Experts dismiss prediction of global wine shortage Experts downplay prediction of coming global wine shortage

James Schwanke shops for wine at K&L Wine Merchants in the South of Market in San Francisco. Several industry analysts disputed a Morgan Stanley report that predicts a global wine shortage in coming years. James Schwanke shops for wine at K&L Wine Merchants in the South of Market in San Francisco. Several industry analysts disputed a Morgan Stanley report that predicts a global wine shortage in coming years. Photo: Pete Kiehart, The Chronicle Photo: Pete Kiehart, The Chronicle Image 1 of / 8 Caption Close Experts dismiss prediction of global wine shortage 1 / 8 Back to Gallery

Confusion abounds over a prediction that a wine shortage could be looming.

A Morgan Stanley report released this week said worldwide wine demand exceeded supply by nearly 300 million cases in 2012. The study blamed the shortfall, the greatest in 40 years, on bad weather and fewer vineyards, and it added there may not be enough wine in future years.

But don't start hoarding your wine, because analysts are seeing it differently.

"I can't say we've felt any shortage," said Mulan Chan-Randel, who buys Rhone varietals and wines from the south of France for K&L Wine Merchants 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."

Analysts say wine production has actually increased significantly and consumption is stabilizing. In fact, California's harvest is expected to reach 4 million tons, nearing last year's record.

Wine experts in California and the world argue that the industry is in fine shape and that much of the reduced production has been intentional because of a wine glut.

And most important, they say, is that there is plenty of wine to go around and prices should stay consistent.

'Report is just wrong'

"Morgan Stanley's report is just wrong," said Rob McMillian, executive vice president of Silicon Valley Bank and founder of its wine division. "In 2010 and 2011, we also thought we were trending toward a shortage in the United States, but 2012 was a record production year. This year is almost as big. Everything we're seeing is leading us to believe that there won't be enough tank space for all the production here."

The International Organization of Vine and Wine, an intergovernmental winemaking and viticulture agency, just released its report and predicts that global wine production will see a spike of 8.8 percent in 2013 - its highest level in seven years.

"In Europe, after five modest consecutive harvests and an exceptionally low 2012 harvest, 2013 wine production may be qualified as relatively high," according to the organization.

California, which is responsible for 90 percent of all U.S. wines and is the fourth-leading wine producer in the world behind France, Italy and Spain, has had 19 years of consecutive growth.

Last year, winemakers in the state sold a record 360.1 million cases, a retail value of $34.6 billion, according to industry consultants Gomberg, Fredrikson & Associates.

"Analysts must have looked at the decline in Europe but didn't take into consideration that growers there were overproducing," McMillian said. "Europeans have ripped out 100,000 hectares of vines for that very reason."

Supply and demand

The report's authors, Tom Kierath and Crystal Wang of Morgan Stanley's Australian consumer and beverage branch, declined to be interviewed.

Stephen Rannekleiv, a wine industry analyst for Rabo Bank in New York, said initially it did look like there would be a shortfall, but it didn't materialize.

"Analysis of this sort is a bit of a challenge," he said. "Spain, Italy and France had much better harvests this year than what was expected - even increases over previous years. There's no looming shortage that we can see, barring some unforeseen shock to supply or demand. All you have to do is look at bulk wine pricing, which has really been coming down, to realize there's no shortage."

But consumption continues to climb; in the United States, last year's sales saw a 2 percent increase over 2011. On the production side, vineyards continue to shrink - China is the only country consistently expanding its vine acreage. The Morgan Stanley report concludes that those two elements make predicting a shortage a simple case of supply and demand.