The Alcohol Industry Faces Headwinds

Few purveyors of alcohol will be toasting the new year. Just three days into 2025, the US surgeon-general was advocating labels to warn drinkers of the link to cancer. This time next year, Ireland will be health-labelling its drinks. The sector has little to be merry about in any case. Abstinence is in vogue, at least in swaths of the developed world.

The ranks of US adults aged 18-34 who have “ever” drunk an alcoholic beverage has fallen from 72 percent to 62 percent over the past two decades, according to Gallup polling. As if lower sales are not headache enough, tariffs mooted by US president-elect Donald Trump stand to erode earnings. This starts to smack of structural decline. So far, the weak Chinese consumer — quaffing a tenth of Pernod’s net sales — and a natural slide from the Covid-inspired boost, had all the hallmarks of a cyclical downturn. Share prices and valuations duly crumpled. UK-listed Diageo, with shares off by a tenth last year, looks relatively unscathed beside France’s Pernod Ricard, nearly 30 percent, and cognac maker Rémy Cointreau’s 40 percent. Reflecting a deeper fall, expect analysts to scratch earnings estimates lower — if companies don’t beat them to the punch and do so at upcoming quarterly results. Introducing tougher regulations can do serious damage to earnings. Big Tobacco turned to vapes as part of its efforts to offset clampdowns on conventional cigarettes, but regulators followed suit and vapes went up in smoke. Marlboro maker Altria wrote off virtually its entire $12.8bn investment in Juul before exiting. Still, the beauty of beer goggles is the ability to see the glass half full. Drinking follows classic rules: most is done by the minority. In developed markets about 60 to 90 percent of alcohol is consumed by the top 20 percent of drinkers, according to Bernstein. These hardened souls are far less likely to be deterred by warnings. Big tobacco also offers a handy playboo

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