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Asian alcohol stocks stumble after US cancer warning
Shares of major Asian alcohol producers have dropped following the US surgeon general’s cancer warning on alcohol announcement, echoing recent declines in Western alcohol giants.
Asian beverage stocks have taken a hit this week after US surgeon general Vivek Murthy issued an advisory linking alcohol consumption to an increased cancer risk. The announcement suggested implementing health warnings on product labels, raising fears of tighter regulation that could mirror the trajectory of tobacco over the past three decades.
In Japan, Sapporo Holdings Ltd. suffered its steepest decline in five months, sliding by 5.1%. China’s premium liquor producer Wuliangye Yibin Co. saw a 3.7% drop, while Hong Kong-listed Budweiser Brewing Company APAC Ltd. fell by 2.6%, Bloomberg found.
Edward Mundy, an analyst at Jefferies Financial Group, explained the market’s reaction, stating, “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. This could act as an overhang on a sector that is already trading on a depressed multiple,” he said to Bloomberg.
Following Western Trends
This latest slump in Asian alcohol stocks follows a similar downward trend among Western alcohol giants, as reported two days ago by db. Brands such as Diageo and Pernod Ricard have seen their shares falter under the weight of growing regulatory scrutiny. The surgeon general’s warning has intensified those pressures, and we are yet to see how the industry responds to shifting consumer sentiment.
While the US accounts for significant alcohol consumption, 70% of adults reportedly drink at least once a week which contributes to a market worth US$260 billion in 2022, the implications of warning labels extend beyond American borders. Amir Anvarzadeh of Asymmetric Advisors told Bloomberg, “Many now believe alcohol warning labels and marketing regulations of brands will get much tighter and go the same way as tobacco did 30 years ago.”
However, he also noted that any regulatory changes would likely take years to implement, potentially cushioning the long-term impact on stock performance.
The road ahead for Sapporo
Among Asian alcohol producers, Sapporo may be particularly vulnerable due to its recent robust performance driven by asset reductions. While its shares have nearly quadrupled since the end of 2020, it makes the company more exposed to sudden market corrections.
Many analysts believe the disruptions are only temporary, as per the ever fluctuating nature of the financial markets. However, with parallels being drawn to the trajectory of the tobacco industry, the bigger question will be how the alcohol sector adapts to the pressure of these perceptions.
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