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

The move is the latest sign of increasing pressure on liquor companies over future demand for alcohol, after the US surgeon-general. said last week that such drinks should carry a warning to raise awareness about their link to cancer.

Pharmaceutical groups are also currently exploring whether weight-loss drugs such as Ozempic – which is experiencing a boom in demand – can be used to reduce alcohol consumption and treat addiction.

Smith, who runs the Fundsmith Equity fund, told shareholders in his annual letter that Diageo was one of three stocks he sold last year, as he owns shares in the world’s biggest spirits producer. since the fund’s inception in 2010.

In the letter published on Thursday, Smith, who is one of the UK’s best-known stockpickers, warned that the drinks sector more broadly “is in the early stages of being negatively affected by weight loss drugs” such as in Ozempic and Wegovy.

“In fact, it is likely that drugs will eventually be used to treat alcoholism as its effect on consumption,” he added. Diageo declined to comment.

Smith’s comments follow recent study published in the journal Addiction found that Ozempic and similar products cut opioid and alcohol abuse in half. Meanwhile Novo Nordisk also current test if its weight-loss drugs can reduce alcohol consumption and treat alcoholic liver disease.

He also raised concerns about the “new management” of Diageo, led by Debra Crew since June 2023, due to the “lack of information about the business in Latin America that produced results worse than the sector of this place”.

The maker of Guinness and Johnnie Walker said in January last year that it was suffering a “perfect storm” in the region, due to high levels of inventory and a decline in sales of Scotch whiskey in Latin America and the Caribbean causing a profit warning in 2023.

Fundsmith Equity 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 rival funds.

Smith, who is based in Mauritius, said the fund would retain its stake in drinks company Brown-Forman, the distiller of Jack Daniel’s Tennessee Whiskey, but said the company also “may be seeing early signs of adverse effects of weight loss drugs”.

However, he noted that the company leans more towards premium spirits compared to Diageo, “which may help offset the effect of weight loss drugs” as consumers “drink less but higher that quality.”

Fundsmith Equity also sold American food company McCormick and tech giant Apple. Smith said Apple’s share price had “raised sharply”, making it expensive to buy more stock and so sold shares in the fund after first taking a stake two years ago. .

He defended the poor performance of his fund last year, saying that just five stocks – Nvidia, Apple, Meta, Microsoft and Amazon – provided almost half the returns of the S&P 500 index.