Wine drinking up, but don’t worry about a global shortage

On the international wine scene, there’s a bit of confusion about a recent report from financial services giant Morgan Stanley that said global wine production is at its lowest level in 40 years, creating the possibility of a wine shortage in the near future.

The report said worldwide demand in 2012 exceeded supply by nearly 300 million cases, blaming the shortfall on poor weather and fewer vineyards.

“The data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released,” said the Morgan Stanley report.

Which could mean higher prices, but don’t start hoarding wine quite yet.

Many analysts say there isn’t anything to worry about.

“I can’t say we’ve felt any shortage,” said Mulan Chan-Randel of K&L Wine Merchants, an importer in San Francisco. “We may not be having as many closeout specials as we had during the recession, but I don’t see anyone ratcheting up the prices, either.

“We definitely felt an increase in consumption, especially with Millennials. But we’ve been able to keep up.”

According to Ronan Stafford, Canadian Wine Report analyst, legal-age Millennials, the so-called Generation Y demographic with birthdays from the late 1980s to the early 2000s, drank 25.7 percent of the wine consumed in the United States in 2012.

That’s a bit above the global average for Millennials of 20.6 percent but significantly less than the 41.4 percent downed by drinkers 55 or older in the United States.

According to Constellation Brands, the world’s largest distributor of wines, there are 62 million Millennials of legal drinking age, with another eight million turning 21 within two years.

While the younger drinkers are having an impact on U.S. wine consumption, the big player on the world scene is China.

A report last week from Reuters said China, the world’s second-biggest economy and an estimated 1 billion people, has become the world’s No. 1 consumer of red wine, overtaking France and Italy.

Overall, the United States remains the world’s top wine consumer, drinking about 400 million cases a year, said the wine and spirits trade association VINEXPO.

According to the London-based International Wine and Spirit Research, Chinese wine consumption has doubled in the last five years, and last year reached an estimated 1.865 billion bottles of red wine.

That equates to 155 million nine-liter cases (12 .75-liter bottles), a jump of 136 percent in consumption over five years.

Meanwhile, France downed 150 million cases and Italy polished off 141 million cases.

That beat France into second place for red wine and Italy into third, VINEXPO said.

As the Chinese economy continues to improve and its citizens become more affluent, Chinese demand for wine is expected to nearly double by 2016 to 400 million unit cases.

That could make China, not the United States, the world’s largest wine consumer.

“Further import demand will likely be required to meet the rising consumption gap,” according to the report.

China also is increasing its wine production, up 400 percent in 10 years to where that country now is the world’s fifth-largest producer of wine.

In addition to the improving economy, there is a cultural reason for the Chinese to drink red wine, said VINEXPO Chief Executive Officer Guillaume Deglise.

“Red is the color of luck and good fortune and white is the color of death” in China, Deglise told Reuters.

“So you don’t want to drink white, why would you?”

And it’s not only the Chinese. All across Asia, the demand for wine is growing.

“U.S. bulk wine exports to Japan have been growing as major Japanese importers are now importing popular-priced California wine brands in bulk and bottling in Japan,” said Wine Institute Trade Director in Japan, Ken-ichi Hori.

According the American Wine Institute, about 90 percent of U.S. wine exports to Japan come from California.

In 2011, that import market was worth $1.39 billion.

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