Is legal marijuana threatening the beer industry?

Is legal weed having a negative impact on the craft beer business? Perhaps you’ve come across some of the recent stories that suggest so. If you pay close attention to national beer news, you’ve probably seen at least one of these stories.

It all sounds very ominous. For instance, a recent story on Slate.com asserts, “So far this year, beer volumes have dropped roughly 2 percent in Colorado, Oregon, and Washington, which have all legalized recreational pot…”

AOL’s version of the same story suggests, “As additional states consider legalizing marijuana, beer companies will be at an even greater risk.”

These stories, and others were instigated by a report from Cowen & Company, a reputable data analytics companies. The data used for the report came from The Nielsen Company, a reputable data source.

So what gives? Is there really a correlation between the legalization of pot and declining beer sales?

In reality, nobody knows if legal weed is negatively impacting the craft beer business or the overall beer business. Bart Watson, Chief Economist for the Brewers Association says, “Although I don’t purport to know what the long-term effects of marijuana legalization will be, I can say that I see no evidence that legalization has had an effect on beer sales in the short term.”

According to Watson, “I’m not convinced that anyone has clearly demonstrated what the causal mechanism would be for marijuana legalization decreasing beer sales.”

Watson suggests that Cowen & Company’s use of Nielsen data for its analysis is problematic. “I think Nielsen data is great, and I don’t doubt that in the channels they measure those numbers have some validity, but the problem is that Denver is probably one of the markets where scan/POS misses the most volume given the incredibly strong craft on-premise scene.”

Cities like Portland and Seattle also have a very strong “on-premise” beer scenes. That is, measuring beer sales solely by what gets scanned at grocery stores and convenience stores is probably not an entirely valid approach as it doesn’t account for pint sales at the pub, growler sales at the brewery, and other ways that craft breweries move their product these days.

The correlation between legal marijuana and beer sales is probably more about income than anything else, which is not a point that should be glossed over. “The pressure we are seeing on lower-priced beers is consistent with the trends we are seeing in cannabis use by income group nationally,” Cohen & Company analysts wrote. “Indeed, while cannabis incidence has been on the rise nationally, over the last 10 years (through 2014, the most recently available) we have seen the biggest increases among lower-income households, where cannabis use is also highest.”

The Cohen & Company report asserts that many beer drinkers are swapping their six-packs for marijuana, and that has major implications for the beer industry — especially for makers of cheaper beers like Anheuser-Busch and Molson Coors Brewing Company.

According to the report, mainstream beers like Bud Light, Coors Light, and Miller Lite, are under siege from legal marijuana, with volumes down 4.4 percent in the states studied. The report also says that craft beer sales growth is slowing in the states studied. Big beer volumes down, craft beer growth slowing. Big difference.

My conclusion is that legal weed is just one of many factors impacting the overall decline in beer sales. It’s true that overall beer sales numbers have been declining in recent years, with wine, liquor and malted non-beer beverages taking a bite out of overall beer sales. At the same time, across the nation craft beer sales continue to rise, including in those places where marijuana is legal. The big beer companies are the ones taking the hit, so to speak.

The closest craft beer gets to declining sales is slower growth. We’d all love to see 12 percent growth every year, but in 2016 we had to deal with 8 percent growth.

Truth is, “those lower-income households, where cannabis use is also highest,” are less likely to be craft beer consumers anyway. There is an indisputable correlation between income and craft beer consumption, but that’ s topic for another day.


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One comment

  1. My friend is a hop head and an herb smoker. He likes to do take a hit of sativa then check out new beers from an elceltic group of micro breweries. He said the herb allows him not to go over board on alc. so I would imagine that herb has mellowed the typical drinker by a pint or two per session.

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