Madeira Wine in the 21st Century

As we saw in our first piece, the trend for Madeira wine commercialisation indicates a long-term slow decline in volume, from 1978, but with an out of sequence peak in 2001 (with 2000 being a good year) was followed by a sharp drop in 2002 and a period of slow decline and plateauing at an average of 3.24 million litres per year a CAGR 2002 -2024 of -0.49%.

Less is more?

The increase in value per litre is interesting, this period (2002-24) sees a 2.03% CAGR per year in value per litre, this is a good result given a CAGR in volume of -0.49%. If we adjust for inflation the real increase is 0.45 euros per litre increase, not such an encouraging figure.

Madeira wine production 2015-2024.

IVBAM provide some very useful data for this period[1] Unfortunately the chart in question only goes to 2023, so it was necessary to merge data from 2024[2] as well to produce one complete chart for analysis 2015-2024.

This IVBAM data set is very detailed showing the commercialisation of Madeira wine across all the categories of wines made. It is possible to distil trends on a grape by grape basis, by method of wine maturation (Canteiro or Estufagem) and by the age of wines being commercialised.

From this it is possible to understand where the decline of Madeira wine commercialisation is most pronounced. By contrast it is possible to see which categories of wines are growing. It paints an interesting picture.

[1] commercialisation-of-madeira-wine-by-variety-and-age—2015-to-20246797a22377083.pdf

[2] commercialisation-of-madeira-wine-by-variety-age-and-traditional-mentions-with-an-indication-of-the-year-of-harvest-year-20246797aa9a26941.pdf

Percentage make-up of Canteiro and Estufagem Madeira wine production 2015-2024

Styles of Production, Canteiro and Estufagem[3]

90 to 91% of Madeira wine is produced by the Estufagem[4] process, accordingly 9% – 10% is produced by the Canteiro method. Understanding this difference is crucial to understand what is happening to Madeira wine commercialisation trends. The movements are small but significant as we shall explore.

In simple terms we could consider Canteiro produced Madeira wines to be the single malts of Madeira (aged in wooden casks for several years) and Estufagem to be the blended whisky equivalent in that the wine is made quickly and marketed as a young product.

It is important to note that Canteiro has enjoyed a steady CAGR increase of 2.32%, largely due to a broadening of the category to include more Tinta Negra wines which has a CAGR of 14.53% (2015-2024). By contrast Estufagem treated wines declined by -1.4% CAGR over the same period.

The Madeira wine styles listed below are described in the glossary as part of this series of posts.

Commercialised volumes growth 2014-2024 (by category)[5]

Total Commercial volume CAGR

This table shows selective growth of differing categorisations of Madeira wines. It is important to note that these categories are not mutually exclusive, a Core 4 wine will be a Canteiro produced wine and will likely feature in the “prestige Index” presented later in another posting.

[3] Canteiro means the aging of the wine in wooden barrels in a naturally heated environment to mature the wine over years. Estufagem uses heated tanks to rapidly madeirize – heat the wine in months.

[4] A means of heating the wine in large tanks.

[5] Author analysis including defining a Premiumisation index of Madeira wines

[6] Sercial, Verdelho, Boal, Malvasia

[7] As defined by the author and detailed in a subsequent post

From this table, it is clear to see that Madeira wine patterns of commercialisation are showing a trend towards premiumisation. With the notable example of Frasquira wines the premium segment of Madeira wines is showing steady growth. So, in our comparison model with the Scotch whisky industry, the performance of Madeira wines is losing volume at the low priced and bulk exports for the food industry. Scotch Whisky in 2024 saw a decline in premium malt whisky and a strong uptick in blended whisky production, asking the question whether there is a premiumisation ceiling?

However, as we have noted about 90% of Madeira wine is produced used the Estufagem method and sold as Current wines, modified wines and wines for food ingredients all under 5 years old wines, denominated by sweetness not grape varietal. The grape used is usually Tinta Negra.

Madeira for the Food industry

Madeira produces fortified wines exclusively for the food industry to use. These are wines modified by the addition of salt or sold under strict conditions of how they are to be used in cooking and food production.

These “not for drinking” – cooking wines represent 25% of total production 2015-2024. This category declined by -1.05% CAGR. This accounts for a significant proportion of the overall decline in Estufagem produced wines as they are produced using this process. This wine is largely exported to EU states and we shall address this decline in a post about export markets.

The Noble Grapes

The Noble grapes – “Core 4 – (a shorthand developed for Malvasia, Bual, Verdelho and Sercial)” represents 7.67% of commercialised volumes 2015 -2024 and grew by 1.59% CAGR. These grapes are used almost exclusively for Canteiro wine production.

The rise of Tinta Negra

Tinta Negra is also classified by IVBAM as a Noble Grape when utilised in the Canteiro process.

Tinta Negra as a Canteiro aged wine at 10 years old grew 18.70% CAGR between 2015 and 2024. All categories of Tinta Negra subject to Canteiro maturation grew by 14.53%. This will have included more aged Tinta Negra bottlings and Colheita Tinta Negra bottlings.

This is a solid development, growers like working with Tinta Negra, it is a versatile grape and by using Madeira’s micro-climates and altitudes as well as skilled processing, fermentation and maturation Tinta Negra is now producing 4 styles of wines that are representative of the sweetness of Malvasia or medium sweetness of Boal or the medium dry notes of a Verdelho or off dry notes of a Sercial.

Colheito and Frasqueira wines

Colheita wines grew at a modest 1.51% CAGR 2015 – 2024.

Frasqueira wines declined by – 2.86% CAGR 2015-2024. Volumes are very small and this category seems to be struggling for new releases rather than a shortage in demand.

Overall Madeira volumes 2015-2024 declined by -0.73% CAGR which except for Frasquira was principally a decline in young Estufagem matured wines. By contrast Canteiro matured Maderia wine grew by 2.32%

Prestige Index

Importantly and very encouragingly our Prestige Index[8] of top 30 Madeira wine types grew by 2.96% CAGR. Clearly while there is some slowing in the Ultra Premium market (Frasquira wines), more likely due to a shortage of stock for releases and the Covid Pandemic, 2024 saw strong premiumisation trends for Madeira wines, indicating that unlike the Scotch Malt Whisky segment premiumisation has not (yet?) run its course.

The need to maintain volumes of Madeira wine commercialisation

Madeira continues to lose volumes at the lower end of the market, while Scotch whisky sales of lower value – blended whisky whisky continued to grow as drinkers have in 2024 down traded from more premium products. Clearly for Madeira, learning from the Whisky industry; a balance needs to be achieved with both segments (premium and volume) returning positive growth and that is one of the challenges the Madeira wine industry faces, along with gently increasing the velocity of premiumisation.

Compared to the slumps in global wine production (down by 4.8%) and consumption (down by 3.3%) Madeira wine has held its own from 2015 onwards.

Impact of the 2020 pandemic and recovery

The 2020 volumes of Madeira being commercialised dropped by 16.5% compared to 2019. Canteiro volumes dropped by 40%, Colheita by a similar number and Frasqueira by 31%. The core 4 category declined in volume by 46.5%.

How the volumes have recovered is very interesting indeed. In crude volume terms the overall volume recovery is still in negative territory, and 2024 volumes remains -6.41% lower than in 2015.

It was the decline in local consumption that hit Madeira the hardest according to IVBAM data[9]. The drop from 2019 to 2020 was massive. The fall in exports was significant but not as catastrophic. The premium sector – prestige index was hit disproportionately hard decline by almost 40%. It is self -evident that this sector is very dependent upon purchases being made by tourists visiting Madeira.

The Covid pandemic impact and recovery data looks like this:

Madeira Island (local consumption – commercialisation)

• 2019: 486,513 L
• 2020: 182,769 L
• Change: –303,744 L (–62.5%)

Madeira wine Exports (all other markets combined)

• 2019: 3,162,937 L
• 2020: 2,623,683 L
• Change: –539,254 L (–17.1%)

Madeira Island market recovery 2020-2024

[9] commercialisation-of-madeira-wine-by-market—2015-to-20246797a8e58ca5c.pdf

Consumption in Madeira

In 2021 a recovery begins, but it is still well below pre‑Covid levels, by 2022 tourism rebounds strongly and consumption almost fully recovers and by 2023–2024: Madeira Island consumption exceeds pre‑Covid levels.

Export recovery pattern

Exports

Exports recovered quickly in 2021, returning close to pre‑Covid levels, but during 2022 to 2024, exports largely plateaued, fluctuating but not showing strong growth. Unlike Madeira Island consumption, exports did not surge above pre‑Covid levels.

Using IVBAM data it was possible to model what happened in the pandemic in more detail as the Madeira wine market recovered.

Canteiro commercialisation volumes have bounced back strongly with volume in 2024 being 23% greater than in 2015. Colheita has recovered by 14.5%, the core 4 category by 15%. The key 10-year-old category of wines declined by 24% in 2020, but recovered very strongly and shows a volume increase of 39% in 2024 over 2015.

Tinta Negra at 10 years old increased markedly in 2020, almost doubling, 2021 saw a further 50% increase, followed by no commercialisation in 2022 and 2023, before a very strong set of numbers for 2024.

Frasqueira wines volumes recovered strongly in 2021-2023, before a precipitous decline in 2024 as pent up demand will have exhausted some stocks.

Overall, the recovery of the Madeira wine industry presents a series of mixed messages. It appears that the recovery is partial with overall volumes of low value wines still incomplete, especially in export markets. The prestige category is in a much healthier place.

Again, we must highlight the inconsistent and challenging nature of the export market for Madeira wines particularly for the lower price point wines. A detailed analysis of export activity is provided in a further post.

In summary

In summary, despite the considerable impact of the Covid pandemic in 2020 the Madeira wine industry is fairing well in the 2020s. Premiumisation (our index is presented in the next post) appears to be working, however, we also present a Commercial Importance Index (CII) in the next post which indicates that Madeira wine producers must not allow the volume important low price point segment to decline too rapidly. Why?

Well, the lesson from Scotch whisky is that premium volumes can go into reverse as in 2024 and a value for money offer (blended whisky instead of malt whisky) helped support the overall category. It is too early to conclude that the premiumisation journey has a ceiling, but in difficult economic times drinkers do trade down.