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Cannabis-based booze to be ‘biggest disruptor ever’

US election day didn’t just mark the naming of a new president – 8 November also saw a fresh wave of cannabis legalisation spread throughout the US. But as marijuana increasingly gets the green light, what does it mean for spirits?

Can cannabis and alcohol ever coexist as happy bedfellows?

California, Maine, Massachusetts and Nevada were united in more ways than one on 8 November 2016. While the landmark day saw Donald Trump secure his route to the White House, the four US states voted blue for Hillary – and they also leaned green, opting to legalise recreational cannabis use.

They joined Colorado, which legalised the sale and possession for non-medical use in 2012, alongside Washington in 2012 and Alaska and Oregon in 2014. Polling day also saw Republican states Arkansas, Florida and North Dakota pass ballot initiatives to legalise medical marijuana use.

It’s not just in the US where consumers can now legally light up to relax – Amsterdam has long cultivated a coffee shop culture, while law-makers in Berlin have agreed to a partial decriminalisation trial.

Italy too is exploring some form of legalisation, although the recent constitutional referendum and subsequent resignation of prime minister Matteo Renzi is expected to slow things down somewhat. Portugal has long decriminalised drug use, although recreational cannabis is not widely tolerated. Meanwhile, marijuana for recreational purposes is set to be legalised in Canada in 2017.

Even just a few years ago, Christopher Snowdon, head of lifestyle economics at the Institute of Economic Affairs, a British think-tank, was sceptical about the widespread legalisation of cannabis. “But now because of what’s been going on in America, where something like 25% of the population now has access to legal marijuana, I would expect to see legalisation in European countries spread further in the next five or 10 years,” he says.

The public health and social implications of legalisation have been debated at length so will not be discussed here. Suffice it to say some lobby groups decry the movement, while other pro-liberalisation groups claim it circumvents the black market while tackling associated health issues. Critical for the spirits sector is how the changing habits of mature market populations will hit consumption – can cannabis and alcohol ever coexist as happy bedfellows?

Biggest disruptor

“The substitutions versus complementary use argument will become a key research area of focus,” Spiros Malandrakis, senior alcoholic drinks analyst at intelligence provider Euromonitor reckons. Earlier this year, he told The Spirits Business that cannabis-based drinks are set to become the “biggest disruptor that ever was” in the US market, with the ‘craft’ drive a mere “playground in comparison”.

So what do spirit suppliers think about the move? California’s Humboldt Distillery, located in the heartland of cannabis cultivation, added Humboldt’s Finest to its portfolio earlier this year, a vodka infused with local, lawfully-grown hemp.

“Here in our home state, marijuana has only been legal for a few weeks, so there’s not enough data to predict how it will affect sales for the beverage alcohol industry,” says distillery owner Abe Stevens. “It wouldn’t surprise me if, in the long run, there could be a minor decrease in alcohol consumption, but I don’t lose any sleep over it.”

His business is small, he says, and while he has growth aspirations, he doesn’t expect the change in the law to have a measurable impact. “I think it’s more of an issue for large multinational beverage companies to worry about. If you’re doing hundreds of millions, or billions, of dollars in sales, then maybe even a fraction-of-a-percent change would still be a lot of money.”

For Henry Fisher, policy director and editor at VolteFace, a drug public policy think-tank, it’s helpful to look at the US state of Colorado as a test case. While he admits most studies into the impact of cannabis legalisation on alcohol consumption have focused on beer, he says there is a downward correlation.

“Although alcohol sales have continued to increase in the state [since legalisation], they haven’t actually increased relative to population increase and relative to the fact that they’ve had a huge increase in tourism over the last few years,” Fisher explains. “So per person it seems like people are actually consuming less alcohol.” While in Colorado ‘alcohol’ hasn’t been broken down into beer, wine and spirits, he suspects it’s the former two that are bearing the brunt.

“Spirits are consumed more on a night out in more partying, social situations, whereas beer and wine are more likely to be consumed at home and in settings where cannabis is more likely to replace them. Spirits are more likely to be consumed in bars, and cannabis, at least at the moment, can’t be legally consumed in public spaces in Colorado or elsewhere.”

Hybrid opportunities

If, as Fisher suggests, spirits have yet to bear the full impact of cannabis legalisation, there may be a chance for spirits players to straddle both areas of interest. This is what France-based drinks group Marie Brizard Wine & Spirits (MBWS) is attempting to achieve with its Shotka release. Launched at the TFWA World Exhibition & Conference in 2015, the product is essentially a flavoured vodka offering a cannabis taste – but without the narcotic effects.

“We developed a formula that is something between a vodka and gin, with a very herbal flavour,” says Darius Siaudinis, MBWS marketing director, western Europe and Africa. Interest is obviously stemming from the recipe, but he is embracing the novelty factor – and for him it’s essential to launch now to get ahead of the inevitable wave of releases in an emergent hybrid category. “For those who are first it will be easier to be visible – it will be a lot more difficult to enter the market when shelves say ‘I already have 10 cannabis products’.”

MBWS is expecting a rush as brands seek to capitalise on the relaxing taboos around cannabis. But neither Shotka nor Humboldt’s Finest are ‘true’ hybrids – they focus on flavour rather than combining any psychoactive effects. VolteFace’s Fisher anticipates regulatory barriers aplenty for those pioneering producers looking to fully capitalise on legalisation.

“If you have limitations on where products containing cannabis can be sold, and obviously you have limitations on where products containing alcohol can be sold, you might end up with a situation where products can’t legally be sold anywhere.” He again looks to Colorado, where lawmakers in the state capital Denver passed legislation allowing bars to apply for a licence to sell cannabis – only to be scuppered by their Colorado-level counterparts who ruled that the drug cannot be sold by any outlet that also serves alcohol.

“Essentially, bars will have to make the choice about whether they want to sell alcohol, or whether they want to be coffee shops in a similar way to Amsterdam,” Fisher explains. With Colorado seeming to set the US precedent, it’s legislation like this that could be the biggest threat to spirits.

Cocktails at home

Away from the on-trade, could the rise of cannabis impair the burgeoning at-home cocktail market in the US and beyond? Warren Bobrow, author of Cannabis Cocktails, Mocktails, and Tonics: The Art of Spirited Drinks and Buzz-Worthy Libations, believes a balance can be struck – but it depends on the drink, the drug, and of course, the imbiber.

“The Benny Goodman Fizz and with a puff of THC (tetrahydro-cannabinol, the psychoactive constituent of cannabis)-infused absinthe and THC-infused Old Tom-style gin dispels the theory that drinks are meant to get you wasted,” he says. In which case, embracing a sort of cannabis/alcohol education strategy could be key to securing the future of at-home cocktails in certain markets. After all, it’s likely to be simpler to light up and relax rather than get the cocktail shaker out.

But can corporates and cannabis ever happily mix? For IEA’s Snowdon, it’s a
cultural and philosophical mismatch. “It seems there is a natural sort of resistance to having big business involved at all,” he muses.

With more legalisation likely – the tax benefit of a regulated marijuana market would “number in the billions”, calculates Fisher – cannabis is a challenge that won’t go away for the alcohol industry.

Because fundamentally, there’s one good reason smoking and drinking don’t sit well, and why spirits brand should view cannabis as the competition. As Fisher quips: “It’s not very pleasant for a lot of people to be drunk and stoned at the same time.”

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