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Sogrape – a firm with a good vintage

The family behind wine-maker Sogrape has battled through wars and acquisitions to produce of one of the world's most popular wines. Rodrigo Amaral talks to third-generation chairman Fernando Guedes about the firm's international strategy

In the 15th and 16th centuries Portugal was a small, but brave country that carved a place for itself in the world by sailing fearlessly to places where nobody else dared to go. Today it is a charming place at the Western edge of Europe, more renowned for its beautiful beaches, gorgeous food and quality wines than for its international forays.
 
But there still are some Portuguese who are aiming to conquer the world, including Sogrape, a family-owned company based in the North of the country, which produces some of the most famous brands of Portuguese wine. And just like its defiant ancestors, it has moved to extend its influence in the New World with the acquisition of New Zealand winery and brand Framingham in November 2007.

Global expansion
The company has a clear international strategy that has paid off handsomely. In the 10-year period to 2006, Sogrape doubled its turnover, reaching more than €180 million thanks to the production of wines in Portugal, Spain, Argentina and now New Zealand that are shipped all around the world. It has 10 wineries in Portugal, with the capacity to produce more than 52,000 bottles every hour. In the past decade or so Sogrape has modernised and expanded its production, and, under the leadership of the second and third generations of the Guedes family, the company is a leader in the Portuguese wine market.

Sogrape is chaired by Fernando Guedes, who, as the son of founder Fernando Van Zeller Guedes, started work at the family firm in 1952, aged 22. Today his three sons, Salvador, Manuel and Fernando, all occupy positions in the management board. However, the next generation will have to prove themselves before setting foot in the company. An agreement between the three brothers establishes that any future family member will have to accumulate five years of professional experience outside Sogrape before getting into the company. Before that, they can only spend six-month internship periods there.

Sogrape began when a group of 16 friends gathered their savings together in order to create their own winery in 1942. The timing was not ideal, as the main consumer markets of Portuguese wines, particularly the UK, were heavily affected by the Second World War, and local producers found themselves encumbered with high, unsaleable stocks of Douro, Porto and other wines. But the group went ahead anyway, setting up a company called the Sociedade Comercial dos Vinhos de Mesa de Portugal Lda under the leadership of Fernando Van Zeller Guedes, who organised the winery's first vintage. In the 1950s, the Guedes family gradually took control of the company, acquiring a stake of over 50% of Sogrape as the original partnership between Fernando Van Zeller and his friends went through a number of capital re-organisations.

The newly formed enterprise identified Brazil as an alternative market to a war-ridden Europe where to sell its products, while the company's first adventure producing wine outside the Iberian Peninsula began in Argentina in 1995. But its most dramatic coup so far may well have been the Framingham acquisition from beverage giant Pernod Ricard.

By purchasing the Marlborough-based winery, Sogrape claims to be taking forward its strategy of making its presence felt all around the planet. "This is an important step toward turning our strategy of developing high quality wines into concrete reality", said CEO Salvador Guedes at the time. "Framingham is a top quality company with a strong potential to be represented in New Zealand, Australia and beyond, (including) important foreign markets to us like the UK, the US and Canada."

The company is already firmly established outside Portuguese borders, with foreign markets making up 60% of Sogrape's revenues – a total of €115 million in sales. For most of its history Sogrape has dedicated itself to exporting the wines produced in its home wineries, and the company claims its wines can now be found in 120 countries. In some of them, like the US, it has acquired wine distributors, consolidating channels for the distribution of its own brands and those of companies with which Sogrape is associated.
 
But the actual production of wines in foreign countries is a fairly recent development, having first been tried in 1995 when Sogrape acquired Finca Flichman, a traditional producer located in the Argentine province of Mendoza. It took 12 years for the group to extend its international domains, but the company says its adventures abroad are unlikely to stop at New Zealand.
 
"We are paying attention to opportunities that might arise elsewhere", Mr. Salvador Guedes told Families in Business. "We have every interest in expanding our international business. This trend is gaining strength, as the global increase of our sales is obviously supported by a production capacity that doesn't restrict itself to Portugal."

A world famous bottle
In addition to being the main force behind the company's initial years, Fernando Van Zeller was also the man responsible for devising Mateus Rosé, the wine that has since become the company's most successful product and a strong contender for the title of most famous Portuguese wine in the world. Mateus Rosé is easily recognisable for its unique short bottle, which was inspired by the water-carriers used by soldiers during the war that was raging in Europe at the time. The design aimed to differentiate Mateus Rosé from its rivals, a goal that was broadly achieved. The short bottle would be usually stored in front of other wines, increasing the exposure of the brand on the shelves of shops – an extra perk of this simple innovation.

Fernando Van Zeller's marketing instincts were also proved when he decided to send two bottles of Mateus to every Portuguese ambassador and consul around the world with the suggestion that they should drink one and gift the other to someone they knew who occupied some high position in the country where they were based. "We received orders from all around the world as a result," Salvador recalls. Other daring marketing initiatives included the recruitment of international pop icons like Jimmy Hendrix and Elton John to publicise the brand. Mateus was at first exported to Brazil with great success, and it soon spread around the world. The rosé table wine gained a boost after getting access in the 1950s to the UK, which remains one of its main markets until today. Now more than 20 million bottles of Mateus are sold every year, with British drinkers answering for about one quarter of the total, the company estimates.
 
"It was thanks to the increase in Mateus' sales in the 1950s that we created the conditions to diversify our portfolio with other Portuguese wines, in order to take advantage of that initial success," Salvador says. Throughout the years Sogrape has expanded its presence in Portugal, first in wineries in the demarcated Dão region, by the end of the 1950s. The pace of expansion accelerated in the 1980s, when the Quinta de Azevedo winery was acquired, giving Sogrape a foothold in the market of Vinhos Verdes (a type of young wine). In the same decade some famous port brands were added to the portfolio, namely Ferreira and Offley. Sandeman, another name with international projection, was purchased in 2002, expanding the range of port wines produced by Sogrape and also giving the company access to the sherry market.
 
The company has divided its portfolio of products in two lines, one aiming at the domestic market, and the other at international customers. With the latter in mind, Sogrape is investing in the promotion not only of its brands, but also of the image of Portuguese wines as a whole. "Consumers in England or the UK don't know much about the wines of Portugal," Salvador argues. For instance, it is a member of the marketing committee of ViniPortugal, a trade association created to promote Portuguese wines abroad, and other like-minded entities. By doing so, Sogrape follows the road first set by Fernando Van Zeller Guedes, who soon after launching Mateus started a tour of South American and American cities to find buyers for his products.

An independent future
Sogrape also stresses that it is not afraid of being the target of a takeover in a market where consolidation is in the order of the day. With a turnover of €180 million a year, the firm is not among the largest players of the market, and the company readily concedes that mergers and acquisitions are part of a current trend. "The wine market is very atomised nowadays, and the trend is for acquisitions to happen, giving origin to groups that are stronger and more relevant in the international marketplace," Salvador says. But Sogrape believes that its position as Portugal's largest wine producer and the good results posted in the past few years will help it to remain independent of third parties and to keep developing the business while relying on its own strengths.
 
The family actually tried to strengthen its position in the company last year, when investment society Bernardino Carmo & Filho SGPS, SA, which belonged to the Carmo family and held 31.51% of Sogrape's holding company, was put on sale. The Guedes family tried to acquire the company to increase its stake, but was outbid by Portuguese entrepreneur Joe Berardo. Soon rumours were spreading in Portugal that Berardo, who has other interests in the wine market, could try to buy the Guedes' stake at the company. Salvador denied at the time any intention of selling out, and has reinforced the family's desire to carry on with the business. "In the long term, we believe that we can grow even further and carry on honouring the wines of Portugal around the world," he concludes.

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