Is The Rise Of A Legal Cannabis Industry Bad For Beer Sales?
By Roger Malespin photo/istock.com/:eskymaks
With the cannabis industry reaching over $10 billion in sales in 2017 and projected to grow exponentially for years to come, other recreational drugs are suffering. The beer industry is facing their biggest challenge in decades as more Americans have access to cannabis thanks to legalization and decriminalization.
Vivien Azer, managing director and senior research analyst at Cowen Investment Group, believes that beer will be the biggest loser in the rise of cannabis sales in the United States.
"We view the interaction with alcohol as being the most obvious to us as we think of these products as substitute social lubricants," Azer, managing director and senior research analyst at Cowen, told CNBC. "Binge drinking rates, for instance, are significantly lower in states where adults have access to adult-use cannabis,"
Cowan predicts that if the U.S. fully legalized cannabis, it could reach at least $75 billion by 2030. This corresponds with the current U.S. wine sales of around $60 billion. Cigarette sales held at $77 billion and beer sales at $110 billion.
It should be noted that the projections are assuming that the federal government will not interfere with state cannabis laws, but ardent anti-marijuana Attorney General Jeff Sessions has not garnered the support he hoped in that endeavor.
The beer industry is well aware of this and the versatility of cannabis, and must make long-term decisions to combat it. Andy Thomas, CEO of Craft Brew Alliance, whose beer brands include Red Hook and Kona, told IBD that pot is "potentially one of the most disruptive factors" to the beer industry, whether it's smoked, vaped or swallowed. "I think regardless of what kind of path you take, you can't help but say it's going to be another one of those forces that changes the way people socialize," he said. "You have to look at it as an opportunity," he added later. "Otherwise I think we're kind of putting our head in the sand."
To the beer industry, and to a lesser degree the wine industry, cannabis is a threat that is hard to protect against - one currently treated as little more than a risk factor but can potentially be much more. An evolving legal landscape and a fluctuating effect on customer spending money make discerning appropriate responses difficult. Larger market giants such as Molson-Coors have stakeholders to answer to, and are in the uncomfortable position of having to wait and see how things develop.
It is true that the effects of cannabis on beer sales in the short term are questionable for now, but there are other ways the cannabis industry is affecting beer. Venture dispensaries are driving up the cost of warehouse space in Colorado and California, and tourists find the novelty of the variety of cannabis products appealing. It’s unlikely to be a major factor in the short term, but within a few short years the cannabis industry can very well be a serious threat to the centuries old beer industry bottom line.