During a recent webinar, Malandrakis and Shane MacGuill, head of tobacco research at Euromonitor International, informed attendees that global markets for alcohol and tobacco are gradually losing ground to cannabis and other competing products. In this challenging yet potentially profitable landscape, these products are actively seeking innovative ways to grow. Malandrakis remarked, “Alcohol distributors view the development of cannabis as unavoidable and are eager to engage in this segment, which could open up new avenues for growth and revenue, helping them stay relevant in the upcoming years.”
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 drinks and “stay ahead of shifting consumer trends.” Rob Sands, CEO of Constellation Brands, told The Wall Street Journal at that time that he does not perceive marijuana as a serious threat to the alcohol industry; however, he emphasized that Constellation is not “going to stand around twiddling [its] thumbs” as the market expands. Instead of viewing cannabis as competition, Constellation is opting to collaborate with it, echoing its strategy of acquiring disruptive craft brands.
Constellation is not alone in exploring this market. In September, Lagunitas Brewing introduced an IPA infused with marijuana terpenes—aromatic compounds derived from the cannabis plant. However, this limited-time beer available in California does not contain tetrahydrocannabinol (THC), the psychoactive ingredient in cannabis that induces a high.
Currently, due to varying state regulations, the legal marijuana market in the U.S. is valued at approximately $5.4 billion, while the illegal market is estimated at $40 billion. Researchers predict that the total legal marijuana market could exceed $50 billion by 2025. In contrast, Canada is moving forward with federal legalization of recreational marijuana, providing more immediate potential.
According to an October Gallup poll, American attitudes towards marijuana legalization have evolved dramatically, with only 12% approval in 1969 rising to an all-time high of 64% today. While marijuana remains illegal at the federal level, eight states and the District of Columbia have fully legalized its use, allowing more than one in five Americans to legally access it.
If more states move toward legalizing recreational cannabis, beer sales could face even more significant declines. A June report from Cannabiz Consumer Group estimated that the beer industry could lose over $2 billion in retail sales to legal marijuana. The report indicated that 27% of beer drinkers have already replaced beer with cannabis or would consider doing so if it were legalized. This trend could also affect wine and spirits sales. Last year, beer’s dollar share decreased by 0.3% to 49.2%, and the survey suggested that recreational marijuana could capture 7.1% of the beer industry’s revenue.
Malandrakis pointed out that beer sales are particularly susceptible to the “cannibalizing effect” of cannabis, as the primary demographic for beer—young adults and millennials—often includes cannabis users. Nevertheless, craft beer, artisanal spirits, and premium cannabis strains appeal to the same audience, creating opportunities for hybrid products and collaboration between the two industries.
Existing examples of cross-pollination include wines infused with THC, beers featuring aromatic cannabis compounds without THC, cannabis-infused vodka, and cocktails. Additionally, cannabis and wine pairings are being promoted in tours aimed at “premiumizing” certain regions, such as California. “I foresee more of this trend emerging in the coming years,” Malandrakis stated.
He also noted that the language of alcoholic beverages is increasingly prevalent in the cannabis sector, with terms like “nose” and “aroma” being utilized alongside newly coined phrases like “cannatourism” and “cannasseurs.” Ultimately, the alcohol and tobacco industries should embrace the cannabis sector without apprehension, as there are numerous areas of overlap and mutual appeal that can be explored for the benefit of both markets.
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