During a recent webinar, Malandrakis and Shane MacGuill, the tobacco research head at Euromonitor International, informed participants that the global alcohol and tobacco sectors are experiencing a decline in market share due to the rise of cannabis and other competing products. These emerging products are actively seeking innovative ways to grow in a challenging, yet potentially rewarding environment. “Alcohol distributors recognize the inevitability of cannabis development and are striving to engage in this segment, which could offer new avenues for growth and revenue, helping them maintain relevance in the coming years,” stated Malandrakis.
Constellation Brands is positioning itself to capitalize on this opportunity, having announced in October its acquisition of a 9.9% minority stake in Canopy Growth, a Canadian cannabis company. This $191 million investment will enable the beverage giant and Canopy to create cannabis-infused beverages, allowing them to stay ahead of changing consumer trends. Rob Sands, CEO of Constellation Brands, mentioned to The Wall Street Journal that he does not view marijuana as a significant threat to the alcohol industry, but insisted that Constellation would not remain idle as the market evolves. Rather than competing with cannabis, Constellation is opting for collaboration, a strategy reminiscent of its numerous acquisitions of disruptive craft brands.
Constellation is not alone in exploring this market. In September, Lagunitas Brewing introduced an IPA infused with marijuana terpenes—the aromatic compounds derived from the cannabis plant. However, this limited-time beer available in California does not contain tetrahydrocannabinol (THC), the psychoactive component of cannabis.
Currently, the U.S. legal marijuana market is valued at approximately $5.4 billion, while the illegal market is estimated to be around $40 billion, according to researchers. By 2025, the legal marijuana market is anticipated to exceed $50 billion. With Canada having legalized recreational marijuana at the federal level, the potential there is more immediate.
Public opinion on marijuana legalization has shifted dramatically, rising from just 12% approval in 1969 to a record high of 64% today, according to an October Gallup poll. The firm noted that while marijuana remains illegal at the federal level, eight states and the District of Columbia have fully legalized it, with over one in five Americans residing in states where it is legally permissible.
If more states choose to legalize recreational marijuana, projections indicate that beer sales could face even greater challenges. A June report from Cannabiz Consumer Group estimated that the beer industry could lose more than $2 billion in retail sales to legal marijuana. The report also highlighted that 27% of beer drinkers have either substituted cannabis for beer or would consider doing so if marijuana were legalized. This trend could also affect sales of wine and spirits. Last year, beer’s market share declined by 0.3%, dropping to 49.2%, with projections suggesting that recreational marijuana could capture 7.1% of the beer industry’s revenue.
Malandrakis pointed out that beer sales are particularly vulnerable to the “cannibalizing effect” of cannabis, especially since the core demographic of beer consumers—young adults and millennials—are also likely to be cannabis users. However, craft beer, small-scale brewing, and artisanal spirits attract a similar audience to premium cannabis strains, which could foster collaboration between the two industries through hybrid products.
Existing areas of cross-pollination include wines infused with THC, beers featuring aromatic cannabis compounds but lacking THC, cannabis-infused vodka, and cannabis cocktails. Malandrakis also noted that wine and cannabis pairings are being offered on tours aimed at “premiumizing” specific regions, such as California. “I can definitely foresee more of this kind of integration in the coming years,” he remarked.
Additionally, the terminology of alcoholic beverages is being adopted in the cannabis sector, with terms like “nose” and “aroma” being used alongside newly coined phrases such as “cannatourism” and “cannasseurs.” Ultimately, Malandrakis emphasized that the alcohol and tobacco industries should embrace the cannabis sector without apprehension, as numerous areas of overlap and shared appeal can be explored for mutual benefit.
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