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Big Beer Feeling the Pinch in Legal Weed States

While it's impossible to draw definitive conclusions about the link between cannabis and alcohol sales, there's been an undeniable downturn of beer sales — especially big brands like Budweiser — in states with legal cannabis.
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Big Beer Feeling the Pinch in Legal Weed States

A recent study by a leading financial services firm shows that, yes — beer sales are down in states with legalized cannabis.

There has been much speculation about what impact cannabis legalization could have on the alcohol industry. The question has been, would alcohol sales dip when adult use of cannabis became a legal alternative to throwing back a round?

Vivien Azer, Cowen and Company managing director and senior research analyst specializing in the beverage, tobacco and cannabis markets, explained the possible correlation between the sales drop and the availability of legal marijuana. From craft beer journal Brewbound:

Azer unpacked the latest Nielsen data in those three states — beer markets that have “collectively underperformed” in the last two years — and found that “the magnitude of the underperformance has increased notably,” with beer volumes falling more than two percent year-to-date and trailing the overall U.S. beer market.

“While (marijuana) retail sales opened up in these markets at different points of time, with all three of these states now having fully implemented a retail infrastructure, the underperformance of beer in these markets has worsened over the course of 2016,” Azer wrote.

“This is perhaps not surprising, given that U.S. government data for the states of CO, WA and OR all show consistent growth in cannabis incidence among 18-25 year olds,” she added, “coupled with declines in alcohol incidence (in terms of past month use).”

In those markets, craft beer is slowing but the “biggest drag” is on mainstream beer producers – those companies’ economy beer volumes are down 2.4 percent and premium domestic volumes (Bud Light, Coors Light, etc.) are down 4.4 percent, Azer wrote.

While it remains to be seen if cannabis and beer can both thrive in an adult use market, there are certain indications that the future of legal cannabis may resemble the current state of the alcohol market, especially when it comes to the distribution model in the largest cannabis market on earth, California.

And that’s a major point of contention between bureaucrats eager to bank on the rising tide of marijuana tax revenue and those outlaw growers who’ve been supplying the state. From Politico:

Under the new regulations, licensed distributors were given control over measurement, taxing and testing for all medical marijuana before it can move to the retailer. The rules are modeled on the system that emerged at the end of Prohibition to wrest control from mobsters and their illegal liquor empires. States required wholesalers to bring alcohol from the manufacturer to the retailer, a system that has proven fantastically lucrative for distribution companies. Some of those players are now poised to make millions of dollars as the middlemen in California’s burgeoning medical marijuana market.

The familiar alcohol distribution model gives comfort to California law enforcement and state regulators who still view marijuana growers with suspicion, even 20 years after medical marijuana was legalized. But it runs counter to the 22 other states that have legalized marijuana in some form where cultivators sell their wares directly to retailers.

As unlikely (and for some in the industry, infuriating) it might seem, the future of a once-taboo staple of the counter culture may be as conventional and mainstream as a six-pack of brew.

TELL US, Do you think cannabis will overtake alcohol sales nationally?

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