More Oaks After Fires Boost Portuguese Cork Maker Corticeira

(Bloomberg) -- Four months after deadly fires ripped through Portuguese forests and villages, Prime Minister Antonio Costa picked up a spade and planted a cork oak tree.

The move was aimed at offering hope to communities that lost everything to some of the worst blazes in Portugal and to prevent future conflagrations -- oaks are more resistant to fires than eucalyptus and pine forests. For Corticeira Amorim SGPS SA, the world’s biggest exporter of cork products, the call for more oak couldn’t have come at a better time.

More Oaks After Fires Boost Portuguese Cork Maker Corticeira

Riding an increased demand for traditionally bottled wine, the company has been asking Portuguese landowners to plant more oak trees. Cork stoppers, which account for two-thirds of the company’s annual sales, are expected to help Corticeira Amorim post another record year of revenue in 2018, according to Chief Executive Officer Antonio Amorim. The Mozelos, northern Portugal-based company, which doesn’t own any cork oak forests, is now considering investing alongside landowners in new plantations of this type of tree.

“We’re reaching a point in which the industry and the market demand a bigger supply of cork,” Amorim, whose company was founded by his great grandfather in 1870, said in an interview. “Today everybody wants to have wines that use cork stoppers because they offer more quality and a more traditional and positive experience for consumers. We need to ensure that the supply of cork will meet demand from this growing industry.”

More Oaks After Fires Boost Portuguese Cork Maker Corticeira

Cork demand has been recovering since 2010, after earlier being challenged by alternatives such as plastic stoppers, according to Amorim. Demand for wines that use cork stoppers in countries from France to China helped boost sales at Corticeira Amorim by 9.4 percent to a record 702 million euros ($869 million) in 2017.

About two-thirds of the 18 billion bottles of wine that are produced annually are sealed with cork, according to the Portuguese Cork Association. The remainder are sealed with screwcaps or plastic stoppers.

Fire Resistant

The company’s push dovetails nicely with a government plan to reform Portugal’s forests, following last year’s deadly fires. Under the plan, the government is looking to expand the area of cork forests by at least 50,000 hectares by offering incentives to farmers who plant the thick, medium-sized trees with slow-burning outer barks.

“Cork forests are normally more resistant to fires because of the size and distance between the trees,” Miguel Freitas, the country’s secretary of state for forests and rural development, said in an interview. “This is only the first step toward increasing our supply of cork.”

Prime Minister Costa said in the European Parliament on March 14 that southern Europe needs to have fewer eucalyptus trees, fewer pine trees, and more oaks and olive trees to cope better with fires. Eucalyptus is used to produce pulp and paper, one of Portugal’s main exports.

Great Potential

Cork is also a major export for the country, which produces more than half of the world’s cork and ships about 986 million euros a year of cork-based products, according to the Portuguese Cork Association. Cork forests currently occupy an area of about 700,000 hectares, data from the association showed.

Corticeira Amorim is working with researchers to reduce the time in which the slow-growing Quercus Suber tree bears its first harvest of cork bark from about 25 years to less than 10 years. Another way to bolster production is to increase the density of oak tree plantations to about 300 trees per hectare from 70 trees per hectare, said Amorim. The aim is to convince farmers to invest in planting the trees, he said.

“When landowners realize the enormous potential of cork to increase profit, they’ll start planting cork oak trees instead of other species,” Amorim said. “Cork has great potential to continue to grow. Our only limitation is in terms of supply.”

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