Bad news for imbibers, as well as for investors in companies that manufacture and distribute alcoholic beverages today: On Friday, the U.S. Surgeon General released an "advisory" statement on the relationship between alcohol and cancer, linking alcohol consumption to "increasing risk for at least seven types of cancer."
Shares of Boston Beer (SAM +0.44%) stock are down 3.6% in response, as of 11:05 a.m. ET. Molson Coors (TAP +0.02%) and LVMH Moet Hennessy (LVMUY 0.48%) have fallen 2.2% and 2.8%, respectively.
NYSE: TAP
Key Data Points
What the U.S. Surgeon General says about alcohol and cancer
U.S. Surgeon General Dr. Vivek Murthy cites alcohol as a contributing factor to cancer of the breast, colorectum, esophagus, liver, mouth (oral cavity), throat (pharynx), and voice box (larynx), and notes that "for breast cancer specifically, 16.4% of total breast cancer cases are attributable to alcohol consumption." He further argues that drinking even less than one alcoholic drink per day can increase cancer risk, and blames alcohol for 20,000 cancer deaths annually in the U.S.
In today's announcement, Dr. Murthy notes that scientific evidence of links between alcohol consumption and increased cancer risk has been known for decades, but "less than half of Americans recognize [alcohol] as a risk factor for cancer."
To fix this, Dr. Murthy recommends (among other actions) placing warning labels on alcoholic beverages to highlight their cancer risk. He furthermore recommends putting these warning labels on all types of alcohol, naming beer (Boston Beer and Molson Coors), wine (Molson Coors and LVMH Moet Hennessy), and spirits (all three of these beverage stocks) as specific targets.
What this means for alcohol stocks
Investors in alcoholic beverage stocks got the message loud and clear this morning: The Surgeon General wants to slap warning labels featuring the scary word "cancer" on the products their companies sell. That's certain to have at least some effect on sales. (Investors in tobacco stocks can tell you all about that). Investors are reacting appropriately to the news by selling off some alcohol stocks to reflect the heightened risk.
And yet, this is only a risk -- not a certainty.
Just because the U.S. Surgeon General recommends something, doesn't necessarily mean it will happen. By law, changing the warning labels on alcoholic beverages would require an act of Congress. Moreover, the present Surgeon General might be leaving his post in as little as 17 days, when President-elect Donald Trump takes office on Jan. 20.
It's currently not known whether Trump's intended nominee for the post, Dr. Janette Nesheiwat, will likewise want labels on alcohol to warn of cancer risk, but if she doesn't, there would seem little motivation for Congress to ratify the advice of an outgoing surgeon general who does.
Finally and most obviously, surgeons general have been warning about the cancer risk from tobacco for decades, yet people still smoke cigarettes. Even in a worst-case scenario (for alcohol investors), I think it highly unlikely that putting a few cancer labels on alcoholic beverages will stop people buying alcohol.
Perhaps the best reaction investors could have to today's mini-sell-off in alcohol stocks, therefore, might be to survey these stocks for potential bargains. Of the three alcoholic beverage stocks, I personally see the most value in Molson Coors, which at a price-to-earnings ratio of less than 13 and paying a 3% dividend, might actually end up being quite a healthy addition to your portfolio.
