U.S. demand for cheap wine buoys global market

PARIS -- Is the world drowning its sorrows in cheap wine?

An industry group said Thursday that more wine could be consumed globally this year, thanks to crisis-fueled demand for cheaper or discounted tipples, particularly in the United States.

While that might benefit some low-end producers, the organization's director cautioned wine growers to resist what he called the "massive pressure on prices," which erodes profits.

"If you cut too much, it's difficult to go back to your original price," Federico Castellucci said.

After years of steady growth, global wine consumption started to retreat last year, along with the rest of the world economy.

The International Organization of Vine and Wine said that erosion may have halted as wine growers battled to maintain sales volumes by cutting prices and as more wine is sold in bulk.

It predicts world wine consumption should rise by 4 percent to 6.5 billion gallons in 2009 from an estimated 244.9 million hectoliters last year.

"People who want to keep drinking are buying cheaper wines," said Castellucci, noting that holiday season purchasing has not been tallied and that this year's consumption could yet fall.

He said the United States -- second only to France in terms of total wine consumption -- has "continued to import but with a strong attention to prices."

Improved winemaking technologies mean that cheaper wine is much more palatable than 20 years ago, said Castellucci, whose family has made wine in Italy's Marches region for three generations.

"We should make sure people have wine at a reasonable price so they can drink every day," he said.

Low-cost brands

In the United States, large-scale vintners such as Fred Franzia, co-founder of the Bronco company in California, are producing brands such as Charles Shaw, known as Two Buck Chuck, for $1.99 a bottle in some states. It hopes to sell as much wine as possible and believes no bottle should cost more than $10.

Last year, the U.S. surpassed Italy in terms of total wine consumption for the first time.

In European countries like Britain, large supermarket chains such as Sainsbury are offering sale gimmicks such as two-for-one offers and offloading large quantities of cheap wine.

Castellucci said the industry's challenge is to keep attracting people who haven't been brought up in a culture of wine, with the hope being that when the economy recovers, they will move on to more expensive wine.

"In classical music, you don't start with Wagner, you start with Boccherini," he said, referring to the 18th-century Italian composer and cellist. "It's the same with wine. We start with very simple, gentle wines, after they go up in scale."

The latest figures on wine production around the world also reveal a few key shifts.

Global wine production is expected to remain flat this year at 268 million hectoliters, the same level as 2008, although the estimates were made before northern hemisphere crops were completely harvested.

Overall, European Union wine volumes are forecast to grow by 1 percent this year and France is seen overtaking Italy as the world's biggest producer in volume terms.

Wine production in the so-called "New World" -- Argentina, Chile, South Africa, Australia, New Zealand and the United States -- is seen falling by 1 percent. U.S. volumes are expected to grow by 6 percent.