The value of cork
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Lisbon - When divers salvaged 162 bottles of champagne from a shipwreck at the bottom of the Baltic Sea in 2010, taking a sip when they reached the surface, they were surprised to discover how well the bubbly had aged after almost two centuries under water. With the labels long washed off, researchers had to rely on engravings on the cork stoppers to trace the origin of the 170-year-old loot to champagne houses in France. It was natural they’d call on Corticeira Amorim, the world’s biggest producer of wine corks, to replace the closures.
For Antonio Amorim, Corticeira Amorim’s CEO, the fact that 79 of the bottles were still drinkable is further evidence of the virtues of cork in preserving the world’s finest champagnes and wines. One of the bottles -- a Veuve Clicquot -- later sold for a record 30 000 euros ($31 800) at auction.
It’s a point he’s keen to drive home as he takes steps to restore faith in the natural resource, which lost some of its allure in the 1990s and early 2000s because of a contaminant in a fraction of cork stoppers that produces a “corked” taste, spoiling a tiny percentage of wines distilled every year, according to the Cork Quality Council, a non-profit organisation. The advent of synthetic stoppers and screwcaps has challenged producers like Corticeira Amorim to improve their product and explore new sources of revenue.
“This proves that there is only one product in the world that is able to ensure the quality and longevity of wines and champagne” Amorim, 49, said in an interview in Mozelos, northern Portugal, where the company founded by his great grandfather in 1870 is based. “That champagne wouldn’t have survived with plastic or aluminium caps.”
Cork is a major export for Portugal, which produces about half of the world’s cork and ships about 940 million euros a year in cork-based products abroad, according to the Portuguese Cork Association, a consortium of cork growers and manufacturers. Cork stoppers for wine and champagne make up the bulk of these exports.
Corticeira Amorim briefly considered also moving into plastic and metal alternatives before deciding to stay with what it knows best. The company has spent about 200 million euros on finding a way to produce contaminant-free natural cork stoppers and develop other products ranging from flip-flops to lightweight flooring solutions for high-speed trains.
It’s also expanded into cork-based insulation materials and surfboards.
“We decided to stick with cork because we knew our market would have a lot of room to grow,” he said.
Last year, Corticeira Amorim claimed to have become the first cork company to produce a taint-free natural cork stopper, a laborious process that requires all of the corks to be individually screened on the production line to eliminate the risk of contamination. The new NDtech corks are currently used in icon and ultra-premium wines but the company’s goal is to scale up production in coming years to supply most of the wine industry.
Rising demand from wine consumers in the US and China is boosting sales. Corticeira Amorim’s revenue rose 6 percent last year to a record 641 million euros, marking the seventh consecutive year of growth.
“Demand for premium products in the US and other markets is increasing, and wines that use cork are perceived to be more premium than others,” said Jose Mota Freitas, an analyst at Caixa-Banco de Investimento. “Demand for screwcaps has been falling partly because of the introduction of higher-quality cork stoppers.” Mota Freitas has a neutral rating on the stock and a price target of 10 euros a share.
Corticeira Amorim has been cutting cork from Portugal’s oak forests for almost 150 years, supplying about one-third of all cork used every year in 12 billion wine and champagne bottles - of a total 18 billion - that use cork stoppers. The remaining six billion are sealed with plastic and other stopper types such as screwcaps, according to the Portuguese Cork Association.
Amorim took the helm in 2001 from his uncle Americo Amorim. Americo, who is an investor in Portuguese oil company Galp Energia, helped build the company into the world’s biggest producer of cork before taking it public in 1988. Corticeira Amorim shares have risen five-fold since 2007, closing little changed at 9.68 euros on Tuesday. The stock has climbed 14 percent this year.
With demand for cork rising, one of the biggest challenges Amorim now faces is finding an ample supply of trees. The Quercus suber, the slow-growing tree that produces cork, takes about 25 years from planting to bear its first harvest of outer bark. It then takes another two harvests, or 18 years, to produce cork that is good enough to make bottle stoppers.
“It’s very hard to convince landowners to plant these trees when they have to wait so long to start selling their cork,” said Amorim. “If we manage to shorten this cycle there is an extra incentive to plant oak trees as opposed to olive trees or vineyards.”
Tests carried out by a farmer in the Alentejo region, home to the country’s biggest oak forests, have succeeded in shortening the first cycle through the use of fertilizers and a new irrigation system. Corticeira Amorim is working with researchers to expand this experiment by planting oak trees on a plot of 400 hectares of land in Portugal and Spain.
“There’s no time to rest,” Amorim said. “This company has the responsibility of being a leader in the cork sector and if we don’t lead the way, I doubt that someone else will have the ability to do it.”Bloomberg