As more states legalize recreational cannabis, some alcohol businesses remain wary of how it will affect their bottom lines. A new study may prove them right in their concern.
According to research conducted by the Cannabiz Consumer Group (C2G), in markets where cannabis has been legalized the new industry has already siphoned off 7.1% from beer revenues.
If cannabis were legalized nationally, C2G predicts that the beer industry would lose more than $2 billion in retail sales.
Of beer drinkers, 27% say that they already have substituted cannabis for beer, according to C2G research, or would substitute their retail beer purchases with cannabis in the future if legal.
These numbers were generated using C2G’s CannaUse study on the cannabis mindset and behaviors of more than 50,000 individual participants, the company’s warehouse of over 55 million cannabis purchase transactions, and CPG consumer panel and point-of-sale data sourced from IRI through an exclusive data and analytic share arrangement.
How can alcohol businesses minimize the negative impact?
“Consumers use cannabis to satisfy various social, medical and experiential needs,” explains Rich Maturo, C2G CIO. “By better understanding why different segments of consumers’ use cannabis, companies can minimize the loss resulting from legalization. Despite best efforts however, leakage will occur. Those having the foresight to view cannabis as an opportunity as opposed to only a threat will fare much better than those who strictly take a defensive position.”
There were 24.6 million legal U.S. cannabis consumers in 2016. Legalization has since extended to additional states, either through medicinal or recreational legislation or both. C2G projects that legal cannabis penetration will settle at a level comparable to that of beer and wine and that a fully mature market would create a new $50 billion industry.
In emerging markets a novelty impact often occurs as new users try a product simply for the experience but do not sustain its use, skewing early market predictions. Results suggest this will not occur with legalized cannabis as consumers are more invested in the products that they are buying, understanding the potency, strains, and formats available and its uses for pain management, holistic health, and relaxation. C2G predicts the novelty impact will not be felt in this industry.
C2G also expects legal cannabis to impact other segments of the alcohol industry including wine, spirits and on-premise sales.