**Challenges for the Alcohol Industry Persist Post-Dry January**
While Dry January may feel like a distant memory, the challenges facing the alcohol industry are far from fading. The US Surgeon General’s advisory linking alcohol to cancer, the emergence of weight-loss medications that may reduce alcohol consumption, a growing preference among young people for fitness over drinking, and the looming threat of tariffs have left brewers and distillers grappling with significant issues. Although they can promote low- and no-alcohol alternatives, these developments are concerning enough to unsettle investors.
The year began on a troubling note when US Surgeon General Vivek Murthy issued an advisory highlighting the health risks associated with alcohol, recommending that beverages include warnings about their cancer links. This places alcohol in a similar position to tobacco, increasingly scrutinized by public health advocates. Analysts warn that this could lead to stricter regulations, including limitations on advertising and sales locations. If the trend mirrors that of cigarettes, companies may have some time to adapt, especially with the potential for delays under different administrations. However, the Surgeon General’s warnings are significant, and the narrative surrounding alcohol and cancer is likely to keep this issue in the public eye.
In addition to these concerns, the alcohol industry faces immediate challenges: drinking is declining across all age groups, with Millennials showing the most significant decrease since late 2021, as reported by Morning Consult. Gen Z’s aversion to alcohol is also well-documented. Furthermore, emerging evidence suggests that GLP-1 medications may reduce cravings for both food and alcohol. Debra Crew, CEO of Diageo Plc, which owns Guinness and Gordon’s, noted the difficulty in distinguishing the specific impact of weight-loss drugs from the broader trend toward moderation. US alcohol consumption is only slowly rebounding from its pandemic-related decline, indicating that these drugs, along with demographic shifts and economic pressures, are affecting consumer behavior.
Compounding these issues are the anticipated 25% tariffs on imports from Mexico and Canada, which could further strain the industry. Constellation Brands, known for its popular Modelo Especial beer, recently lowered its full-year sales forecast and expanded its range of potential outcomes. Additionally, the 25% tariffs on aluminum imports pose another challenge, as a significant portion of beer is packaged in cans.
However, brewers and distillers may be in a better position than tobacco companies, having already diversified into low- and no-alcohol beverages.
