During a recent webinar, Malandrakis and Shane MacGuill, head of tobacco research at Euromonitor International, informed attendees that the global alcohol and tobacco markets are losing ground to cannabis and other competing products. These emerging products are exploring avenues for innovation and growth in a challenging yet potentially profitable landscape. “Alcohol distributors recognize cannabis development as inevitable and are actively engaging in this segment, which could represent a new growth area and revenue stream, helping them stay relevant in the coming years,” stated Malandrakis.
Constellation Brands is positioning itself to capitalize on this opportunity. In October, the company announced it would acquire a 9.9% minority stake in Canopy Growth, a Canadian cannabis firm, in a deal worth $191 million. This partnership will enable Constellation to develop cannabis-infused beverages and “stay ahead of evolving consumer trends.” Rob Sands, CEO of Constellation Brands, told The Wall Street Journal that he does not perceive marijuana as a significant threat to the alcohol sector. However, he emphasized that Constellation will not remain passive as the market evolves. Instead of competing with cannabis, Constellation is opting to collaborate with it—a strategy reminiscent of its previous acquisitions of disruptive craft brands.
Constellation is not the only player in the alcoholic beverage industry exploring this market. In September, Lagunitas Brewing introduced an IPA crafted with marijuana terpenes, which are aromatic compounds derived from the cannabis plant. However, this limited-time beer, available only in California, does not contain tetrahydrocannabinol (THC), the active chemical in cannabis responsible for its euphoric effects.
According to researchers, the current legal marijuana market in the U.S. is valued at approximately $5.4 billion due to varying state regulations, while the illegal market is estimated at $40 billion. The total legal marijuana market is projected to surpass $50 billion by 2025. Given Canada’s recent federal legalization of recreational marijuana, the potential for growth there is immediate.
A Gallup poll released in October revealed a significant shift in American attitudes towards marijuana legalization, with approval rising from just 12% in 1969 to a record 64% today. While marijuana remains illegal federally, eight states and the District of Columbia have fully legalized it, allowing more than one in five Americans to legally consume cannabis.
If more states move towards legalizing recreational marijuana, the beer industry could face even greater challenges. A June report by Cannabiz Consumer Group estimated that the beer sector could lose over $2 billion in retail sales to legal cannabis. Notably, 27% of beer drinkers have either already replaced beer with cannabis or would consider doing so if it were legalized. This trend may also impact wine and spirits sales. Last year, beer’s market share declined by 0.3% to 49.2%, with projections indicating 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, as the core demographic for beer—young adults and millennials—tends to overlap with cannabis users. However, craft beer, artisanal spirits, and premium cannabis strains attract a similar audience, potentially bridging the gap between the two industries through hybrid products and collaboration.
Existing areas of cross-pollination include THC-infused wines, beers with aromatic cannabis compounds (excluding THC), cannabis-infused vodka, cocktails, and cannabis-infused martinis. Additionally, wine and cannabis pairings are featured in tours aimed at “premiumizing” regions like California. “I foresee more of this in the coming years,” Malandrakis remarked.
He also noted that the terminology of alcoholic beverages is prevalent in the cannabis sector, with terms like “nose” and “aroma” frequently used, alongside new phrases such as “cannatourism” and “cannasseurs.” The overarching message is that the alcohol and tobacco industries should embrace the cannabis market without hesitation, as there are numerous overlapping interests and opportunities that can be mutually beneficial.
In this evolving landscape, consumers are increasingly looking for health-oriented products, such as calcium citrate vitamin D3 with zinc tablets, which promote wellness. As the alcohol and cannabis industries continue to intersect, there may be opportunities to create products that integrate these health supplements with cannabis-infused options, further appealing to health-conscious consumers. Therefore, recognizing and adapting to these trends will be crucial for both the alcohol and cannabis markets moving forward.