Shares of leading Asian liquor and beer manufacturers experienced a sharp decline following recent remarks by U.S. Surgeon General Vivek Murthy, who confirmed a direct link between alcohol consumption and an increased risk of cancer. In his advisory, Murthy also called for warning labels on alcoholic beverages, a move that sent ripples through the industry.
On Monday, Sapporo Holdings Ltd.’s stock plummeted as much as 5.1% in Tokyo, marking its most significant drop in five months. Wuliangye Yibin Co. of China saw a decline of up to 3.7%, while Budweiser Brewing Company APAC Ltd. in Hong Kong fell by 2.6%. Treasury Wine Estates Ltd. in Australia dropped 2.7%.
Edward Mundy, an analyst at Jefferies Financial Group Inc., noted that the market is likely to take a cautious stance on alcohol-related risks, especially with the looming possibility of health warning labels. “The market will adopt a ‘shoot first ask questions next’ approach to the risk of potential health warning labels on alcoholic drinks and cancer risk in the US,” Mundy stated. He warned that such concerns could weigh on the sector, which is already trading at a low valuation.
The U.S. Surgeon General’s advisory highlighted the alarming fact that less than half of Americans are aware of the cancer risks associated with alcohol consumption. According to Murthy, more than 70% of U.S. adults consume alcohol at least once a week, contributing to approximately $260 billion in national sales in 2022. Despite the mounting scientific evidence, awareness remains limited.
Amir Anvarzadeh, from Asymmetric Advisors, suggested that tighter alcohol marketing regulations and labeling, similar to the restrictions imposed on tobacco products decades ago, could be on the horizon. However, he indicated that the decline in stock prices may be temporary. Any regulatory changes, Anvarzadeh added, are likely to take years to materialize.
In Japan, Sapporo appears particularly vulnerable. The company has seen impressive stock gains, nearly quadrupling since the end of 2020, largely due to successful asset reduction strategies. However, the potential for tighter regulations on alcohol products could dampen investor sentiment in the near future.
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