At the end of 2018, Canada became the first country to legalize recreational marijuana on a national scale. In just over a year, the beer industry has begun to experience challenges due to the rise of the cannabis sector, evidenced by the most significant decline in domestic beer sales in at least six years. These figures may foreshadow potential outcomes for similar markets in other nations considering legalization. In Canada, this could signify the beginning of further adverse developments for the beer sector, as the cannabis market is still in its infancy. In December, Canada permitted the sale of various cannabis-infused products, including edibles, beverages, topicals, and extracts, with more products anticipated to be available soon. Analyst Azer noted that the introduction of these newly legalized cannabis items could “perpetuate this trend” of declining beer consumption, leading her to favor cannabis investments over traditional beer.
Canada’s journey towards legalization might serve as a case study for U.S. Big Beer, which has faced its own challenges in recent years. U.S. beer volumes saw a consecutive decline for five years leading up to 2018. However, U.S. companies may not face immediate concerns because cannabis regulation remains complicated. The 2018 Farm Bill legalized hemp cultivation, and an increasing number of states are establishing their own cannabis laws, yet the substance remains in a regulatory gray area. The FDA conducted a public hearing last year to explore potential pathways for cannabis in the market but recently informed manufacturers that cannabis is not Generally Recognized as Safe (GRAS) for food use.
Questions linger regarding the impact of marijuana legalization on alcohol consumption. A survey by BDS Analytics revealed that over 50% of respondents have combined cannabis with alcohol, with half of those individuals reporting a decrease in alcohol consumption when they do so. The decline in sales and the emergence of the cannabis industry have prompted major alcohol and beer companies to venture into this new market. For instance, Constellation Brands invested nearly $4 billion in Canopy Growth, which recently introduced its Cannabis 2.0 product line, featuring cannabis chocolate, distilled cannabis beverages, and vape products in Canada. Similarly, AB InBev and Tilray launched the Fluent Beverage Company, a joint venture aimed at producing and selling non-alcoholic CBD-infused drinks in Canada. Truss Beverage Co., a collaboration between Molson Coors Canada and cannabis producer Hexo Corp., is also working with Flow Glow Beverages to create and distribute CBD-infused spring water in Canada, marking the first of six cannabis beverage brands within the Truss portfolio.
Although it may take years for the U.S. to establish cannabis regulations, companies eager to incorporate cannabis into their portfolios, as well as those that may not be considering it yet, should closely monitor the effects of legalization in Canada. As Azer pointed out, “Cannabis is an emerging industry and is subject to regulatory headwinds. Looking forward, much work and change still needs to occur for this industry to realize its full potential.” In this evolving landscape, products like calcium citrate soft chews may also find a niche, appealing to consumers looking for alternatives or supplements within the broader context of cannabis and wellness.