Legalization of Marijuana Threatens the Alcohol Industry
Financial Analysts Warn of Risks to Alcohol Producers
Financial analysts at Bloomberg Intelligence have conducted a study and concluded that the legalization of recreational marijuana poses a significant threat to the alcohol industry.
People Are Choosing Marijuana Over Alcoholic Beverages
Bloomberg Intelligence surveyed 1,000 American adults and found that 49% of them smoke marijuana instead of drinking alcohol at least once a week, while 22% use cannabis more often than they consume alcohol. Experts believe that increased accessibility and popularity of cannabis due to legalization will lead to a steady decline in alcohol sales and a drop in the stock prices of alcohol producers. According to analysts, shares of Constellation Brands, a company that produces beer, wine, and other alcoholic beverages, are valued 16% lower because of marijuana legalization.
The report states: “Cannabis consumption is increasing, and we believe that marijuana is replacing alcohol. We expect that greater availability of recreational marijuana will pose a major threat to all segments of the alcohol industry, especially beer and wine producers, since these are cheaper than hard liquor.”
Alcohol Producers Face Losses as Cannabis Ban Is Lifted
Investment bank TD Cowen conducted its own research and found that over the next five years, the number of cannabis users in the U.S. will grow by 18 million, while the number of alcohol consumers will decrease by 2 million, as more people choose to smoke marijuana instead of drinking. Currently, 134.7 million Americans consume alcohol, and the U.S. alcoholic beverage market reached $263.6 billion in 2023. Based on these figures, it is estimated that by 2027, alcohol producers will lose about $1 billion annually due to legal marijuana sales.
In contrast, the recreational cannabis market is expected to see rapid growth. Last year, cannabis sales in the U.S. totaled $29 billion. TD Cowen estimates that by 2027, this figure will increase by 28% to $37 billion. Even then, Americans will spend about seven times less on cannabis than on alcohol.
Similar Trends Observed in Canada
Canada is experiencing a similar trend. Researchers report that from the legalization of marijuana in October 2018 through February 2020, beer sales dropped by 2.8%, which translates to 13,600 liters per 100,000 people per month. However, sales of hard liquor changed only slightly, suggesting that some Canadians have replaced the beer they used to drink at home after work with marijuana.