Quinta do Vallado (Vallado), a Portuguese vineyard founded in 1716 and situated in the Douro Valley, had been run by the Ferreira family and their descendants for 200 years. It produced Port wine and in the late 1990s high quality table wines. Other recent activities included wine tourism, an onsite shop and own-label olive oil. It was recognized globally as a high-quality wine producer – winning many awards and continued ratings above 90 points (96 times)

by Wine Spectator and Robert Parker in 2020. Over the past twenty years, globalization had become of utmost importance with exports accounting for 40 per cent of its total revenues by 2020. Its geographic reach had expanded tenfold from 5 international markets in 2000 to 48 in 2020, with a sixfold increase in growth rate in the last twelve years.

The challenge was how to continue growing revenues. Vallado could continue to push into international markets but which should it prioritize given it would be competing with the largest wineries in the world? There was also Covid-19 to consider and the long-term impact on the industry. Vallado could concentrate on its premium and super premium wines with high prices and margins but low volumes, or develop entry-level wines with low prices and margins but high volumes, sold through off-trade channels with discount/promotion strategies.

Alternatively, it could remain a niche vineyard.

The Portuguese wine industry Wine production in Portugal had always been an important part of agriculture, related to domestic economic conditions but also with a strong export tradition. In the eighteenth century, Port wine exports were big business for the Portuguese, with Great Britain the most important market. Regulation in the 1930s led to improved wine quality and conditions for wine producers. A slogan at the time was ‘To drink wine is to feed one million people in Portugal.’ When Portugal joined the European Union in 1986 the production of dry wines took off – with the abolishment of the Port lodges’ monopoly wine producers including those in the Douro valley could produce and bottle their own wine: Port or dry Douro wines.

Quinta do Vallado Vallado’s wines were uniquely positioned between the tradition of the ‘Old World’ and the innovation of the ‘New World’. While Port was a traditional Portuguese wine, the Douro region’s dry wines had adopted some of the practices, marketing and mindset of the New World. The Douro winemaking region was declared a World Heritage Site in 2001. In 2003, Quinta do Vallado joined forces with four other vineyards in the region forming the Douro Boys group with the goal of promoting the region’s wine. They pooled their efforts, organizing joint presentations, seminars and tastings. The Boys’ reputation grew globally, recognized by respected critics including The New York Times.

In 2009 a new winery was completed, combining state-of-the art technology with high-quality architectural design; it was one of the most visited places in the Douro Valley.

The Vallado wines Vallado invested in the design of the bottles and the labels, a far cry from the Portugal of the past.

In 2009, Vallado moved from a single national distributor in Portugal to several regional ones. The goal was to be present in each region – this meant getting a bottle of wine into a restaurant would be faster. The same year, they decided to sell directly to large supermarket chains in Portugal – another major change to its operations.

Premium brands Vallado produced unique wines in small volumes targeted at the ‘luxury’ sector – a crucial contribution to the prestige of the Vallado brand and its profitability.

The Vallado Adelaide was the top dry red wine from an old single vineyard. The name was a tribute to the vineyard’s ancestor Dona Antonia Adelaide Ferreira. It was only produced in very special years

(2005, 2007, 2008, 2009, 2011, 2012, 2014) and in small volumes (3,500 bottles). Other premium brands included Vallado Tributa Port 1866 (99 Parker Points and mainly sold in China at a time when the market was strong in luxury) and Vallado ABF Port 1888 (98 Parker Points – launched in 2016 to celebrate the 300th anniversary of Quinta do Vallado. It was a limited edition of 933 numbered bottles – sold at more than €3,000 per bottle).

International markets Two-thirds of Vallado’s production was destined for the domestic market, giving a strong local base.

Portugal’s domestic market was growing progressively

(mainly through tourism, hospitality, restaurants, etc.) leading to steady wine sales. Vallado had initially focused on the domestic market although its market share was fairly small. It was also established in foreign Portuguese-speaking markets (Angola, Brazil, Macau), where it had a strong position and from there expanded into new potential markets

(USA, Canada, UK, China). Brazil and Angola had become priority markets for Vallado wines.

New opportunities included the US, one of Vallado’s largest markets, where a 25 per cent tariff was imposed on imported wines from France, Germany, Spain and the UK in 2019. President Trump had then threatened to raise this tariff to 100 per cent tax on all European wines.

The UK was another potential market for Vallado, but with the country’s withdrawal from the European Union, the long-term effect on taxes and trade regulations was unclear. China was also on the company’s radar – potentially a game-changer for sales of Vallado’s wines as they opened an exclusive Vallado store in November in Wenzhou, although a few months later it was closed due to Covid-19.

Poland was the vineyard’s largest export market in value and volume. It was an example of the benefits of the good relationship with the Portuguese supermarket chains – Jeronimo Martins – that also owned the largest Polish retail chain, with over 3,500 shops.

Questions:
1 What are the opportunities and risks for global strategists in the wine industry?
2 How can Quinta do Vallado continue to grow its revenues? Should it maintain its push into international markets? If so, which markets should be prioritized?
3 How can it compete with the largest wineries in the world to serve the global market?
4 Should it concentrate on:

a) premium and super premium wines with high prices/low volumes or

b) entry-level wines with low prices and margins but high volumes sold through off-trade channels with discount/promotion strategies?
5 Should it remain a niche vineyard?
6 Will Covid-19 have a long-term impact on the industry?