Despite the challenges posed by the COVID-19 pandemic, the export of Portuguese wine experienced a remarkable surge in 2020, defying expectations. This surge has not gone unnoticed, attracting a fresh influx of foreign investors, particularly from South America and Asia, stimulating the market even more.
Portugal has a diverse viticultural landscape with over 250 indigenous grape varieties across 31 distinctive wine regions. While renowned regions like Madeira, Porto, Douro, and Vinho Verde have already cemented their reputation in the wine world, there are lesser-known areas that present excellent prospects for investment. Among them, one stands out as a genuinely exceptional and undervalued destination — the Azores archipelago. Even UNESCO has recognized the vineyards of the Azores as a World Heritage Site.
The Remarkable Vineyards of Pico
The Azores are located in the heart of the Atlantic Ocean, just a three-hour flight from Lisbon. Among the nine volcanic islands of the archipelago, Pico Island stands out as the youngest and highest, boasting some of the world's most astonishing and inhospitable vineyards.
The winemaking tradition of Pico dates back to the 15th century when the first settlers began planting grapes amidst volcanic stones. They placed soil, brought from neighboring islands, into small basalt cracks. To shield the vineyards from the wind, ocean, and the overall cool climate, stone walls were built around them, reaching about 1.5 meters in height. Over time, the slopes of the Pico volcano became adorned with kilometers of a picturesque mosaic of stone walls, reminiscent of Greece. These dry-stone enclosures, known as 'currais' or 'corrals,' have become iconic landmarks of Pico.
Local winemakers have a saying: "The best vineyards are the ones where you can hear the crabs singing", which highlights the significance of the proximity to the sea. This unique location ensures an abundance of sunshine and optimal maturation for the grapes. Combined with currais, it creates a greenhouse effect and helps Pico's vineyards flourish, producing exquisite and flavorful grapes.
For centuries, Azores wine enjoyed unprecedented popularity in Europe and America. It was in the 19th century when the phylloxera aphid destroyed most of the vineyards, and winemaking in Pico began to decline.
Today, local winemakers, with the government's support, are determined to restore Pico's former glory as the world's wine capital. And everything suggests that this may well happen soon.
The Common Effort for Growth
The Landscape of the Pico Island Vineyard Culture was classified in 2004 as a World Heritage Site by UNESCO, putting it back on the map.
In 2014, acclaimed Portuguese winemaker António Maçanita returned to the island of his childhood to establish a boutique winery. Today, his Azores Wine Company is among the most prestigious and well-regarded wine producers in both the Azores and Portugal.
In 2019, the company started building a new headquarters. This facility spans approximately 1,650 square meters and encompasses areas for production, winemaking, bottling, labeling, and storage. Additionally, the project includes a dedicated space for wine tourism, featuring five apartments and a conference room. The Azores government council recognized the overall investment as being of significant regional interest.
In 2019, during the inauguration of the Azores Wine Company construction site, the President of the Regional Council, Vasco Cordeiro, shared compelling statistics highlighting the remarkable growth of the Azores wine market: "10 years ago, there were only 100 hectares in active production. Nowadays, if we count what is in production and the projects under construction for the recovery of abandoned vineyards, we are talking about over 800 hectares of vineyards."
Today's key players in the market include producers such as Pico Wines, Adega do Vulcão, alongside Azores Wine Company. There are more than 300 members in The Pico Island Wine Cooperative (Cooperativa Vitivinicola Da Ilha Do Pico or CVIP), which exports wine internationally, primarily to the U.S., Canada, and Germany.
"Being a new player in many different markets allows us to experience exponential growth that other producers don't usually see. At this time, we have the U.S. and Canada as our biggest markets", director of Cooperative Losménio Goulart says.
Goulart also shared that CVIP experienced its most successful year in 2019, with a great harvest of 530 tons of grapes, the largest in the past decade. However, in 2022, it saw a significant decline, with only 120 tons of grapes collected on Pico Island. The fluctuation in crop yields highlights the dynamic nature of winemaking and the influence of various factors on grape production.
In 2002, recognizing the significant expansion of the Azores' wine industry in recent years, the Autonomous Portuguese Region of the Azores Parliament approved the creation of the Archipelago's own vine and wine institute, known as the Instituto do Vinho e da Vinha (IVVA), similar to those representing other key Portuguese wine areas such as the Douro and Madeira.
The creation of the IVVA will help raise the quality standards across the Azorean wine industry and promote its image in the national and international markets.
Sustainable wines with unmatched taste
Despite its small size, the Azores wine market is already known for producing wines of exceptional quality. The region's unique climate and volcanic soils give Azorean wines a distinctive flavor and character that sets them apart from wines produced in other areas. “Texture, acidity, and saltiness come together in Azorean wines in a way you can’t replicate,” says Azores Wine Company's co-founder Filipe Rocha.
The region's most commonly grown grape varieties are Verdelho and Arinto, which are used to make white wines. Red wines are also produced in smaller quantities, using grape varieties such as Castelão, Negra Mole, and Touriga Nacional.
Most Azores wineries are family-owned and operated. This fits perfectly into the state principles of the Rural Development Program for the Azores. This program aims to increase the competitiveness of local agricultural production while reinforcing the preservation and restoration of the environment and traditional landscapes.
The Azores producers are known for their traditional winemaking techniques, which involve hand-harvesting grapes and fermenting them in open-top lagares (traditional stone tanks).
To create exceptional and distinctive wines, some Azores producers carve out their niche in the market. They focus on developing unique products that can command higher prices. While some opt for the traditional use of oak barrels to age their wines, others embrace innovation by experimenting with aging their wines in seawater. This unconventional approach adds a distinctive flavor profile to the wines and sets them apart from others.
Grape growing and wine production in Portugal is in high demand with investors showing great interest. The Azores, being one of the country's most underrated regions, is expected to experience significant appreciation in the near future. This year the Azores were named the world's most undervalued travel location. The tourist flow to the islands has grown significantly in recent years and continues to increase rapidly.
Wine tasting is one of the many attractions the Azores offer its visitors, and the market shows an evident need for investment stimulus.
What to Know Before Considering Investing in Wine in the Azores?
Agriculture investments are considered safe and conservative due to the non-volatile nature of farmland, ensuring capital preservation. Specialized funds in this sector typically have transparent and straightforward business models. We have previously discussed the potential of investing in Agriculture in Azores.
However, investing in wine, presents its own challenges.“Investing the agriculture in the Azores is always a challenge because we face a lot of climate-related events that can have a big variation in therms of the number of times it happens in one year and in therms of how strong they are. Those events are becoming more common and have been the main responsible for the lack of productivity that we can see in the vineyards”, the director of CIVP Losménio Goulart explains.
The very climate that imparts the distinctive taste to Azores wine can actually cause problems. Losménio describes, "The climate here is very rough and even the vines complain abou that! There is a big influence coming from the soil and the sea that is for sure, you can sense that when you visit the vineyards and you can see some salt on the rocks or on the leafs and you can understand the influence. It is usually something than can be a plus or also a curse because of the effect it creates around the plant: humidity related problems, sunburns from the salt on the leafs, we have it all”.
Grapes are more fragile compared to other crops, such as olives. Therefore, investing in wine production will be a riskier option, especially in regions with challenging weather conditions.
However, as Losménio points out, the Azores have experienced a surge in interest from international investors in recent years. The heightened attention has already impacted land prices on the small island of Pico. Many anticipate prices to continue to rise in the coming years as the Azores attract more tourists, businesses, and investors. Those who are considering investing in this growing market are better off starting to look for the best options now, before entry prices skyrocket as it happened with Madeira at the peak of its popularity.
If you are more interested in investing in the wine market instead of the more popular hotel investment route, make sure to seek professional help to figure out the specifics of the local market and the challenges that come with the local climate. Another secure option is to explore investment opportunities through specialized funds with prior experience in agricultural investments in the Azores, particularly wine production.
The head of CIVP highlights that while there have been some trades in progress, it remains unclear how these projects will pan out in the long run. According to him, the key lies in finding viable solutions for utilizing the grapes, as failing to do so could result in significant costs. This venture requires healthy companies involved in the transformation process and a market that can accommodate the increasing prices of wines. However, achieving alignment among these three factors is not always straightforward.