The alcohol industry has been thriving despite a streak of threats: the legalisation of marijuana, a trade war with China that has hampered US exports, the rise of the sober-curious movement. Now a new risk, one few investors or companies are publicly acknowledging, could pressure sales: weight loss drugs.
Eli Lilly & Co's Mounjaro and Novo Nordisk's Ozempic and Wegovy have gained popularity as a fast way to lose weight thanks to celebrities such as Khloe Kardashian and Elon Musk. Most people who take GLPs shed at least 5% of their body weight and, depending on the therapy, more than half can lose as much as 20%. Newer drugs promise to push those numbers even higher.
But they don't only curb cravings for food. For some, these new weight-loss drugs also seem to dampen the rewards of addictive substances, whether that's nicotine, opioids or alcohol — America's longstanding favorite vice. Scientists have shown that rats, mice and monkeys drink less when given certain GLP1 therapies and are studying whether the same effect can be seen in humans, and, if so, understand its scope.
Early readings from Wall Street analysts suggest that could have a dramatic impact on the alcohol industry. Weight loss drugs may not carry the same threat to the alcohol industry as, say, Prohibition, but companies and investors would be wise to start strategising about how they will adapt as more people begin to take the drugs.
A survey conducted by Morgan Stanley's AlphaWise research unit found that people consumed 62% less alcohol while taking weight loss drugs. Among those consuming less, 22% said they stopped drinking alcohol entirely. Meanwhile, the firm expects the number of people taking obesity drugs to grow nearly fivefold over the next 10 years to about 7% of the US population, or 24 million people. That's roughly the size of Texas.
By 2025, the firm estimates an overall 1.8% reduction in alcohol consumption from weight loss drugs. For perspective, the US alcohol industry amounted to $197 billion in 2022, according to market intelligence firm IWSR. A reduction of almost 2% could amount to a $3.5 billion loss in sales.
To be fair, those are just estimates. No one has a true handle yet on the long-term impact of these drugs. But obesity medicine specialists say many patients who take them mention an aversion to alcohol. And even those who still drink socially consume a much more modest amount. The desire simply isn't there. Moreover, the feeling of fullness after, say, one beer makes a second round unappealing.
Take the experience of Shannon Lee, an Oregon-based digital marketing professional who says that before going on Mounjaro, she'd drink about four glasses of wine or beer each week. But any craving for alcohol pretty much vanished after her very first dose, and she can count on two hands the number of drinks she's had in her 15 or so months on the drug. "It's rendered me speechless," she says. "I looked forward to drinking beer, going out to dinner with friends and having a glass of wine. Now, I'm the designated driver because I just have no interest in it."
That could create a strong draw for people trying to manage their weight while also recognising they've slid into unhealthy drinking habits. Recent data show women in midlife are increasingly struggling with alcohol; meanwhile, a recent poll by KFF showed that the same group is more aware of and more interested in trying GLP1s than men.
The potential threat of weight loss drugs to alcohol demand comes as the alcohol industry is flying high on pandemic-driven growth and renewed interest in premium spirits, wine and beer. Brown Forman, which produces spirits including Jack Daniels whiskey, Herradura tequila, and Woodford Reserve bourbon, increased its annual revenues between 2019 to 2023 by 27% to $42.2 billion. In the last four years, London-based spirits company Diageo has seen its tequila business quadruple, surpassing its vodka sales, Chief Executive Officer Lavanya Chandrashekar told investors in an earnings call earlier this month.
Alcohol companies should redouble their efforts to test out new products as consumers become more mindful of health. Nearly every large company has dabbled with nonalcoholic or low-calorie options such as Boston Beer Company's low-calorie Truly Hard Seltzer or Molson Coors' new mocktail line Roxie. The dawn of the Ozempic era should only light the fire under them to bulk up their health-conscious offerings faster.
There are some caveats. For starters, many forecasts optimistically assume significant and lasting uptake of the drugs. While it's true GLP1s must be taken chronically for maintenance, a major unknown is whether people are willing or can afford to be on them for life — or even for more than a year or two. Insurance coverage for the treatments has been spotty, and while increasing evidence of their health benefits could open up access for some, consistent, affordable access will remain a near-term barrier.
And these drugs won't necessarily change the way people eat or drink, but the amount they eat and drink. For food and alcohol companies, that might mean doubling down on premiumisation — charging more for a higher quality product in a smaller container.
Certainly, alcohol companies aren't facing a cliff. Even though consumers are increasingly moderating their alcohol, they're choosing low-alcohol drinks over nonalcoholic ones, according to IWSR. Alcohol will likely continue to be a part of ritual gatherings for meals and time together with friends and family. It just might play a smaller part.
Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, health care and the pharmaceutical industry.
Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry.
Disclaimer: This article first appeared on Bloomberg, and is published by a special syndication arrangement.