Is Legal Cannabis Hurting or Helping Beer Sales?

Some of the latest data from Wall Street’s Cowen and Co. shows the U.S. cannabis market at the moment is worth right around $50 billion. That’s with only ten states having established a taxed and regulated system that allows cannabis products to be sold in retail dispensaries to adults 21 and older.

The same report shows the industry could rise up in the next decade and swell into a colossal $80 billion business sector.

When taking into account the current market data, it seems reasonable to suggest that legal weed could give alcoholic beverages a run for their money. But is it really possible that the cannabis industry could one day become such a force to be reckoned with that it creates hardships for Big Alcohol and changes the way the industry has operated for over eight decades?

Well, in some cases, the answer could be a resounding Yes.

In fact, this scenario might already be playing out in Canada, where marijuana has been fully legal nationwide since October 2018.

Despite all of the reports about how the northern nation’s cannabis legalization scheme has been a miserable failure so far – mostly because there are weed shortages and the black market is alive and well -- Cowen’s latest report shows that more Canadians are smoking marijuana than they are drinking beer.

Canadian beer sales dropped off by right around 6.8 percent in March of 2019. This is the most significant hit in over two years, the report shows.

Analysts at Cowen directly connect Canada’s fading interest in beer to the country’s move to legalize marijuana. “As we have asserted in the past, we believe that beer faces the biggest headwind from the transition to legal cannabis access,” the report reads. “We think this is a troubling sign for beer.”

But is weed really responsible? Maybe, maybe not.

In Colorado, one of the first states to legalize marijuana for recreational use, beer sales have hardly shown any signs of being in jeopardy.

The state just broke a beer sales record at the beginning of 2019, according to Colorado Public Radio. The report shows that suds suckers across the state consumed 9.8 million gallons of beer in January -- 1.6 million more than the same month in the previous year. Much of this boost is attributed to the state’s recent decision to end the 3.2 percent ABV cap that it had on beer sold in grocery and convenience stores. These retail outlets are now free to sell beer without those restrictions.

Meanwhile, the Colorado cannabis industry recently broke a sales record of its own. Reports from the Colorado Department of Revenue shows the state just sold $114.3 million of herb back in March 2019. Colorado hasn’t witnessed that much weed flying off the shelves since August of last year when sales hit $112 million. It shows that even after five years of operation, the industry’s earning potential remains strong.

In other words, beer and weed are living together harmoniously.

Regardless of what Cowen says about the brewing industry risking lost profits due to legal marijuana, there is a contrasting argument to be made that the two substances are actually complimenting each other nicely and contributing to larger cash hauls in areas that have ended prohibition.

The beer industry would be the first to make this argument.

Last November, Bob Pease, president and CEO of the Brewers Association, said the brewing sector was only getting bigger in states that have legalized marijuana -- particularly in Colorado, California and Washington. “Craft beer’s share of market in all three of those states continues to grow.”