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SCENARIOS OF THE FUTURE

Wine: consumption declines, consumers “age”. Mandatory to focus on value

The outlook to 2040 according to the Unione Italiana Vini (Uiv) Observatory. Lamberto Frescobaldi: “we must also renew and rationalize the offer”

More than 37 billion bottles of wine are consumed worldwide annually, more than half of which are uncorked in eight countries: the United States (14%), followed by France (10%), Italy and Germany (7%), then China (6%) and the United Kingdom (5%), Canada (2%) and Japan (1%). Epicenter areas of global consumption that, over the past two decades (1999-2019), have seen wine demand increase by 27%, a race destined, however, to draw breath in the next two decades. Compounded by the gradual rise in the average age and the concomitant worrying distance from wine by the younger generations, consumption rates are expected to increase by just 7%, with an average annual growth rate of 0.35%.
A far from serene scenario, the one drawn by the Unione Italiana Vini (Uiv) Observatory, today, at its assembly in Rome, with an outlook based on historical curves of global consumption trends and demographic forecasts from now until 2039. With data mixed in with other factors already strongly impacting strategic markets, such as the U.S., and consumption attitudes, that tell of how the wine-consuming world will no longer build its growth on volume, but much more likely on the value expressed by bottles of wine. A component - that of value - that has multiple declinations: physical and spiritual well-being, environmental and ethical sustainability, and “social” consumption, in which wine enters (and will increasingly enter in the future) into close competition with other beverages.
Italy, in this context, is even more exposed to the slowdown in demand in the 8 top buyers, which, for Italian wine, is worth almost 2/3 of total exports.

According to the Unione Italiana Vini (UIV) Observatory, exports will increasingly be the key market discriminator, given that domestic consumption is set to decline, and not by a small amount (-1.2 million hectoliters) over the period considered. From abroad, the increase will still be timid (+1.8 million hectoliters, to nearly 23 million hectoliters in 2039) but will be able to make up for the shortfall generated by the domestic market, with a positive balance - far from the boom years - of just over half a million hectoliters. This is all net of recurrences of the economic crisis, the health wave and other exogenous factors such as ethnic and religious factors.
“The wine-consuming world will no longer build its growth on volume, but on the evocative value expressed by bottles: from taste to experience, from the concept of sustainability, to lifestyle. In this framework”, said the president of Unione Italiana Vini (Uiv), Lamberto Frescobaldi, “the wine supply chain will have to increase the “premium” trend of its proposals, but also renew and rationalize an offer that today, in several cases, is out of focus with respect to a rapidly changing demand, young people first and foremost”.
The study, in particular (the full report in the focus, ed.), analyzes trends based on the gradual aging of consumers: in the 1990/99 decade, over-65 and under-25 consumption were in perfect parity, at around 18%, but the real setback is expected in the decade closing in 2039, when the first cluster of older group-which will be increasingly “core-consumers” - will account for 30 % of volumes, with the second dropping to 13 %. The effect of demographic change will sharpen a trend that has already materialized over the years, with the traditional producing countries (Italy, France, but also Germany and Spain) entering a negative dynamic and so-called normalization (in Italy and France in the 1960s more than 50 million hectoliters were consumed, with a per capita figure well above 140 liters per year). An equal settling trend occurred, again between 1999 and 2019, in Germany and Japan, while strongly expansive were Canada, the UK, the US and China, with increases in wine consumption of 15 million hectoliters in the US and China, 7 in the UK and over 3 million in Canada.
The outlook to 2039 now predicts positive changes for the United States (+9.3 million hectoliters), China (+4.1 million) and Canada (+1.1 million), while Japan and Old World countries will mark moderate declines of up to -2%.
For all countries monitored, a rise in the average age of the population is predicted (UN basis): the oldest country by 2040 will be Japan (52 years on average), followed by Italy (51 vs. 44 in 2020) and Germany (47). Surprising is the Chinese figure: the average age of 45 is higher than France, the UK, Canada and the US (between 41 and 44). And evidently, as the population ages, there is a corresponding decrease in wine consumption, with which the sector will, of necessity, have to come to terms.

Focus: The World of Wine in the Future. Demographic and consumption scenarios as of 2040 by Osservatorio del Vino - Unione Italiana Vini
280 million hectoliters of wine are consumed worldwide. More than half of these volumes are made in a handful of countries, led by the United States (14%), followed by France (10%), Italy and Germany (7%), then China (6%) and the United Kingdom (5%). Canada (2%) and Japan (1%) were also included, albeit with lower volumes than other countries, such as the Netherlands or Russia, in order to go for a sample that would include the largest consumers from the three main continents (Europe, Asia and the Americas) and make the basis for comparative analysis on consumption and population trends broader. The countries monitored make up the backbone of Italian wine exports: 64% by value, with the U.S. in the lead (24%), followed by Germany (15%), UK (10%), Canada (6%), France (4%), Japan (3%), with China at the tail end (1.5% share), a country that has been looked at with much attention (and hope) for more than a decade, but that has slowed down sharply in the last three years in terms of import and also consumption rates.

Population growth forecasts
Based on United Nations estimates, the world’s population will reach close to 9.2 billion in 2040, up from 8.1 billion today. Growth, however, is expected to gradually slow down from the dizzying pace recorded since the 1980s, so that before the end of the century the peak of 10.4 billion - expected by the UN around 2080 - will no longer be exceeded. On the contrary, from 2090 a gradual descent will begin, for the first time since 1950, bringing the world population back below the 10.4 billion touched only 10 years earlier.
Stopping the analysis at 2040, and narrowing the field to the countries monitored in this analysis, except for Italy and Japan, for which the demographic forecasts are of reduction (-3% and -7% respectively in the 10-year averages from 2020 to 2039 and from 2010 to 2019), and Germany (expected to be stable), for all the others the indicators are still of growth: from +7% for France to +9% for China, to rise to +11.5% for the UK, +16% for the US and +21% for Canada.
Beyond vertical upward or downward movements, a rise in the average age of the population is predicted for all the countries monitored: the oldest country by 2040 will be Japan (52 years of age on average), followed by Italy (51 vs. 44 in 2020) and Germany (47). The Chinese figure is surprising: the average age of 45 is higher than France, the UK, Canada and the U.S. (ranging between 41 and 44), but the surprise is up to a point: the policies of forced containment of population growth undertaken by the Beijing government have had (and will increasingly have in the future) the effect of drastically slowing down births, halting that positive flow of young-older turnover that until the beginning of the new millennium had kept the average age of the population around 26.

Wine consumption
In a context that sees on the one hand a slowdown in population growth (when not a decline, as for our country) and the progressive aging of individuals, wine consumption is also expected to enter a new phase of maturity. Maturity that has already materialized in the decade from 1999 to 2019, with the traditional producing countries (Italy, France, but also Germany and Spain) entering a negative dynamic and so-called normalization (in Italy and France in the 1960s more than 50 million hectoliters were consumed, with per capita attested well above 140 liters per year). But an equal settling trend has occurred in Germany and Japan, while strongly expansive are only Canada, the UK, the U.S. and China, which between 1999 and 2019 saw wine consumption increase by 15 million hectoliters (U.S., China), 7 (UK) and over 3 million Canada.
This is a new phase of maturity, because in all these countries in 2039 - compared to the decade ending 2019 - growth rates are set to dampen, even considerably: China will stand at +4.1 million hectoliters, while the U.S. from +15 will drop to +9, and Canada will reduce the increase in the volume consumed by a third (+1.1 million hectoliters). This concerns countries that as we have seen have active population balances to 2040. In the UK, despite the expected growth in terms of population, at the consumption level it will fall into negative territory (-700,000 hectoliters), as will Japan, Germany, France and Italy, with the latter two remaining in negative dynamics - in the opposite way to the others - but reducing the magnitude of the physical loss (Italy from -9.2 million in 2019 to -1.2 million in 2039).
Adding up the eight countries monitored, if the growth between 2019 and 1999 had assumed the volume of +31.2 million hectoliters (+27%), by 2039 this increase is reduced to 1/3, to 10.3 million (+7%), with only the United States bringing in a dowry 9.3 million increase (+27%).

The aging of consumers
In the general context of a slowdown in the rate of increase in consumption between decades, and even in the face of a population that as mentioned above remains in a positive dynamic, what is expected to change radically as early as 2040 is the physiognomy of the typical wine consumer: for all the monitored countries-whether with constant, increasing or decreasing consumption-a shift in weights between generations is expected anyway and always, which is going to impact drastically on the volume and quality of consumption.
The monitored total of the eight countries shows a more than telling trend: in the decade 1990/99 over-65s and younger were in perfect parity, around 18%. In the following decade, a first breakthrough, with the older ones rising to 20% (10 million more hectoliters) and the younger ones dropping to 15% (only 2 million more hectoliters), in fact not affecting the weights of the middle group (25-64 years old), which remains stable as a share at 65%, increasing in physical terms by 20 million hectoliters.
The real setback is expected in the decade closing to 2039, when as a result of the slowdowns in generational turnover seen earlier the oldest are expected to rise to 30% of consumption (15 million hectoliters more than in the previous decade), against a new reduction of the youngest (to 13%, this time due to declining consumption, -2 million hectoliters) and the middle group reducing both physical consumption (-4 million hectoliters) and consequently the percentage weight on the total, to 58%.
In essence, if the younger segment, due to a gradual decline in births, tends to slow down in its function of feeding the middle segment, the middle segment (25-64 years old) suffers a twofold effect: in the decades to come, the more mature (the 40-50 year olds), having entered the elderly one, will bring with them their (generally established) consumption habits, causing the volumes of this cohort to rise, while the younger portion (under 40) will be destined to lose out in terms of individuals and thus consumption, considering that the younger people who feed it from below are generally more occasional.
The growth in overall consumption in the eight countries monitored (the 10.3 million hectoliters seen above) is largely attributable to a shift of individuals-generally consumers who become “core consumers” as they age-to the older cohorts, which offset the decline in younger cohorts in absolute terms and-in the median bracket-that of the younger cohorts here as well (25-40 years old).

What is expected for Italy
In a general context that sees - among the countries to which Italy is most exposed - only the US and Canada growing in terms of consumption, while negative dynamics more or less heavily involve the UK, Germany, Japan and France, scenarios of relative stability are forecast for our country, with elements of concern dictated by the erosion of domestic consumption (-1.2 million hectoliters to 2039, remembering that the domestic market is worth half of the total).
Exports still and increasingly turn out to be the key to making the sector sustainable, although projections from now to 2039 compared to the 2010/19 average see a growth of 1.8 million hectoliters (thus around 22.5-23 million), which only partially offsets the shortfall generated by the domestic market, with a positive balance of just over half a million hectoliters.
In essence, the expected evolution, understood as the intersection of demographic (or ethnic and religious, not taken into account in this analysis, but already strongly impacting strategic markets, such as the U.S.) and consumption attitudes, indicates that the wine-consuming world will no longer build its growth on volume, but much more likely on the value expressed by bottles of wine. A content - that of value - that has multiple declinations: physical and spiritual well-being, environmental and ethical sustainability, and “social” consumption, in which wine enters (and will increasingly enter in the future) into close competition with other beverages.
Source: Wine Observatory - Unione Italiana Vini (UIV), Rome, July 12, 2023

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