Beer Sales Get Pummeled in Canada Post Legalization
Buds over suds!
One of the greatest fears the alcohol industry has developed over the years is that it is somehow going to get choked out by the cannabis trade. There were all sorts of reports floating around immediately after Colorado and Washington became the first to legalize the leaf, suggesting that brewers, both large and small, were losing sleep at the thought of forfeiting so much as a sliver of their profits to weed. There were, of course, a handful of optimistic predictions, too. Some brew houses claimed that legal weed was actually creating a win-win situation for everyone involved. Many of these folks said there was enough action in the business of the buzz for both substances to live in harmony. And while this is undoubtedly true, we’re learning with each passing year that beer is taking a hit at the hands of legal weed. All we have to do is look to Canada, where cannabis has been legal for more than a year, to see the tale of the tape.
Some of the latest data from Beer Canada shows that the first year of legal weed in the northern nation sucked the life out of the local brew crews. Beer volumes dropped off nationwide by around 3%, the report shows, revealing a savage trend of decline that could buds over suds.
“This is far worse than the trends seen between 2014-2018, where beer industry volumes fell an average 0.3%,” Cowen and Co. market analyst Vivien Azer recently told Bloomberg News. And the drop-off, she says, appears to be largely attributed to the fact that legal marijuana is now available.
It’s not like this happened without any warning. In 2018, ahead of the official launch of retail pot sales in Canada, a report from the Canadian Imperial Bank of Commerce (CIBC) revealed that the population could be expected to spend more of its money on legal weed than on alcoholic beverages. And despite the legal market having some trouble shining through as initially predicted, there is still enough action to shake the foundation of the brewing trade. The latest report shows that domestic beer volumes took a dive by around 4%, while imports experienced an uptick of 1.4%. It’s not that Canadians are necessarily making the switch from beer to weed, it just appears that more of them are consuming less alcohol in the wake of legalization.
The situation will likely get worse for alcohol before it gets better. Cowen says that after reviewing decades of trends related to alcohol and marijuana, it seems highly probable that alcohol sales will continue to slide for the next decade or so. “Since 1980, we have seen three distinct substitution cycles between alcohol and cannabis; we are entering another cycle,” Azer said in 2018.
Plummeting profits is just one of the reasons that alcohol producers have been looking to get into the cannabis trade. They are searching for ways to keep up with the times and make up some of the losses brought about by legal weed. Yet, this move hasn’t exactly been the saving grace that the booze slingers have hoped for. At least not at the moment. Constellation Brands, the maker of Corona, and incidentally, one of the biggest beer manufactures to get into the cannabis business, has invested around $4 billion in producing a line of THC-infused beverages. But the company’s third-quarter earnings, which were published on Wednesday, showed a $534 million decrease in that investment. It is, however, an improvement from the $839 million slap it experienced in the second quarter. Still, the company is not in any real trouble, according to business reports.
In the United States, there is some evidence that people are using marijuana as an alternative to alcohol. We are in the midst of a non-alcoholic revolution, of sorts, one by which the Millennials and Generation Z are looking for ways to stay away from the drink. Some reports suggest that weed is now the go-to in many states where it is legal. Binge drinking rates are down in some of these areas, but not all. California and Nevada, for example, two hot spots where rock n’ roll and gambling continue to tickle the economic backbone, booze sales are still dominating over marijuana. Nevertheless, according to Cowen, we can expect to see the alcohol trade take more hits in the next several years as marijuana legalization continues to spread.
TELL US, are you making a conscious choice to smoke more cannabis rather than drinking alcohol?