Newsletter · 2026-07-22 · Ashutosh Agarwal

Bernstein Makes the Case Alcohol's Slump Is Cyclical - Vice & Wellness: Alcohol & Nicotine - July 22, 2026

Vice and Wellness (alcohol and nicotine) newsletter for July 22, 2026. Bernstein's Nadine Sarwat makes the case that the alcohol slump is mostly cyclical rather than structural and that the stocks are pricing in too much doom, even as a rough July 4 sales read, GLP-1 adoption and a shift to canned cocktails keep pressuring volumes, while the week's only nicotine coverage came from a pouch startup founder.

Vice & Wellness: Alcohol & Nicotine

July 22, 2026: Bernstein Makes the Case Alcohol's Slump Is Cyclical

For a year now the loudest voice in the room has said Americans are simply done drinking, a generational break, structural, permanent. This week the most-watched sell-side beverage analyst on Wall Street sat down on a podcast and pushed back hard: the decline, she argues, is mostly the economy, not the end of alcohol, and the market has priced in far too much doom. She said it in the same week the July 4 sales numbers came in ugly and a "healthy beer" founder told a similar story from the other end of the industry. Meanwhile the drugs that quiet food noise are quietly taking drinks off the table too, and, for the first time in a while, the people trading tobacco stocks stayed on the sidelines, leaving the only nicotine news to a startup founder with a very specific plan to make America smoke-free.

TL;DR

A top Bernstein analyst says the alcohol crash is mostly cyclical, not structural, and thinks the stocks are pricing in too much gloom. Nadine Sarwat's key stat: Americans drink about 11% less per person than in 2019, yet the share of the household budget going to alcohol is actually up. Translation: people still want to drink; it's gotten more expensive and they're broke. That's a very different, and more fixable, problem than "a generation quit."
The July 4 drinking data was genuinely bad. An early read had total alcohol down 9.5% for the holiday week, the worst of any consumer category, before later data softened it to roughly flat on dollars and down 1.6% to 4.9% on volume. Beer's whole story in 2026, per the wholesalers' economist, is "occasions, not volume."
GLP-1 weight-loss drugs keep pulling drinks off the check. A survey cited this week found 45% of people are eating out less and skipping the drink when they do; a bestselling author who lost 45 pounds on one said flatly, "I basically hardly drink alcohol at this point."

What's new

Bernstein's Nadine Sarwat makes the cyclical case, and calls out the doom pricing. The most substantive thing said about beverage alcohol all week came on Beernet Radio, "Ep. 345 Nadine Sarwat of Bernstein" (Jul 15, 2026). Sarwat, Bernstein's beverages analyst, walked through the numbers that frame the whole debate. Per-person alcohol consumption in 2025 was "around 11 percentage points down on 2019" (she normalizes for different alcohol strengths, so this is pure ethanol), but here's the twist: "the share of household wallet that's dedicated to spending on alcohol is actually a little bit up on 2019, despite volumes being down." People are spending the same slice of their money on booze; it just buys them less, mostly because bars and restaurants got so much more expensive. Her blunt read: "I think the financial markets are saying that in the share price, they're pricing in too much of it being structural. And I think there's so much evidence to show it's cyclical." She won't wave the whole thing away: "there is a Gen Z consumer that does drink less," and she openly wonders whether that's health-and-wellness or simply that "they're broke and they're living at home with their parents, like my interns that I talked to today," but her weight of evidence lands on cyclical. This matters because it directly contradicts the year's dominant bear narrative, and it comes from the analyst institutional investors actually read.

"I think the financial markets are... pricing in too much of it being structural. And I think there's so much evidence to show it's cyclical."

Nadine Sarwat, Bernstein

The "is alcohol the next tobacco?" question, and why the pricing playbook doesn't transfer. In the same conversation, Sarwat took on the trade a lot of investors are quietly running: treat booze like cigarettes, push price to offset shrinking volume, and milk the cash. She thinks it fails. Her pricing map from 2020 to 2025, against cumulative US inflation of 26%: beer pricing ran just below that; spirits off-premise rose only 9%, but spirits on-premise (the $20-plus Manhattan cocktail "pre-tax, pre-tip") jumped 30%. The problem with the tobacco model is that "you can't really raise prices" when there's a genuine affordability squeeze and people actually want the product: try cutting price and, thanks to the three-tier system, "there's no guarantee Buffalo Wild Wings is going to cut their price," so the supplier just eats it. Where the money is actually going: ready-to-drink cans. "RTDs, I like to say on a per unit basis, it's highway robbery," she said (you pay far more per ounce of alcohol for a High Noon than a bottle of Jack Daniel's), "but I'm going to pay less than $20." That total cash outlay, not the per-unit math, is how the stressed consumer now shops. The read for stock-pickers: she likes Brown-Forman's balance sheet (net-debt-to-earnings leverage of 1.8, "much lower than a Diageo or a Pernod"), reads Diageo's "management changes or headcount cuts" as the sector finally pulling the cost lever, and gave Constellation's new CEO a qualified thumbs-up ("if it ain't broke, don't fix it, but maybe tinker with it").

July 4 was ugly, then less ugly, but the trend is clear. The hard sales data came via Brewbound Podcast, "Best Day's Tate Huffard on Fitting Into Non-Alc Beer's 'Belonging' Phase" (Jul 15, 2026), where Brewbound's Zoe Licata ran the holiday scans. The first read from NIQ had total alcohol down 9.5% for the July 4 week, "the largest decline of all CPG [consumer packaged goods] categories," so this wasn't a soft holiday for everyone, alcohol specifically took the hit. Later data was less brutal: Circana had total alcohol dollars roughly flat (+0.1%) with volume down 1.6%, while NIQ's four-week read through July 4 showed dollars down 3% and volume down 4.9%. The industry's explanation, which Licata says you'll hear "over and over again for the next couple months" on earnings calls: heat waves and storms. The more durable framing came from Lester Jones, economist at the beer wholesalers' association, who told her "the story of 2026 in beer is occasions, not volume": the World Cup and July 4 filled bars, but the underlying volume keeps leaking. The unanswered question she kept circling: 2026 had a stacked calendar of big occasions; "2027, what are those occasions?"

Every wine category is falling, except the one in a can. On Business of Drinks, "125: Bootstrapping Saint Spritz to 55K Cases With CEO Ben Patton" (Jul 15, 2026), founder Ben Patton (whose sister, former Bachelorette Jojo Fletcher, fronts the brand) offered a clean operator's-eye view of where wine is going: "if you look at wine, every single wine category is down except wine-based cocktails," which are "growing double digits." His read on why: consumers are "graduating from the days of rosé all day or the days of drinking an entire 750 ml" toward single-serve formats, partly non-alcoholic adoption, partly "people staying single longer" who don't want to open a whole bottle for one glass. He also flagged the cocktail of the moment: the Aperol Spritz has become "the most popular cocktail in America... for the first time in 20 years," knocking the margarita off the top of the bar. And a striking data point on how fast non-alcoholic is moving: Saint Spritz quietly launched a non-alc line on Amazon and "in 60 days, we were the number one selling non-alcoholic line on Amazon," with his biggest problem now "keeping Amazon stocked." Operator commentary, not analyst forecast, but it's a live, on-the-ground confirmation of the shift from bottles to single-serve and from full-strength to zero-proof.

GLP-1s keep quietly rewiring the drink order. Two health-focused podcasts and one money show all landed on the same conclusion from different angles. On The James Altucher Show, "Charles Duhigg Lost 45 Lbs on a GLP-1 | Why Food Noise Vanishes" (Jul 16, 2026), author Charles Duhigg (who wrote The Power of Habit) described the alcohol effect first-hand: "People who are on a GLP-1 find that they have much less of a craving to drink. I actually basically hardly drink alcohol at this point... I see a beer and I'm like, eh, I'd rather have, like, a juice." He framed drinking as a "keystone habit": cut it and sleep, focus and socializing all shift with it. The money-side read came on Networth and Chill with Your Rich BFF, "How GLP-1s Are Reshaping the Economy and Who's Really Paying for It" (Jul 15, 2026), which cited an EY Parthenon survey finding "45% of respondents... said they're eating out less and less likely to order a drink when they do," a double hit to alcohol on top of Gen Z already drinking lightly. For context on the scale of the appetite change, the same episode noted a Cornell study showing a household's grocery bill drops 5.3% within six months of someone starting a GLP-1 (over 8% for higher-income homes), with impulse snacks down about 10%.

The debate

This week the podcasts argued the alcohol question from both sides with unusual rigor, and, notably, the cyclical case got its strongest airing of the year. Nicotine's debate barely happened (more on that below).

Bear: the decline is real and structural. The evidence keeps stacking. The July 4 scans were the worst of any consumer category on the early read (Brewbound). Every wine category except canned cocktails is shrinking (Business of Drinks). And GLP-1 drugs are demonstrably pulling drinks off the check, with a bestselling author saying he's essentially stopped drinking (James Altucher Show) and nearly half of surveyed diners cutting back (Networth and Chill). Add the long-running worry that young adults are forming fewer drinking habits, and you get a slow-motion re-rating of the whole category.

Bull: it's the economy, not the end of alcohol. This is where the week got interesting, because the most credentialed voice made the cyclical case. Sarwat's core evidence (Americans spend the same or a slightly larger share of their wallet on alcohol than in 2019, they just get less volume for it) says the desire is intact; the constraint is price and a stretched consumer (Beernet Radio). Gas prices, she argued, were the real swing factor behind recent air-pockets in the data, "and that affected many industries outside of beer." She's not alone. On Recipe to Revenue, "Ep 61 - Building a Brand Around the World's First 'Healthy Beer'" (Jul 15, 2026), Cactus Brewery's founder, who has "owned two bars" and now sells a 3.9% ABV fortified lager, put it plainly: "everybody's saying alcohol sales are going down and there's a big shift. And really, I don't think that that's going to last a long time." His view is that people aren't quitting so much as getting "a lot more intentional," trading heavy drinking for lower-strength, "premier" products, and he leaned on the timeless argument that "there's a reason alcohol has never disappeared from society," the social value of the local watering hole. That's an operator talking his own book, but it rhymes with the analyst: the shift is toward better and less, not none.

The tell for the whole debate: if Sarwat is right that this is cyclical, today is a trough and the stocks are cheap; if the bears are right, it's a structural de-rating that has further to run. The next few earnings calls, and whether the "occasions, not volume" crutch keeps working into a thinner 2027 calendar, will start to settle it.

The names in play

Brown-Forman (BF.B) got the closest thing to a positive nod this week: Sarwat singled out its balance sheet, with leverage of 1.8 times earnings "much lower than a Diageo or a Pernod," as the kind of financial health investors reward in a tough tape, and pointed to Jack Daniel's line extensions (a blackberry expression, and Numix ready-to-drink cans) as the controllable share-gain lever. Constellation Brands (STZ) drew a qualified defense: its new CEO's early comments were "a good start," and Sarwat wants to see follow-through on marketing Corona as a scale brand, backing non-alcoholic with its own brands, and flavored line extensions, while acknowledging the last 18 months have been brutal, much of it (immigration, squeezed consumer wallets) "not their fault." Diageo was read constructively-through-the-pain: its "management changes or headcount cuts" are the sector finally attacking costs, and Sarwat noted Diageo has itself admitted that chasing premium-only left it exposed on the "wide range of price points" a squeezed consumer now wants. Molson Coors (TAP) was the hard case: its Monaco cocktail push is "only a dent" against the structural pressure on light and value beer, and investors "would like to see change sooner rather than later." All pundit/analyst framing, not company insiders.

Read-throughs

Non-alcoholic beer, past the fad, into a shakeout. On the Brewbound episode, Best Day founder Tate Huffard (an operator) said the category has crossed a threshold: retailers now treat non-alc as "here to stay," and his brand (the "number two pure play") has grown distribution "30% in the last six months" with double-digit growth "in all regions across the country." But he warned of a coming "shakeout" as shelves get "bombarded with a plethora of new SKUs." The tailwind is real for the Athletic Brewings, Heineken 0.0s and Guinness 0.0s; the caution is that most of the me-too launches won't survive.
Functional and "better-for-you" alcohol, borrowed from the soda aisle. On Taste Radio, "Why The Next Big Thing, In Booze Or Beyond, Is Often Borrowed" (Jul 17, 2026), Brewbound's Zoe Licata explained that alcohol trends run "3, 3.5 years behind" non-alcoholic beverages, and that the acquisition of soda brand Poppi was the trigger for a wave of spiked "better-for-you" sodas. The breakout example is the alcoholic sports drink: Stateside's Super Lyte did "120,000 cases" in its first five weeks and is "targeting 1.5 million for the full year" at 4.5% ABV, essentially, as one host put it, "a BORG in a can." She's skeptical most survive ("if you try to do it now, you're already behind"), but the category is pulling volume from traditional beer. Separately, the Guinness "Split the G" social-media game keeps driving on-premise trial of a 4.2% ABV, ~120-calorie stout, a reminder that lower-strength and "sessionable" is where the energy is.
THC drinks vs. beer, the cannibalization story keeps getting debunked. On At Your Convenience, "Hemp Beverages in Chicago: Exploring the Market Potential" (Jul 16, 2026), convenience-store operator Dan Rozowski (R-Marts) said his beer category is growing month-over-month year-on-year even as he stocks THC drinks: "it's not hurting our beer numbers." Forum chair Melissa Vonderhaar cited Nielsen data that in states where THC beverages are legal, beer is down 2%, but Nielsen attributes only 0.2 of that 2 points to THC drinks, "incredibly low." The most memorable data point: a major retailer found "the most common items in a THC beverage basket are Chardonnay, Tito's and champagne," buyers are adding THC to an alcohol basket, not swapping. The takeaway for anyone modeling substitution: THC drinks look additive to the basket, not a beer-killer, and operators are folding them into the beer aisle to drive traffic.
Hemp-THC drinks face a regulatory cliff. The flip side, from The Dales Report | Trade to Black, "The Political Fight for Cannabis Just Exploded | TTB Weekly Recap" (Jul 20, 2026): a proposed federal change to THC limits could, per the US Hemp Roundtable, "eliminate approximately 95% of existing hemp-derived products." Shippers (FedEx has gone "extremely restrictive") and payment processors (Shopify, Stripe, Square) are already preparing to cut off non-compliant products, and states are splitting: Virginia has strict limits, Ohio opposed a restrictive framework, Missouri may fold hemp into its licensed marijuana system. Watch the November 12 deadline. If the cliff arrives, a chunk of the THC-beverage competition to alcohol could vanish overnight, a potential quiet positive for beer. Also noted: Tilray's BrewDog brand launched a £1 million "bar tab" football-season promotion across England, Scotland and Ireland.
GLP-1 caveat: the science is early. For balance: on Itchy & Bitchy Podcast, "225: GLP-1 the Magic Miracle Medicine (update) Should EVERYONE take IT?" (Jul 20, 2026), the physician host cautioned that the reduced-drinking finding comes from "subgroup analysis" (not the primary purpose of the trials), so "we have correlation, but not causation yet" and it "needs further investigation." The behavioral effect on alcohol is showing up consistently, but the hard clinical proof isn't locked in.

What changed

Two things moved this week. First, the alcohol debate finally got a heavyweight on the cyclical side. For months the structural-decline story has run unchallenged; Bernstein's Nadine Sarwat put real numbers behind the counter-argument (flat-to-higher wallet share, an affordability squeeze, gas prices as the swing factor) and explicitly said the stocks are pricing in too much doom. Whether she's right is now the whole ballgame for the group.

Second, the week's only nicotine coverage came from a startup founder rather than from anyone trading the listed tobacco names. Last week's genuine catalyst, the FDA easing pouch rules and clearing Zyn products as lower-risk, drew no fresh investor commentary on Philip Morris, Altria, or British American Tobacco this week. What did land was a founder-and-investor breakdown of the pouch land-grab, useful for the long-term map, not for this quarter's numbers.

One nicotine story worth your time anyway. On Austin Next, "What This Unlikely Deal Shows About New Austin | Max Cunningham (Sesh) & Jake Medwell (8VC)" (Jul 16, 2026), Sesh founder Max Cunningham and investor Jake Medwell of 8VC laid out the pouch bull case with unusual clarity (Sesh is a private nicotine-pouch startup, so this is founder/investor commentary, not a read on the listed tobacco names). The frame for the whole reduced-risk thesis: "I believe that we can make the US a smoke-free country, which is below 5% incident rate. The only country that has done that so far is Sweden. And funny enough, in Sweden, over 50% of people that use nicotine products are using white pouches." The runway is enormous: the US has "60 million nicotine users," the majority still cigarette smokers, and pouches are "only 5% of that total market... so about 3 million pouch users." Two structural points every tobacco investor should internalize: first, the regulatory moat is why these businesses are valued the way they are, nicotine companies trade at "between 10 and 15 times revenue... there is no other consumer product category in the world that trades like that," because the FDA's PMTA approval process (which took Zyn "about six years") is a years-long, multi-million-dollar barrier to entry (Sesh alone put "over $15 million" into its application). Second, being on the market before the 2022 synthetic-nicotine deadline lets a company keep selling while it waits in the queue, the same rule the listed players benefit from. For scale, Medwell reminded listeners that Zyn's parent sold in 2022 "for $16 billion, which was the same as WhatsApp." None of this moves a PM or BTI number next quarter, but it's the clearest recent articulation of why the pouch land-grab is the whole game.