Five ways demographics shape alcohol consumption

Several financial institutions, including Rabobank and BMO Capital Markets, have recently released reports on the state of the alcohol and wine markets. The most wide-ranging of these, Barclays Investment Bank’s Future of Global Alcohol, was produced for its private clients and is not publicly available. Areni spoke with Laurence Whyatt, a lead author of the report who is also head of European Beverages Equity Research at Barclays. An incisive analyst and communicator, Whyatt outlined five ways that demographics shape global alcohol consumption.

1. Demographics are destiny

Barclays Bank has been concerned with demographics for a long time, Whyatt said because “the more people you have, the more potential consumers you have.”

After recognising that demographics were an important driver of the market, Barclays built a database that layered economic and other information on top of UN population data. The result is an alcohol database for every country.

“What we learned is that the demographic changes were largely explaining the volume changes in alcohol,” he said. After looking at the data, they realised the Chinese market was changing: “We identified the issues in demographics, particularly in the Chinese market, back in 2023, when we became much more concerned about potential growth.” The reason is that the number of young people has been declining for more than a decade.

“We were running some models looking at how that population was going to evolve over the next decade and realised it was going to shrink by nearly a quarter between now and 2035,” Whyatt said.

“That made us much more concerned about the potential for growth of products like Cognac and even the Scotch Whisky industry.”
Consumption has already begun its downward slide: “China’s alcohol consumption has actually halved per capita since 2015 in spirits… Beer consumption is down around 20% since 2013.”

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2. One group is the most important

Demographics are the most important indicator of alcohol consumption, and the proportion of people in the population aged 25-40 is critical, Whyatt said. This group not only predicts total alcohol consumption, but is the group that’s most likely to be working. “Western Europe is seeing declining per capita consumption,” he said. “Young people in these countries are declining in number; the birth rate has been falling in a number of these places over the past few decades, and you really need a healthy young population in order to have high alcohol consumption.”

3. The outlook for the U.S. remains positive

“We can go back a century to Prohibition and look at how alcohol consumption has changed,” he said. “Generally speaking, we’ve seen an increase in alcohol over that century.”
There have been two major times consumption has fallen: the first was after WWII, owing to economic weakness. “The second time was in the late 1970s, early 1980s, when the U.S. introduced a 21-year-old legal drinking age,” he said. Since then, there has been three decades of growth in per capita consumption, until the pandemic altered things. “Overall alcohol consumption increased in 2020 and 2021 when lockdown started to end, then we started seeing a decline in alcohol purchases.”

Young people are also drinking less, with declines in underage consumption and in heavy drinking among young people since 2010. Whyatt notes, however, that stories about young people drinking less have to be treated with caution.

“The study that’s often quoted to me is the Gallup study,” he said, noting that Gallup is a very reputable polling company. “People look at the stats showing that, say, 18-to-30-year-olds are drinking less, which is true, but only because the 18-to-20-year-olds are drinking less, but the 21-to-30-year-olds are drinking about the same as what they used to drink.”
Whyatt also said that U.S. adults consume the most when they first turn 21, “and that level of consumption stays pretty linear until the age of about 40 to 45.” From then on, consumption begins to decline up to the age of 65. It drops again from age 75.
Whyatt remains positive about the U.S. market because of its continuing economic growth.

4. The male-to-female ratio matters

One of the biggest predictors of premiumisation in the market is the male to female ratio — regardless of country, Whyatt said: “If you have more men than women in any country, you have a higher premium spent in that country.”

When Barclays analysts first recognised the pattern, he said they thought that the data was just being skewed by a few countries, “as there are a few that have quite a major difference in male and female populations.” China is one such country, and Indonesia is another. “So we just excluded those data sets completely — and got the same results.”

It’s not the total number of either men or women in the population that’s important but the ratio.

“The first reason we thought of was maybe it’s just the type of alcohol,” he said. “It is relatively well documented that some of the more premium spirits are drunk by men. Things like Cognac, Single Mark and Scotch Whisky have a very male skew. I guess more entry level or more affordable spirits, things like gin and tequila, skew a bit more female.” Men also drink more than women do, for physiological reasons: Men typically drink three to four times what women drink.

“Somewhere like the U.S., where you are seeing an increase in alcohol consumption over the past few decades, the growth is coming from women,” he said. But even so, Whyatt admits those are speculations for this ratio; they don’t know for sure.

5. Where the growth will come

Whyatt says the U.S. is a good market to study, because there is so much publicly available data.

When looking at where the 25-to-40-year-olds are clustered, Whyatt says the UK is forecast to decline by a single percent in the next decade. Germany is likely to decline by 11% over the next decade. Spain is falling by 8% and Italy by 6%. France is only declining by 2%, but its growth in that crucial demographic is being held steady by people from cultures that don’t drink alcohol.

“So we really highlight these parts of the world as quite challenged from a consumption perspective, if we say that the volume growth has to come from the young. Companies are going to be fighting over a much smaller pool of potential customers,” he said, noting that Argentina is a market to keep an eye on.

“Argentina has gone through a profound economic change with Javier Milei becoming leader,” he said. “But it does have a very strong demography.”

The U.S. will continue to grow, as will India, though for spirits consumption. “As countries get wealthier, the amount of spirits consumed in those countries tends to go up.”

But the big growth will be found in Africa. “Ethiopia and Nigeria are growing by 33% and 34% — it’s an extraordinary level of growth in the young there,” Whyatt said, noting that he sees those countries as important beer markets.

“I think for the wine industry it’s going to take a while before we start seeing the levels of consumption of wine commensurate with some European countries or other developed nations, But Africa almost certainly will be a very important area for growth over the next few decades.”

About Areni Global :

Areni Global est la principale organisation dédiée aux enjeux stratégiques du vin haut de gamme. Elle produit études, rapports de marché, articles et podcasts, et encourage la collaboration et la croissance durable du secteur.