• The US Surgeon General's advisory calls for a warning label on alcohol products.
• The CEO of Free Spirits told BI he thinks the statement will further push a change in drinking culture.
• Non-alcoholic brands like Free Spirits are expanding as mindful drinking gains popularity.

Milan Martin, the CEO of non-alcohol spirit brand Free Spirits, said American drinking culture has evolved over the last decade — and the US Surgeon General's statement on alcohol will further push that change.

In an advisory published Friday, US Surgeon General Vivek Murthy said alcohol consumption was the third leading preventable cause of cancer in the US, after tobacco and obesity. He also said he wants to see cancer warnings on wine, beer, and spirits.

In an interview with Business Insider, Martin said regardless of whether a change to the warning label would win political approval, he thinks the statement will impact consumers.

Do you plan to change your drinking habits in response to the Surgeon General's recommendation? Tell us why in this survey.

"What we've seen with the surgeon general is that there's enough research now that says alcohol does not play a positive role in your life and, specifically, it has ties to cancer," Martin said.

Martin said the advisory will be another "nugget" that reinforces similar messages about drinking based on data points, positive stories from friends who have stopped drinking, or guidelines from other governments. All of those insights sit in consumers' minds and lead them to make more informed decisions, Martin said.

"It's not that the alcohol industry is going away," Martin said. "It's just that people are now just drinking more mindfully and more with an eye to moderation because they have the data."

Martin said the current non-alcoholic drinking landscape looks different than it did even a year ago.

"Even a year ago, when I would see a zero-proof cocktail menu on a restaurant's menu, I'd be like, 'great,'" Martin said, adding that, "the expectation is that most restaurants have them now."

Despite running a non-alcoholic spirits company, Martin said neither he nor his employees classify as "traditionally sober." Martin said he still enjoys cocktails, but he drinks a lot less than he used to. Similar to most non-alcoholic consumers, Martin said he enjoys both options.

Before founding Free Spirits, Martin said he spent 20 years in the advertising industry and embraced the "work hard, drink harder" mentality of the business. Oftentimes, he said he overindulged — but not because he necessarily wanted to.

"It was just that phenomenon of you're having a great time, you're out with friends in some great cocktail bar. The energy is high," Martin said. "Your glass is empty, you order another."

Brands like Free Spirits, which is now distributed across around 8,000 locations in the US, including at stores like Total Wine & More and Wegmans, offer consumers the "bite and burn" of alcohol in a non-alcoholic drink. The drinks also integrate Vitamins B12, B6, and B3. Other popular non-alcoholic options infuse THC or psychedelics.

Instead of drinking orange juice or soda in a social setting, consumers now have the opportunity to experience a margarita or martini without the effects of alcohol.

Martin said Free Spirits' prices have come down by about 15% to 20% since the company's start. As Free Spirits continues to scale and find efficiencies in its supply chain, the company plans to pass those savings onto its partners and to consumers to broaden the availability of the category and the brand, the company said.

• Major alcohol companies have been bracing for a culture shift favoring nonalcoholic options.
• Younger consumers under the age of 30 buy less alcohol and drink less often.
• Brands like Heineken and AB InBev have rolled out their own alcohol-free offerings, bolstering sales.

Even before the Surgeon General on Friday warned that alcohol can cause cancer and should come with a warning label, big companies like Heineken and AB InBev — the parent of brands like Budweiser and Michelob Ultra — were preparing for a culture shift favoring nonalcoholic options.

Nationwide, spending on most kinds of alcohol has declined in recent years — especially among young adults, Business Insider previously reported.

Younger consumers under the age of 30 have become progressively less likely over the last two decades to drink alcohol at all, with 62% of adults under age 35 saying they drink, down from 72% two decades ago, according to data from Gallup published in 2023.

Big brands have launched non-alcoholic options to cater to a market that, while they don't want a boozy drink, may still want something new to indulge in on a special occasion.

Heineken first released its non-alcoholic beer, Heineken 0.0, in March 2017 in the Netherlands and Germany, expanding its release to the United States in January 2019.

Corona Sunbrew 0.0% debuted in 2022, a product from Constellation Brands — a beverage company that produces beer, wine, and spirits from brands like Modelo and Corona Extra. AB InBev, which produces drinks for 500 global brands including Budweiser and Michelob Ultra, launched Corona Cero the same year. Constellation Brands owns the US brand licenses for Corona beer in the US, while AB InBev owns the beer in the rest of the global market.

And their zero-proof bets are paying off, executives have said in recent earning calls.

Harold van den Broek, Heineken's Chief Financial Officer, said during an October 2024 earnings call that the company is seeing an acceleration in non-alcoholic sales across many markets, including the US, adding that the brand's non-alcoholic options have grown to over 4% of their total portfolio since launching.

"We do believe that this category, which has been growing about 6% on average since 2018, will continue this growth trajectory," van den Broek said. "We have high hopes for the non-alcohol portfolio."

Constellation Brands' president and CEO, William Newlands, shared a similar optimism. During an April 24, 2024 earnings call, he said Corona Non-Alcoholic was "the number one share gainer in the non-alcoholic segment."

"I think that does reflect some change in consumer behavior or people that are concerned about being the designated driver but still want to enjoy an outstanding-tasting beer," Newlands said. "We're going to continue to emphasize the betterment trends as we go forward with a number of our product offerings and certainly expect Corona Non-Alcoholic to continue to grow here in this coming fiscal year as well."

Michel Doukeris, AB InBev's CEO, likewise told investors during an October 21, 2024, earnings call that the company views the non-alcohol beer segment as "a key opportunity to develop new beer consumption occasions" and that development in this market will continue to be a focus of the company's strategy going forward.

"We gained market share of non-alcohol beer in over 60% of our key markets in the third quarter, with Corona Cero more than doubling both volumes and revenues," Doukeris said. "While no-alcohol beer is currently a small portion of our global volume, we believe there is a significant opportunity for incremental growth."

Industry representatives have long warned of a "war on alcohol," a warning which increased in fervor after the late 2023 World Health Organization (WHO) report which indicated even low levels of alcohol increase the risk of cancer and that "no safe amount of alcohol consumption for cancers and health can be established."

However, amid the concern that alcohol sales might dwindle, brands have begun to capitalize on shifting consumer behaviors and buoy their overall revenue. Boston Consulting Group values the global market share of no-or-low-alcoholic beers, wines, and spirits at more than $13 billion, with sales expected to grow at an annual growth rate of over 7% between 2023 and 2027, settling at about 4% of the overall alcohol market.

Eliott Edge, the bar manager at Hekate, New York City's only sober bar, told Business Insider there is "a whole ecosystem" of new non-alcoholic offerings that customers are clamoring for, having witnessed increasing demand for the alcohol-free options firsthand.

"I get the sober, the sober-curious, and folks who still drink but want to take a break for one reason or another," Edge said. "Locals, tourists — everyone wants to see what it's like. So the non-alcoholic options don't cater specifically to any particular group."

As a result, more and more bars and brands are going to offer non-alcoholic options going forward, Edge predicted, "because they're going to realize that it's like vegetarians or vegans or gluten-free or dairy-free. It's just another type of customer profile to cater to — and the ones that don't cater to that are going to go the way of the dinosaur."

• The US Surgeon General recommended disclosing the cancer risk of alcoholic beverages on Friday.
• While just a recommendation, the advisory sent shares of some big alcohol manufacturers lower.
• It also presents a fresh opportunity for makers of alternatives to alcohol.

The US Surgeon General's finding Friday that alcohol causes cancer led to stock declines for some of the beverage industry's biggest names — and an opportunity for some newer entrants.

Drinking is a major cause of preventable cancer, Dr. Vivek Murthy said in the advisory, which also recommended placing a notice about the cancer risk on beer, wine, and spirits — similar to how packs of cigarettes include warnings about their health risks.

On its own, the recommendation doesn't mean that labels on booze will change. That would require an act of Congress.

Murthy is also part of President Joe Biden's administration and will be replaced by President-elect Donald Trump's nominee for surgeon general after he takes office on January 20. That nominee, Janette Nesheiwat, could take a different view on the advisory if she's confirmed by the Senate.

However, the advisory prompted a response from some companies and the markets today. Here's what it might mean:

Shares of alcohol companies like Diageo and AB InBev lost out

Stocks of some of the biggest alcohol companies in the world were down Friday after the surgeon general released his advisory.

Shares of Budweiser-maker Anheuser-Busch InBev closed down 2.8% in Belgium. In London, shares of Diageo, the company behind Captain Morgan rum and Ketel One vodka, closed nearly 4% lower.

Still, there's reason to doubt that the surgeon general's advisory will lead to a lot less drinking and fewer sales for the big booze makers, Kate Bernot, lead analyst at Sightlines, which researches the alcohol space, told Business Insider.

Annual per-capita alcohol consumption in the US has hovered around 2 ½ gallons since 2012, Bernot said, citing data from the National Beer Wholesalers Association. Gallup polling shows that the percentage of Americans who say that they drink alcohol has mostly stayed between 60% and 65% since the early 1990s, she added.

That stability in habits comes despite previous research into the link between alcohol consumption and cancer as well as the growth of "Dry January," a commitment drinkers make to avoid drinking during this time of the year.

"Maybe some people change their behavior, but I don't think we're going to see population-level dramatic shifts in alcohol consumption," Bernot said.

Makers of non-alcoholic beer and spirits could get a boost

Even if there is a nationwide shift away from alcohol, many of the big producers already have alcohol-free options that they have been ramping up for years. In 2023, for instance, Constellation released a non-alcoholic version of Corona beer.

"The diversification has been happening as a result of consumers' potential thoughts about alcohol's effect on their health," Bernot said.

Murthy's advisory came right as many drinkers are trying to cut back on their alcohol consumption in the new year or embarking on a Dry January.

That's a potential win for many other brands that make alcohol-free beer, wine, gin, and other drinks.

The CMO of non-alcoholic spirit brand Spiritless, Tom Santangelo, told BI he sees these comments as the "front end of a tipping point."

"My guess is that for a lot of America, this surgeon general statement is kind of the message they need to come to a realization that this is something serious," Santangelo said.

He said the industry has already grown significantly in the last few years as alcohol moderation and abstention have become increasingly normalized. Similar to cigarettes, change may not come quickly, but he said, "It's a message that's going to carry a lot of weight."

Milan Martin, the CEO of non-alcoholic spirit brand The Free Spirits Company, told BI that the US Surgeon General's comments are another "nugget" of insight that will contribute to cultural change around drinking.

"All of these teeny little nuggets sit in our minds and sit there at the point where we're ready to order our third drink and impact our choice," Martin said, adding that conversations among peers and in the media around drinking are contributing to changes in drinking culture.

Athletic Brewing, which sells non-alcoholic beer, similarly said that while it is "aware of the ongoing discussions about alcohol and health," it "has never been anti-alcohol."

"We believe the alcohol and non-alcoholic sectors are synergistic," the company told BI.

Innovative soft drinks, from seltzer to kava, could benefit

Besides alcohol-free beer and cocktails with all the ingredients other than the, well, alcohol, there are other beverages that have attracted attention from the sober-curious — and could benefit if people cut back on booze.

Celebrity seltzer and soda brands often pitch themselves as upscale, healthier soft drinks, BI reported last year.

Others have turned to kava, a beverage that's common to the Pacific and is supposed to help you relax and put you in a better mood. While the most authentic kava is served on its own, brands that have added juice, sugar, and coloring before canning it have popped up over the last few years. Some point to their kava as a healthier choice than a cold beer or cocktail.

Cannabis products could become more attractive

People looking to cut back on alcohol sometimes turn to cannabis as a replacement, especially as governments loosen restrictions. That could be good news for makers of everything from CBD-infused beverages to marijuana dispensaries. Cannabis company Canopy Growth, for example, rose more than 2% Friday.

In 2022, the number of daily or near-daily cannabis users outpaced the number of daily or near-daily drinkers, research from Carnegie Mellon University found.

Some states, such as Minnesota and Texas, already allow liquor stores to sell drinks that contain THC, the main psychoactive component in marijuana, right alongside liquor.

• The US Surgeon General released a report directly linking alcohol to cancer.
• A BI analysis found that spending on most kinds of alcohol has declined — especially among young adults.
• It's reflective of Gen Z's shifting habits when it comes to alcohol consumption.

By the time the US Surgeon General dropped its report linking alcohol to cancer on Friday, Americans had already been curbing their spending on booze over the last several decades — especially young people.

Surgeon General Vivek Murthy said in his latest advisory that alcohol consumption is the third leading preventable cause of cancer in the US, following tobacco usage and obesity. He recommended updating warnings on alcohol packages to raise awareness of the harmful effects of drinking. However, doing so requires an act of Congress.

"For individuals, be aware that cancer risk increases as you drink more alcohol," Murthy wrote in a post on X on Friday. "As you consider whether or how much to drink, keep in mind that less is better when it comes to cancer risk."

Do you plan to change your drinking habits in response to the Surgeon General's recommendation? Tell us why in this survey.

Many Americans have already been cutting back. Business Insider analyzed alcohol spending data from the Bureau of Economic Analysis and the Bureau of Labor Statistics to get a sense of how alcoholic beverage consumption has changed. It showed that spending has decreased over the past few decades, especially among Americans under 25.

With spirits and beer in particular, Bureau of Economic Analysis data shows that personal spending as a share of personal consumption expenditures has dropped since 1959. Spending on wine as a share of personal spending, meanwhile, has seen a small uptick.

Additionally, expenditure data adjusted to 2023 dollars using the consumer price index shows that younger adults under 25 years old spent less on average than this age group years prior. Bureau of Labor Statistics data shows that spending on alcoholic beverages by Americans under 25 is similar to people aged 75 and over.

The decrease in alcohol spending among young people is reflective of Gen Z and millennials' shifting habits and priorities compared to other generations. A Gallup survey from 2023 found that 62% of adults under 35 said they drink, compared to 72% two decades ago, with some of them citing health concerns as a key reason.

Gen Z is also favoring more active settings like fitness groups to socialize instead of drinking, marking a shift in younger Americans' behaviors.

It's unclear how the alcohol industry will respond to Murthy's latest report. However, warning labels on alcoholic drinks have not been updated since the '80s, and Murthy urged Congress to take action by updating labels and revising recommended consumption limits to prevent cancer among the US population.

• Dr. Vivek Murthy, the US Surgeon General, has released a report warning that alcohol causes cancer.
• It is the third leading cause of preventable cancer in the US, after smoking and obesity, he said.
• The report follows a growing number of studies showing the potential harms of drinking alcohol.

The US Surgeon General wants to see cancer warnings on wine, beer, and spirits.

Alcohol is a leading cause of cancer, but less than half of Americans recognize it as a risk factor, Dr. Vivek Murthy said in an advisory published Friday.

This is in contrast to the 89% of Americans who are aware of the links between smoking cigarettes and cancer, according to a 2019 survey of US adults aged 18 and older carried out by the American Institute for Cancer Research.

Alcohol consumption is the third leading preventable cause of cancer in the US, after tobacco and obesity.

Research has found that drinking alcohol leads to an increased risk of seven cancers, including breast, colorectal, esophageal, liver, mouth, and throat and larynx, the advisory said.

The risk increases the more a person drinks, and for certain cancers like breast, mouth, and throat, the risk can start to rise at one or fewer drinks a day, according to the advisory.

Warning labels on alcoholic drinks haven't changed since the '80s

Murthy recommended updating warnings on packaging to raise awareness of alcohol's link to cancer.

"Health warning labels are well-established and effective approaches to increasing awareness of health hazards and fostering behavior change," the advisory said.

Currently, health warning labels on alcoholic beverages mention general "health risks," as well as instructing pregnant women and those about to drive or operate machinery not to drink.

They have not been changed since 1988, The New York Times reported.

Ian Hamilton, an associate professor at the University of York's Department of Health Sciences, who researches drug use, policy, treatment, and prevalence, told Business Insider that there is a general lack of understanding of the role alcohol plays in several types of cancer.

"Many people aren't aware of this, so having this clearly laid out and explained is a welcome development," he said.

Richard de Visser, a professor of health psychology at Brighton and Sussex Medical School, UK, who researches alcohol use and behavior change, told BI that warning labels could be useful for raising awareness but should be part of a comprehensive approach to alcohol harm reduction.

"We also need to develop individuals' motivation and skills, and also provide opportunities for healthier behavior," he said.