Cannabis vs. Beer

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Research published recently by financial analysts Cowen & Company suggests that beer volume in the legal recreational cannabis states of Colorado, Oregon and Washington are underperforming the overall US beer market by 2.6 percentage points year-to-date.

“In adult-use cannabis markets, there are clear signs that cannabis is weighing on beer category trends,” Cowen analyst Vivien Azer wrote in the report. She also noted: “Mainstream beers are the biggest drag, while craft is also slowing. Imports look the most immune.”

Cowen’s report, based on scan and point-of-sales data from The Nielsen Company, notes that sales volume of “below-premium” beers is down 2.4% year-to-date in the three states; “premium domestic” beers are down 4.4% year-to-date, and craft beer sales are flat, underperforming the total US craft sales by 9.5 percentage points, according to the report.

Azer writes that cannabis has been gaining share among adult men at the expense of alcohol over the past decade. She says recent legalization – Maine, Massachusetts, Nevada and California approved consumption in November – is likely to accelerate that trend.

“We are watchful of substitution with alcohol, as incidence among men in the US has fallen 0.1 percentage points in the last five years, while cannabis incidence has risen by 2.65 percentage points. With the legal market still in its infancy, we think the risk to alcoholic beverage consumption will become increasingly apparent,” she says in the report.

In the US, 14% of adults admit to cannabis use, far below the 70% who drink alcohol and 25% who smoke cigarettes, according to Cowen, which pegs the market for legal marijuana currently at $6 billion per year. The firm estimates that legalization has the potential to grow the market to $50 billion by 2026. At least some of that increase is expected to come from illicit users of marijuana transitioning away from the black market.

Alcohol companies are beginning to acknowledge the potential for change in public consumption of their wares. In a recent interview with Bloomberg, Constellation Brands' CEO Rob Sands said, "We're looking at (the possible marriage of alcohol and cannabis). There are going to be alcoholic beverages that will also contain cannabis."

Bars and restaurants are also being forced to decide whether to allow guests to consume cannabis on-premise. In November, the city of Denver approved an initiative which allows a business to let consumers bring their own marijuana and enjoy it on the premises, though the legislation requires local consent and a permit from the city.

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