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Legal cannabis ‘long-term risk’ to US alcohol sector

Cannabis legalisation presents a “long-term risk” to the alcohol industry in the US and could be consumed in “new occasions that alcohol cannot and will not play”, according to a recent report.

Cannabis could be favoured over alcohol for certain occasions

The new study, called Beverage Alcohol, Cannabis and the Changing US Consumer: What are the Real Risks and Opportunities to Consumption Behaviour?, has been published jointly by the IWSR Drinks Market Analysis and BDS Analytics. The report details the state of the current industry, alcohol and cannabis consumers and consumption occasions, trends, risks and opportunities, and growth expectations.

According to the report, the risk to alcohol “is expected to expand as cannabis acceptance and consumption grows, particularly among beer and spirits drinkers”.

It also notes that “not every dollar spent on legal cannabis is a dollar taken from alcohol”, but that drinks firms must “prepare today to meet consumers’ needs as these markets continue to mature and overlap”.

“Though not yet mainstream, cannabis adoption is certainly growing in states where it’s legal and does pose a risk to the beverage alcohol industry in the future,” said Brandy Rand, IWSR’s US president.

“It’s important that alcohol brands pay attention to their consumers, recognising that some occasions may result in a decrease in alcohol consumption in place of, or alongside, legal cannabis.”

Millennials make up 45% of ‘dualists’ – people who consumer both cannabis and alcohol – which the report notes is a “sobering statistic” for drinks firms that are “trying to capture long-term share of mind and wallet among this important demographic”.

The study comes as the US cannabis sector witnesses an explosion of growth in the last few years. Ten US states have legalised recreational cannabis use, while 34 states have approved cannabis for medicinal purposes. All but two of the remaining states permit cannabidiol (CBD) products.

The report also found that in states where cannabis is permitted, alcohol consumption “still remains higher” with twice as many adults over the legal drinking age consuming booze compared to marijuana.

The study also shows that cannabis and alcohol are “often not always appropriate for the same occasions” despite the use of marijuana starting to occur during traditional drinking occasions.

On average, ‘dualists’ are more likely to drink spirits and beer, in particular craft beer, when consuming cannabis.

Baby boomers – those born between 1946 and 1964 – are likely to be “more alcohol-exclusive”, while millennials prefer to swap between cannabis and alcohol, or just consume marijuana.

‘Substantial opportunities’

“Our research shows that up to 40% of adults 21 and over consume cannabis in states where it’s legal,” said Jessica Lukas, vice president, BDS Analytics.

“Cannabis presents substantial opportunities across consumer industries, including new occasions that alcohol cannot and will not play.

“Consumers will continue to look to cannabis products over alcohol for occasions when they are feeling creative, need to get motivated, or seeking health, medical or wellness benefits.”

The report comes just a day after a study claimed that sales of cannabis-based drinks in the US are forecast to break the billion-dollar mark by 2023.

Last month, US trade group the Distilled Spirits Council hit out at “misinformation” about the impact of cannabis on alcohol, stating that legalisation of the drug’s recreational use has not affected spirits sales.

A number of drinks firms have moved into the cannabis market in the past year.

US group Constellation Brands acquired a stake in Canadian cannabis producer Canopy Growth Corporation in 2017 and recently acquired an additional stake worth US$4 billion.

Southern Glazer’s, the largest wine and spirits distribution group in North America, created a subsidiary exclusively for the representation of cannabis products by Aphria in Canada.

Meanwhile, fellow distributor Breakthru Beverage Group formed an exclusive partnership with cannabis producer CannTrust and developed its own cannabis sales platform.

Other leading spirits firms, including Diageo, have been linked to reported cannabis deals, though they have not yet moved into the sector.

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