With many small cannabis businesses struggling to survive in an ever-changing industry, the expenses continue to add up and can ultimately drag the company under. With a longstanding problem of lack of loans, checking accounts and banking services, businesses lack the resources necessary to stay afloat.
With the amount of capital they possess, beverage alcohol conglomerates are actively shopping around to buy up and absorb the successful beverage brands in the Delta-9 THC space. But is it wise for the cannabis industry and community to sell their businesses to these large corporations?
Monica Olano, founder and CEO of Cali Sober Mom and cannabis reform advocate, warns about the harmful results of selling out to big alcohol for the consumer. “Studies have shown that alcohol brands use additives in their products that are linked to cancer,” she says. “Are we going to let the hemp and cannabis industry sell out to this group and potentially taint our wellness product with harmful additives? This would erase a lot of hard work the industry has done to create safer, healthier alternatives to alcohol with a focus on wellness.”
Big Alcohol Filling Revenue Void With Cannabis
Many cannabis companies are already in discussions with big alcohol organizations about potential buyouts, according to Olano. Likewise, hemp beverage companies are being approached by large venture capital firms with strong ties to the alcohol industry. Even big tobacco firms, such as Philip Morris, are approaching hemp businesses for similar opportunities.
“Meanwhile, decreasing alcohol consumption is motivating craft breweries across the nation to pivot to hemp-derived beverages in an effort to close the revenue gap and offer a quicker production process compared to traditional craft beers,” says Olano. “Plus, distributors, wholesalers, convenience stores, grocery stores, bars and restaurants are selling hemp-derived beverages to offset the revenue decline from decreased alcohol sales.”
Consequences of Cannabis Business Buyouts
Alcohol is regulated by the Alcohol and Tobacco Tax and Trade Bureau (ATC) and not the Food and Drug Administration (FDA). As a result, alcohol companies are not required to disclose health facts such as calories, ingredients or provide public health warnings about the risks associated with their products, including links to multiple cancers, according to Olano.
“If alcohol companies take ownership of hemp and cannabis beverages, similar practices could be applied,” she says. “It’s likely that these products will also lack transparency, leaving consumers uninformed about potential health risks. The ingredients added to these big alcohol-owned cannabis drinks could include harmful substances that consumers would never know about.”
Here are some additional consequences that Olano mentions can hurt consumers if big alcohol continues to take over:
- Since hemp and cannabis are currently non-addictive substances, there is a concern alcohol conglomerates might add addictive properties to these beverages to increase sales and ensure consumers keep coming back for more.
- With the alcohol industry closely tied to Big Pharma, additional control over the hemp and cannabis market might incentivize big alcohol to maintain a cycle of sickness and dependency to keep pharmaceutical companies in business.
- According to a study by the Boston University School of Public Health, the taxes collected from alcohol sales cover only a fraction of the costs associated with excessive drinking. These costs include healthcare expenses, law enforcement and lost productivity due to alcohol-related illnesses and accidents.
Standing Your Ground Against Big Alcohol
In order to prevent a buyout from spiraling and hurting the end consumer, Olano suggests that cannabis businesses stand your ground and keep your goals transparent.
“Do not claim to offer a healthier alternative or to help people if your ultimate plan is to sell out to the same companies that your product is meant to compete against,” she advises. “If you claim to provide a healthier alternative to alcohol, ensure that this mission aligns with your long-term business goals. Selling out to big alcohol contradicts the message of promoting health and wellness.”
Along with keeping your goals transparent, Olano offers seven pieces of advice when working with beverage alcohol companies:
- Stay Informed. Educate yourself about the ways big alcohol companies are working against the cannabis industry. Understand their lobbying efforts, marketing strategies and behind-the-scenes maneuvers aimed at undermining your product and industry.
- Know Your Allies. Align yourself with organizations and brands that genuinely support the growth and integrity of the cannabis industry. Avoid partnerships with entities that have conflicting interests or that could compromise your mission.
- Resist Pressure. Don’t fold under pressure from big alcohol. Understand that their primary goal is to dominate the market and maximize profits, often at the expense of smaller players and consumer health.
- Lobby For Transparency. Push for regulations that require full transparency in ingredient disclosure and health warnings for hemp and cannabis beverages. This will level the playing field and protect consumers.
- Promote Non-addictive Standards. Advocate for standards that maintain the non-addictive nature of hemp and cannabis products. Resist any attempts to introduce addictive properties for profit.
- Understand the Costs. Big alcohol’s lobbying efforts are designed to make it more expensive and challenging for cannabis brands to operate. This includes costs related to re-formulating, re-branding, re-labeling, re-marketing and lobbying.
- Invest in Long-term Strategies. Focus on educating consumers about the benefits of your products and the risks of big alcohol’s influence in order to build brand loyalty and consumer trust.
At the end of the day, getting bought out by a beverage alcohol company isn’t the worst thing in the world. Times are tough, and with marijuana still considered a Schedule I drug, cannabis businesses cannot receive the necessary funding to stay successful on their own. As long as consumer health and safety stays your main focus, these partnerships can work out for the best for everyone.
