Terry Smith Diageo to ditch weight loss pills on alcohol cravings

Open the editor’s digest for free

FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.

Veteran investment manager Terry Smith has dumped his £22.5bn fund in Diageo after nearly 15 years amid concerns over the drinks maker’s new management team and demand for weight loss drugs.

The move is the latest sign of increasing pressure on beverage companies to control alcohol demand after the US Surgeon General. He said last week Such drinks should be warned to increase their association with cancer.

Pharmaceutical groups are also currently investigating weight-loss drugs such as Ozempic – which are experiencing high demand – used to reduce alcohol consumption and treat addiction.

Diageo, who runs the Fundsmith Equity fund, said in his annual letter to shareholders that Diageo was one of the three stocks he sold last year.

Smith, one of Britain’s most prominent stock pickers, warned in a letter published on Thursday that the drinks sector is broadly “in the early stages of being adversely affected by weight loss drugs such as Ozempic and Wegovy”.

He added: “Indeed, it looks like the drugs will eventually be used to treat alcoholism.” Diageo declined to comment.

Smith’s opinion comes A recent study Published in the journal Addiction, Ozympic and similar products have proven to reduce opioid and alcohol abuse by up to half. Meanwhile, so is Novo Nordisk. Currently testing Weight loss medications can reduce alcohol consumption and whether they can treat alcoholic liver disease.

He also raised concerns about Diageo’s “new management”, led by Debra Crews from June 2023, because “its Latin American business has performed worse than the sector in this area”.

The creator of Guinness and Johnnie Walker said in January last year that he was hurt. “The Perfect Storm” Declining sales of Scotch whiskey in Latin America and the Caribbean in the region led to a profit warning in 2023.

Fundsmith Equity It returned 8.9 percent in 2024, according to the letter, underperforming the MSCI World Index’s 20.8 percent return and the 12.6 percent average performance of competing funds.

The Mauritius-based Smith Fund said the drinks company, Brown Forman, maker of Jack Daniel’s Tennessee whiskey, would hold the stake, but said the company was “perhaps seeing the first signs of the adverse effects of weight loss drugs”. He said.

However, the company said it would gravitate towards premium spirits compared to Diageo, “which would help offset the effects of weight loss drugs” because consumers would drink “less, but of higher quality”.

Fundsmith Equity sold US food company McCormick and tech giant Apple. Smith said Apple’s stock price had “risen strongly,” making it expensive to buy more shares, and he sold the fund’s shares after initially taking a stake two years ago.

He defended the fund’s underperformance last year, when just five stocks — Navia, Apple, Meta, Microsoft and Amazon — delivered half of the S&P 500 index.