The alcohol industry isn’t going anywhere any time soon, but shifts in the way consumers imbibe have the big boys making big moves. As a green wave of legalization sweeps North America, and slowly the rest of the world, Big Alcohol is bracing itself for impact.
Despite the fact that Cannabis is still very tightly regulated, alcohol industry veterans and analysts are well aware of the dilemma they face. At this point, there’s no question if cannabis legalization will impact alcohol sales. The only question now is how will Big Alcohol leverage their position and power moving into the new frontier. Let’s take a look at a few reasons why alcohol is down and cannabis is up, and exactly how cannabis legalization will affect the alcohol industry.
10-year Study Shows Legalization Reduces Alcohol Sales
Three universities, two U.S. and one Peruvian, combined their forces to find out if legalizing marijuana has any impact on alcohol use. Forbes is suggesting their research paper could be a “definitive proof” for what’s to come. They studied 10 years worth of sales data from 2006-2015 derived from 90 alcohol chain stores including grocery, convenience, drug, and mass distribution stores.
After comparing U.S. states that legalized marijuana with states that did not, the researchers found that counties located in medical marijuana states showed almost a 15 percent reduction in monthly alcohol sales. The study shows that, where marijuana is legally available for medical or adult-use, alcohol sales seem to decline. If you don’t think Big Alcohol has anything to be concerned about then look no further then Aspen, Colorado.
In 2017, licensed cannabis retailers reported income of $11.3 million, reportedly believed to be the first case of marijuana outselling alcohol. Those figures are up 16% from last years sales and according to Aspen’s end-of-year sales tax report, the marijuana industry is the city’s fastest growing retail sector out of twelve.
Why Cannabis Will Disrupt Big Alcohol
The study concludes with the suggestion that marijuana and alcohol are strong substitutes for each other and share almost the same audience. However, the average cannabis consumer isn’t who you might think it is. Instead of young-stoners, the average legal cannabis consumer is actually more likely to be middle-aged and older with a steady income. These are the customers that Big Alcohol is concerned will start looking more towards cannabis for relaxation and recreation rather than beer, wine, or spirits.
According to a 2017 poll by Marist and Yahoo, 34% of women, 56% of healthy, aging baby boomers and 67% of those who earn over $50,000, the U.S. biggest wine-drinking demographic, said their marijuana consumption would increase if it were legalized. Regardless of the simple fact that active, health-conscious baby boomers might prefer marijuana to alcohol, the industry has seen a steady decline in sales overall, which could outline a larger shift in consumer behavior. Major players have already noticed the trend and are betting big on marijuana collaborations to help offset the losses.
Cannabis A Threat or Opportunity To Alcohol
Currently, in states with legalized marijuana cannabis-beverages only make up 5% of sales, according to BDS analytics. When we consider that non-alcoholic drinks make up 80% of the USA’s total beverage market, the idea that CBD and THC-infused non-alcoholic drinks could drastically impact Big Alcohol begins to take on a new perspective.
Canopy Growth shares soared recently with the announcement of their deal with Constellation Brands Inc., the makers of Corona, Mondavi wines, and Svedka vodka. Lagunitas Brewing Company, a Heineken owned beer brand, has already started infusing cannabis into a non-alcoholic IPA-inspired beverage. These are just two major players who’ve already made their move into the cannabis space.
Conclusion
Beyond the loss of revenue from cannabis legalization, Big Alcohol will need to make sure that non-alcoholic makers don’t beat them to the punch when it comes to cannabis drinks. Coca-Cola is already making huge waves with rumors that they’re looking for a cannabis company to buy into, and it’s very likely that they will.
