Is there a hangover on the stock market?

The world is drinking less, and the share prices of Diageo, Pernod Ricard and more are trading at levels we haven't seen for a long time. Is the sector heading the same way as tobacco, or is the market pricing in too much doom-mongering?

Alcohol manufacturers have been encouraging people to drink responsibly for years. It now seems consumers are taking this advice on board. According to data specialist IWSR, global alcohol consumption declined for the third successive year, falling by 2% in 2025 and equating to a drop of 4.5 billion litres. (source). Volumes of beer, wine and spirits all shrank. The United States, one of the largest markets, is causing particular concern for the sector, as US volumes fell by 5% in 2025 (source). This shows it has gone beyond a temporary dip, as just 54% of American adults say they drink alcohol – the lowest figure in almost 90 years. What's more, those who do consume alcohol, drink less. They consume 2.8 glasses a week on average, which is the lowest rate seen since 1996 (source).

Why the thirst for alcohol is falling

Part of the explanation lies in people's wallets, as the cost of living has risen sharply. As consumers face paying more for their daily essentials, there is simply less headroom for spending on going out, which in itself has become much more expensive. Analysts at Bernstein calculated that drinks prices in US bars and restaurants have risen by 29% over the past five years, at a much faster rate than inflation, while supermarket prices have only risen by 9% (source). A striking trend around the world, however, is that consumers aren't turning to drinking at home in huge numbers – they simply drink less. This represents a break from previous crises, when volumes continued to grow after the 2008 financial crisis to name one example. People may have chosen cheaper brands, but they did not drink less.

This means there is more at play than purchasing power alone. Health is the most important reason, as more and more people are finding that even moderate drinking is bad for their health. In young adults, this number stands at two-thirds (source). Gen Zers generally drink in moderation more than older generations, and wearables such as sleep trackers make the disadvantages of an evening out painfully visible in the data the following morning.

Weight loss drugs are another factor. Taking GLP-1 drugs such as Ozempic or Wegovy not only lessens your appetite, but often your desire to consume alcohol, too. Research shows that users drink 29% less often (source), and clinical studies indicate even greater effects in heavy drinkers (source). Add in legalised cannabis as an alternative for a 'legal high' in some countries, and the outlook for beverage manufacturers seems bleak.

Not everything is contracting, however

That said, people aren't just drinking tap water wherever you look. Two segments are bucking the trend, with ready-to-drink cocktails in cans the only large category to grow in 2025. It passed the 9 billion-litre threshold worldwide for the first time (source), as younger generations appreciate the convenience and the price as a cocktail in a can costs a fraction of the price of a cocktail in a bar or café. The no-alcohol or low-alcohol category is also booming. Data specialist IWSR expects volumes of alcohol-free drinks to grow by 36% by 2029, and non-alcoholic beer to double its share of the global beer market by 2033 (source). For manufacturers, this is a double-edged sword – it eats into traditional sales, but those who are strong enough to do so will actually be able to take advantage of the trend.

The picture is more nuanced from a geographical perspective, too. While the US, China and Europe are drinking less, India is the world's strongest growth market (source). Moreover, IWSR expects global volumes to make close to a full recovery by 2035, as more and more people reach the drinking age and the focus shifts further to India, South America and Africa (source).

Valuations have a hint of tobacco

Beverage companies have taken a hit on the stock market, too. Diageo, the world's largest producer of spirits (Johnnie Walker, Guinness, Don Julio, Casamigos), has seen its market value more than halve since its peak in early 2022 (source). Pernod Ricard (Jameson, Absolut, Chivas) recorded its lowest level in more than a decade this summer (source).

As a result, shares in spirits manufacturers such as Diageo, Pernod Ricard, Rémy Cointreau and Campari are currently trading at multiples that primarily used to be seen in tobacco companies. For years, beverage producers received a substantial premium compared to tobacco companies, as drinking remained socially accepted while smoking was cast into the wilderness. Yet the premium seems to have all but evaporated for several distilleries.

It is worth noting that the malaise mainly seems to affect spirits producers, and that beer brewers are far more resilient. AB InBev gained more than 25% on the stock market in the first half of 2026 and is trading at around 21 times the profit (source), partly thanks to a strong second quarter with growing beer volumes and its solid position in ready-to-drink cocktails (source). Heineken and Carlsberg are trading at 14 to 15 times the expected profit (source), with a clear gap to the spirits producers who are feeling the pinch. This shows the market really does make a difference within the sector, as companies who are active in ready-to-drink cocktails, non-alcoholic beverages and emerging markets are rewarded.

The risks at a glance

Anyone who believes that alcohol awaits the same structural decline as traditional cigarettes should keep their distance. Those who think that inflation and uncertainty are holding consumers back, however (albeit on a temporary basis), may see opportunities in the current prices for certain shares. In any case, anyone considering whether they should invest or not should take a number of structural risks into account. The first one is that the health and drinking in moderation trend accelerates even further, particularly as GLP-1 drugs gain even wider traction. The second is regulation, as stricter labelling, higher excise duties or advertising restrictions (the tobacco sector's playbook) remain a real scenario. The third risk is trade conflicts and import duties, as whisky and cognac are favourite targets in trade wars. The fourth and final risk is that large manufacturers often feature significant debts from the era of takeovers, leaving little wiggle room if profits continue to fall.

How to invest in the sector

This can be done in two ways:

• Individual shares. In addition to Diageo and Pernod Ricard, Brown-Forman (Jack Daniel's), Rémy Cointreau, Campari, Heineken, AB InBev, Carlsberg and Constellation Brands are all listed on the stock exchange. The profiles vary greatly, so you should do some thorough research before deciding whether to take the risk of investing in individual shares. If you opt for individual brands, it is best to look at the geographical spread, debt ratio and exposure to growth segments.
• ETFs and funds. Specific alcohol-themed ETFs are rare, but the large drinks manufacturers are widely represented in broader trackers in the consumer staples sector. This spreads the risk across food, beverages and household products, and means you are not reliant on a single beverage group or a single scenario.

The message about doing things in moderation may also be prudent advice for investors. Going all-in on alcohol stocks is not a healthy strategy. However, the sector may still be worth including as a modest ingredient in a well-diversified portfolio and considering current valuations.

Before investing, be sure to read up on the key features and risks of financial instruments.

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