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Alcohol sector has ‘valid reason to be concerned’ about cannabis legalisation

The alcohol industry “may need creative strategies to avoid market decline” if recreational cannabis use is legalised across the US, according to new research.

The alcohol industry could be impacted by the legalisation of cannabis across the US

New research in the Informs journal Marketing Science claims that the alcohol industry could be impacted when the substance is legalised. The study reveals diverging trends for alcohol and tobacco.

According to the report, the “recent wave of recreational cannabis legalisation across the US could generate US$22 billion in sales per year”.

The research by Pengyuan Wang, an assistant professor in the Terry College of Business at the University of Georgia and co-author Guiyang Xiong of Syracuse University looked at anonymous data from 28 million online searches and 120 million ad impressions from a leading US-based web portal from January 2014 to April 2017.

The study shows online searches for alcohol decreased by nearly 11%, while tobacco products were searched online nearly 8% more often.

“It appears the alcohol industry has valid reason to be concerned about legal marijuana and may need creative strategies to avoid market decline if it passes,” said Wang.

The study also found the legalisation of recreational marijuana increases online searches by adults by 17%. However, there is a decrease in searches done by those aged 19 and under after the substance is legalised.

“Contrary to widely held public concern after recreational cannabis is legalised, teenagers appear to lose interest, rather than gain interest,” added Wang. “Policymakers only concerned with an uptick in teen users, may want to rethink their stance.”

The research comes after a number of drinks firms have announced plans to move into the category in the last 12 months.

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.

Sales of cannabis-based drinks in the US are forecast to break the billion-dollar mark by 2023, according to a new report.

At the start of this year, US trade group the Distilled Spirits Council responded to “misinformation” about the impact of cannabis on alcohol, claiming legalisation has not affected spirits sales.

The Spirits Business explored the relationship between cannabis and spirits in depth last year, questioning whether both categories can survive side by side.

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