See Don Julio Tequila Maker Diageo Is Running Low on Booze That Takes Years to Make: Owner of Crown Royal whisky faces shortages resulting from high demand during the pandemic by Saabira Chaudhuri of The WSJ (Appeared in the January 28, 2022, print edition as 'Pandemic Run on Booze Leads to Shortages.'). Excerpts:
"The world’s largest spirits maker is running low on some of its products.
Diageo PLC said soaring pandemic demand is depleting stocks of Crown Royal whisky, Lagavulin Scotch and Don Julio tequila. These bestselling brands can take months or years to age before hitting liquor-store shelves, making it hard to quickly increase production.
Diageo said it also hasn’t had enough bottles to package up Bulleit bourbon to meet demand. It is separately grappling with higher costs for aluminum and cereals that go into the booze-making process. Shipping and energy bills have climbed.[the rise in costs will reduce supply-CM]
To make up, Diageo is raising prices in some markets, including the U.S."
"“The constraint is simply on being able to meet very high demand, said Chief Financial Officer Lavanya Chandrashekar”"
"Manufacturers across industries and regions have faced similar constraints. Pandemic-induced shortages and price jumps have occurred at times for basic commodities like toilet paper and lumber and for bigger ticket items like hot tubs and used cars."
"While bars and restaurants have been closed off and on for the last two years, in the U.S. spirit sales at groceries, liquor stores and online have ballooned."
"consumers who couldn’t spend on concerts, travel or watching live sports instead bought upscale spirits to drink at home."
"Despite the supply-chain constraints, U.S. sales of Crown Royal rose 12% in the second half of last year, compared with a year earlier"
It seems that there actually is not a shortage. The article indicates that there has been both an increase in demand and a decrease in supply. This will cause prices to rise. But if demand increases more than supply decreases, quantity will increase. This may have happened since sales did increase (although it is not clear if that 12% increase is a dollar amount or a quantity amount).
Where the article says Diageo is "running low on some of its products" and "Diageo PLC said soaring pandemic demand is depleting stocks of Crown Royal whisky" it does not mean that there is a shortage.
A shortage means that price is below where supply and demand intersect. But what the article does say is that price went up. And again, that is what we expect to happen when demand increases and supply decreases. With price going up, it is not likely that there is a shortage.
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