Madeira Wine Company, S.A. Business Information, Profile, and History

Company Perspectives:

The Symingtons are very optimistic about the future of Madeira and continue to invest in the production and marketing of their three principal brands: Blandy, Cossart Gordon and Leacock. As the most important shipper of island-bottled Madeira the business is well placed to continue the revival of this most historic wine.

History of Madeira Wine Company, S.A.

Madeira Wine Company, S.A. is the leading producer and exporter of madeira wine, which is produced on the island of Madeira, a Portuguese possession located 400 miles off the coast of Morocco in the Atlantic Ocean. Madeira wine is a fortified alcoholic beverage, similar to port, which is made by combining wine with brandy and other ingredients such as grape juice and heating it for an extended period of time. Much madeira is sold in bulk to France and Germany, where it is used as a cooking ingredient, while the rest is bottled and sold to tourists or exported. The company has been controlled since 1989 by the Symington family, Scottish immigrants who began producing port wine in Oporto, Portugal, in the late 1800s. The Blandy family of Madeira, which controlled the company from 1925 to 1989, continues to own a minority stake. The leading brands produced by the Madeira Wine Company are Blandy, Cossart Gordon, and Leacock. The company also operates the Old Blandy Wine Lodge in Funchal, Madeira, which is a major tourist attraction on the island.

Origins

The production of wine on Madeira dates to the 15th century, when the island was discovered by the Portuguese mariner Joao Concalves Zarco, who gave it its name (meaning "woods") when he landed there in 1420. He found that it was covered with a dense rainforest which was virtually impenetrable, and according to legend Zarco set it afire, after which it burned for seven years until the entire island was covered with a thick blanket of ashes. Zarco was appointed governor and ordered by Portugal's Prince Henry to plant sugar cane, grains, and grapes, for which the nutrient-laden ashes were perfectly suited. Export of wine was minimal until the late 1600s, when the King ordered ships heading across the Atlantic to Portugal's colonies in South America to take on wine at the island. This coincided with the wine shipping business becoming dominated by British immigrants to Madeira, a situation which would remain constant for years to come. Over the next century madeira wine became popular both in South America and in the British colonies of North America, where it was used to toast the Declaration of Independence in 1776. George Washington was also said to enjoy a daily pint of madeira at dinner.

Madeira wine was fortified, which typically consisted of adding brandy to the basic wine produced from fermented grapes. This addition increased the wine's alcohol content and acted as a preservative. The fortification process was introduced in the mid-1700s when the island's wine shippers began using it to help keep the wine from going bad during its long ocean voyage to the Americas. Unlike fortified port wine, which was aged in cool, quiet cellars, madeira achieved its distinctive flavor through stress--a combination of the jostling it got traveling across the Atlantic and the heating it took from the hot ocean sun. The benefits of this process were discovered when an unsold shipment of fortified madeira was returned to the island after traveling across the ocean and back. Henceforth madeira producers asked ships stopping at the island to add barrels of the wine to their holds as ballast so it could travel the seas and gain its distinctive flavor.

In later years the same effect was achieved by heating the wine as part of its production process, typically to a temperature of 120 degrees for a period of three months. A longer heating period at a slightly lower temperature, with a more gradual cooling process, would produce the best grade of wine, and the better types were allowed to age in attics for four or five years. A minimum of 18 months was required for a wine to reach maturity, but the best madeiras were aged for decades. Over time, four main types of madeira came to be produced. These included the dry, lighter Rainwater style, originally developed for export to antebellum southern U.S. plantations; the less dry Sercial and Verdelho; and the darker, richer Bual and Malmsey (all but Rainwater were named for the grape the wine was made from). The quality of the end product was dependent upon the type of grapes used, the kind of fortification, and the aging and heating process.

Banding Together to Cut Costs

Over the years a number of different firms came to produce madeira on the island. In 1913 several leading exporters, Wm. Hinton & Sons, Welsh & Cunha, and Henriques, Camara, & Cia, formed the Madeira Wine Association, which was designed to help its members reduce overhead by pooling costs. The three founding partners became shareholders in the new company, which took full ownership of the assets of each, who remained distinct entities in name only.

In 1925 Blandy Brothers & Co., Thomas Mullins, and Leacock & Co. became additional shareholders in the Association and John Ernest Blandy was named its head. The well-respected Mullins, who was not a wine shipper, became the company's manager. Production was at a low point during this era, with many firms hurt by the impact of American prohibition and the Russian revolution (madeira was extremely popular with the Russian aristocracy), as well as the lingering aftereffects of several vine diseases that had devastated production in the late 19th century. The 1930s and 1940s were also a difficult period, with sales continuing to be dampened by a worldwide economic slowdown and World War II. Following the war the situation improved only marginally as drinking habits changed and fortified wines such as madeira and port fell out of general favor. Madeira wine did find a new market in the Scandinavian countries of Sweden, Denmark, and Finland, however, while the French began to import increasing amounts of a lower-quality madeira made from Tinta Negro Mole grapes for use as a cooking wine. By the 1950s this grape comprised more than three-fourths of the crop produced on the island, and wine produced for bulk imports to France became the primary form of madeira manufactured.

Other companies became partners in the Association between 1925 and the postwar period, including Luiz Gomes da Conceicao & Filhos, T.T. da Camara Lomelino, and Cossart Gordon & Co. Ltd., which came on board in 1953. By this time more than two dozen companies had combined forces in the firm, including all of the island's British shippers and many of its Portuguese ones. The Association continued to be headed by members of the Blandy family, who had lived on Madeira since 1811 and had developed a number of other business interests including shipping, real estate, newspaper publishing, hotel management, banking, and orchid growing. Though different brands were produced using the various shareholders' individual names, in actuality they were bottled from common stocks of wine and blended to fit established styles by the Association's chief blender. The maintenance of separate names was a fiction that the company's sales agents, then numbering more than 70, kept up by use of different business cards for the various brand names, which sometimes caused embarrassment when a single agent pretended to work exclusively for multiple companies.

Beginning in the early 1970s the madeira wine producers' fortunes began looking up after the government took steps to help upgrade the quality of the island's wines. Free grafting of "classical" varieties of grapes was offered for growers who wished to switch to them from Tinta Negro Mole or other forms of produce such as bananas. Some vineyards were lost, however, following the 1974 revolution in Portugal, when democracy was restored to the formerly fascist country. The new government allowed tenant farmers the chance to take control of their land and resell it, and many did, leading to the conversion of many vineyards into housing developments and other uses.

The 1974 revolution also affected the company directly when its bank was nationalized. The bank's new leadership stopped making loans to many businesses, including the Association, which led to problems such as difficulties with its workforce. The older Association directors were soon overwhelmed by the situation and left the company, leaving it in the control of the Blandy and Leacock families. A disagreement about the future direction of the firm led to the Blandy family taking over the Leacocks' shares several years later, which finally helped bring needed stability to the company. During the first few years after the revolution the Association had gone through five managing directors, four financial directors, and four production directors.

In 1979 the Madeira Wine Institute was formed by the Portuguese government, which had the power to regulate most aspects of the industry. The Institute established a set of rules including one requiring that wines contain at least 85 percent of the type of grape shown on the label. The Institute later helped negotiate the standards for wine which were adopted when Portugal entered the European Union in 1986. During this period, the Madeira Wine Association--which changed its name to the Madeira Wine Company (MWC) in 1981--reduced the number of names it used on bottles to about nine from the more than two dozen of earlier years, which greatly simplified the task of the company's chief wine blender.

A New Partner: Late 1980s

Toward the end of the 1980s the Blandys decided to seek outside help in improving worldwide distribution and brand awareness. They approached the Symington family, which they had known for many years, for assistance. In 1988 the Symingtons invested in the company and the following year gained controlling interest when the remaining minority shareholders sold out. The Blandys retained just over 40 percent ownership. The Symingtons manufactured port wine, had an international distribution network, and had developed expertise in high quality manufacturing techniques. The family had come from Scotland in 1882 to Oporto, Portugal, and over the years had developed their business into a leading port winery through the acquisition of several large companies including Warre's, Graham's, Dow's, and Smith Woodhouse. The Symingtons were well regarded within the wine industry for their sharp focus on the business. Though living for more than a century in Portugal, the family remained proud of their U.K. heritage, retaining membership in the Oporto Cricket and Lawn Tennis Club. The Blandys also maintained strong ties to their ancestral homeland.

At this time most of the madeira produced was still being sold in bulk to France and Germany for use as cooking wine. A quarter of this lesser-grade wine was shipped by MWC, which also produced more than half the island's bottled varieties. Much bottled madeira was in fact consumed by tourists to the island, who bought it at a winery tour or to take home, rather than by the inhabitants of Madeira itself. Leading foreign consumers of the company's bottled wines were Britain, the United States, France, Japan, the Scandinavian countries, and Canada.

MWC also operated the Old Blandy Wine Lodge in the center of Madeira's capital of Funchal, which was visited by more than 200,000 people per year. The beautiful and historic lodge showcased the finest wines of the island, and featured a tasting room devoted to vintage madeiras. Wine was produced on the site, and the company also maintained a separate, more functional facility for production of the remainder of its output.

Following the takeover by the Symingtons, efforts were made to increase the prestige of the company's product and broaden its distribution. The three principal brands, Blandy, Leacock, and Cossart Gordon, were promoted, and further efforts were made to induce growers to plant more of the traditional, "noble" types of grapes in place of the lesser varieties that were used to produce bulk-shipment madeira. The Symingtons met some initial resistance when they attempted to change the flavor characteristics of their madeira, making a more "fruity" wine and relying less on the heating process. The Madeira Wine Institute took a dim view of the changes, with its tasting panel continually rejecting samples of Symington-produced madeira. Eventually a workable compromise was reached between the traditional styles and the newer one. Despite the controversy among purists, the company's products became popular with consumers, and MWC's fortunes began to look up under its new ownership.

In the 1990s the Symingtons began a major renovation project at the company's winemaking facility in Funchal, which was completed in 2000. The equipment used for blending and storage of the firm's finer wines was upgraded in anticipation of a growth in interest in bottled madeira, which the Symingtons continued to work diligently to create.

Under the guidance of the Symington family, the Madeira Wine Company was in the best shape it had been in years. The company's improved production facilities and its focus on increasing brand awareness and expanded bottled madeira sales were likely to continue to bring in steady revenues for the firm.

Principal Competitors: H.M. Borges, Sucrs, Lda.; Henriques & Henriques, Lda.; Vinhos Justino Henriques, Filhos, Lda.; Pereira d'Oliveira (Vinhos), Lda.; Vinhos Barbeito (Madeira), Lda.; Silva Vinhos.

Chronology

• Key Dates:
• 1913: Madeira Wine Association is formed by three export companies.
• 1925: Blandy and Leacock firms join Association.
• 1953: Cossart Gordon becomes a shareholder.
• 1974: Following Portuguese revolution, Blandy and Leacock families take control of firm.
• 1981: Madeira Wine Association changes name to Madeira Wine Company.
• 1989: Symington family takes a majority stake in company.
• 2000: Major renovation of wine production facilities is completed.