- The Washington Times - Wednesday, October 30, 2013

Amid reports that rising demand and sluggish supply could produce a global wine shortage, Prav Saraff says he’s not sweating the inventory in his wine cellar just yet.

“We aren’t struggling to keep up with the demand right now,” said Mr. Saraff, director of operations at the District’s West Dupont Circle Wine, adding that trying to bulk up the company’s stock right now doesn’t make sense.

“If we were to stockpile now, we wouldn’t get our orders until January after the busy season is over,” he added. “We’ve been hearing from different reports that [a drought] is coming. Whether or not to stockpile will be a decision that we have to make next year” to prepare for the next busy season.

Merchants and oenophiles alike were both rocked this week by a new market analysis from Morgan Stanley Research, which noted that wine production levels in 2012 plummeted to the lowest levels recorded since the 1960s. According to the survey, global production of wine fell by more than 5 percent last year, and the supply barely exceeded the surging demand for wine.

But while the study produced much angst among tipplers, Mr. Saraff said only the highest quality wines are becoming scarce and that the store is having no trouble despite increasing global rates of consumption and poor production in Europe.

West Dupont Circle Wine is in the middle of its busy season with Thanksgiving and Christmas approaching.

The Morgan Stanley analysis highlighted increasing strains in the global wine trade.

Last year, production in Europe dropped 10 percent because of bad harvests, while consumption worldwide grew 1 percent, according to the report.

The United States and China have been the fastest growing wine markets since the late 1990s. The U.S., which has doubled its per capita consumption since 2000, drinks about 12 percent of the world’s wine, but only produces about 8 percent.

Mr. Saraff believes that wine is becoming more popular among younger drinkers, leading to an increase in consumption.

“A lot more younger people have been drinking wine because it is something new. People are drinking less beer, whiskey and vodka,” he said. “Drinking wine is becoming more common daily practice with lunch and dinner.”

China recently became the world’s fifth largest import market and has doubled its consumption twice in the last five years. The U.S. and China alone are projected to consume more than 400 million cases of wine each by 2016.

The Morgan Stanley report said the wine industry is experiencing an “undersupply of nearly 300 million cases” each year.

This puts more pressure on Europe, the world’s largest supplier, to meet the new demand. Europe makes roughly 60 percent of the world’s wine, but has suffered a 25 percent production decline since 2004. The decline is largely due to poor weather patterns in Spain, France and Italy, the three largest wine-producing countries in the world.

“Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released,” the investment bank’s report said.

Although supply hasn’t been a cause for concern yet for West Dupont Circle Wine, Mr. Saraff said that the retail store cannot predict what effect the recent low production will have in the future.

“Economics tell us supply and demand will determine price. Because of the low production, prices will increase over the next couple years,” he said. “We don’t know what costumer behavior will be like” when the prices increase.

The International Organization of Vine and Wine in France suggests that there will be a global increase in wine production this year. “After five modest harvests in a row and an exceptionally weak 2012 harvest, wine production in 2013 can be qualified as relatively high,” the group said in its most recent report.

However, the organization also reports that the world’s vineyards are shrinking and that output from newer wine-producing countries such as the U.S., Argentina, Chile, Australia, New Zealand and South Africa may have already peaked.

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