Going Green? Recreational Pot Votes Have Our Attention

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Americans voted for more than just the next president this past November. Four states – California, Maine, Massachusetts and Nevada – voted to legalize the recreational use, possession, cultivation, and sale of cannabis. California, Maine and Nevada have imposed age restrictions, limiting recreational use, possession, cultivation and sales to adults who are aged 21 or older. Massachusetts’ bill in particular calls for regulating marijuana similarly to alcohol. California’s bill rolls back the sentences of thousands of people who were convicted on marijuana-related charges.

Recreational marijuana use is legal in Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington, and Washington DC. Another way to put it is this: it’s now legal to enjoy cannabis along the entire West Coast. More than half of the states in our country have legalized medicinal marijuana, and many others have decriminalized the possession of small amounts. Bear in mind that at the time of this article’s publication date, the new laws have yet to take effect in Massachusetts, Maine and Nevada.

Map of marijuana laws by state in the United States - Marijuana legislation

 

To view interactive map, follow this link to  The Cannabist

It appears, in other words, that social attitudes towards pot are mellowing. And, as expected, the US alcohol industry, worth more than $200 billion annually, is keeping a close watch on recreational marijuana developments. More than just watching, some brewers and distillers are opposed to legalization. In fact, some beer and spirit producers have made clear their opinions on the subject through public statements and even donations to campaigns that fight cannabis decriminalization.

"Craft beer tends to appeal to a younger and more hipster crowd who are also more likely to be smoking cannabis," said Trevor Stirling of research firm Sanford C. Bernstein & Co. "Whereas a typical Budweiser drinker – a blue collar industrialized worker – is less likely to smoke cannabis, so potentially there's more risk for craft beer than for mainstream beer."

A regulatory filing by Boston Beer Company, brewer of Samuel Adams, identifies recreational cannabis use as a possible risk factor, stating it’s “possible that legal marijuana usage could adversely impact the demand for the company's products.” The filing also argued that legalization of recreational cannabis could impact the craft beer industry negatively.

The Beer Distributors’ PAC donated $25,000 in 2016 to a campaign group that fought legalization in Massachusetts, while on the spirits side of things, Brown-Forman, the distiller of Woodford Reserve and Jack Daniel’s, has recognized widespread cannabis usage as a potential risk factor for their accounts.

However, not all in the American alcohol industry have expressed concern about legalization. Sierra Nevada, for example, objected publicly when the California Beer and Beverage Distributors donated the sum of $10,000 to fight legalization in 2010. An associate member of the group, Sierra Nevada made it clear that they remain neutral on this topic. The brewer released a public statement that read, "We feel that people have the obligation to choose what is right for themselves without influence from outside interests." It’s clear, therefore, that not only citizens and politicians are divided on the issue of legalizing the recreational use of marijuana.

One reason for the division is likely the lack of empirical data concerning legalization and its impact on alcohol sales. Colorado and Washington only legalized recreational use four years ago. Not enough data has been collected to provide evidence of any effect legalization may – or may not – have on any industry, let alone the alcohol industry.

Anecdotal evidence suggests that Colorado’s alcohol sales may be getting a boost from legalization. As the first US state to legalize recreational use, Colorado has become a haven for marijuana tourism. That development appears to have led to alcohol tourism as well. In 2016, sales of beer, wine and spirits increased 2.7% from 2015. Again, more data is needed. A cursory glance at the available information implies that Colorado’s alcohol sales have not been impacted in a negative way due to legalization.

Interestingly, Cowen & Co., a research firm with offices throughout the United States and also London, Luxembourg and Hong Kong, has presented a forecast for the US recreational marijuana market. Currently, the legal market is worth approximately $6 billion but could be worth upwards of $50 billion by 2026; time and data will tell. Cowen also says that while 14% of adults in the US admit to using cannabis (compared to the 70% who drink alcohol), pot has been gaining share among adult men at the expense of alcohol for the past 10 years. Legalization, according to analyst Vivien Azer, would likely hasten that trend.

The issue is divisive. Are the concerns of some within the alcohol industry warranted? We don’t yet know. Will president-elect Donald Trump and his cabinet disrupt future legalization attempts and overturn current legalization developments? Trump’s at times unpredictable maneuvering makes that unclear. Of more perhaps more immediate concern, should bar and nightclub owners and operators located in states where recreational pot is legal consider marijuana cocktails and other marijuana-focused products? It’s a tempting choice for those doing business where recreational cannabis is legal and won’t jeopardize their liquor licenses, but there are more than just legal ramifications to consider; public perception, standing in the community, and relationships with state and local politicians and government agencies deserve real thought.

Perhaps Sierra Nevada said it best all those years ago: People have the obligation to choose what is right for them. I would add, however, that the obligation also includes doing what’s best for an operator’s employees and community.

Sources

Boston Beer Company SEC Form 10-K

Brown-Forman SEC Form 10-K

Sierra Nevada’s Stance on Proposition 19