demand for Port has outstripped supply. It estimates this year's Port harvest of 70.3 million litres will be below sales levels expected to reach 80.9 million litres.

"Port companies have to manage their stocks with enormous care in order to meet current demand, especially for premium Ports," said the company.

It pointed to recent sales data from the Port Wine Institute that shows Port sales have increased by 4.2% in value to the end of September 2013, whilst volumes have fallen by 2.9%. The trend for premium Port is strong, with sales of premium quality Port up by 12.3% in value in 2013, buoyed by the positive trade and consumer reaction to the 2011 Vintage Port declaration.

"Considering the general economic environment in Portugal and in many other European countries, this is a very robust result for Port," it added.

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