As drinking culture changes and alcohol consumption declines worldwide, the share prices of global liquor manufacturers are wobbling. With consumer sentiment weakening and health concerns growing, the prospect that a culture of not drinking will spread further has emerged as the industry's biggest worry.
On Oct. 31 (local time), Bloomberg said that the market capitalization of global listed liquor corporations had evaporated by a total of $830 billion (about 1,185 trillion won) over the past four years. An analysis by Bloomberg of a price index of about 50 major liquor corporations showed that the index was shown to have declined 46% from the record high set in Jun. 2021.
In fact, the share prices of major players, including Europe's large liquor corporation Diageo, which owns the Johnnie Walker and Smirnoff brands, as well as France's Pernod Ricard and Rémy Cointreau, have fallen to their lowest levels in at least 10 years. Shares of Brown‑Forman, the parent of Jack Daniel's, and Australia's Treasury Wine Estates also plunged. Guizhou Moutai, China's leading baijiu corporation, is likewise trading at more than 40% below its 2021 record high.
In recent years, declining alcohol consumption worldwide has negatively affected the industry across the board. According to a U.S. alcohol consumption survey conducted by Gallup in Aug., 54% of American adults said they drink, the lowest since related statistics began in 1939. Even in Russia, known as the "country of vodka," per capita alcohol consumption fell to 7.84 liters (L) as of Sep., the lowest since 1999.
In particular, as the perception that "drinking is harmful to health" spreads among younger generations, the outlook for the liquor industry is growing darker. Gallup analyzed that the perception that "even moderate drinking is harmful to health" is spreading rapidly among Americans and has now, for the first time, become the majority view. Adding to this, celebrities such as Tom Holland and Katy Perry are actively promoting nonalcoholic beverages, further accelerating the trend toward not drinking.
Barclays analyst Lawrence Wyatt said, "Structural changes are underway in the liquor market, and it seems unlikely to recover to the same growth trajectory as in the past." Morgan Stanley analyst Sarah Simon also said, "Structural changes are occurring now, and people are definitely drinking less than before."
With the spread of the moderation trend, liquor corporations are launching reforms at a bone‑cutting level. This year alone, Europe's Diageo, Rémy Cointreau, Campari, Australia's Treasury Wine, the United States' Molson Coors, and Japan's Suntory Holdings replaced their chief executive officers (CEOs). China's Moutai also replaced two chairpersons in less than two years.
Liquor corporations are seeking a turnaround by rolling out nonalcoholic products one after another. Carlsberg launched nonalcoholic alcohol in Feb., and Italy's Davide Campari introduced a nonalcoholic drink in May. Diageo accelerated market diversification last year by acquiring the Chicago nonalcoholic distilled‑spirit brand "Ritual Zero Proof."
Some see this trend as an opportunity. The U.S. investment hedge fund Cook & Bynum increased its investments in Brazil's beer distributor Ambev and Peru's beer company Backus y Johnston. Although the two corporations' share prices fell this year, they still maintain a positive outlook given their high market shares and stable results in their respective markets.
Cook & Bynum said, "We do not think people will stop drinking entirely," and noted, "Brewers in growing emerging markets will continue to increase beer sales, and over time the beer they sell will become more premium and profitability will also rise."