Cannabis Legalization: A Growing Challenge to the Alcohol Industry

The expanding marijuana legalization movement is posing an increasingly significant threat to the alcohol industry, according to recent financial analyses. Survey data suggests that more consumers are turning to cannabis as an alternative to traditional alcoholic beverages like beer and wine.

A report from Bloomberg Intelligence (BI) predicts that the declining sales of wine and spirits may continue indefinitely, largely due to increased access to legal cannabis and the rising popularity of ready-to-drink beverages. The report estimates that the combined impact of cannabis accessibility and shifting consumer preferences for certain alcoholic products accounts for a 16 percent share valuation discount for major beverage company Constellation Brands, which owns popular brands such as Corona, Modelo, and Casa Nobel Tequila.

BI’s August survey of 1,000 adults revealed that nearly half of the respondents reported using cannabis as an alcohol substitute at least once per week, with 22 percent stating they use marijuana more frequently than alcohol. The analysts believe that as recreational marijuana becomes more accessible in the U.S., it will pose a significant threat to all alcoholic drinks, particularly beer and wine, due to their lower price points compared to liquor.

This trend is corroborated by a report from a multinational investment bank, which describes marijuana as a “formidable competitor” to alcohol. The bank projects that nearly 20 million more people will become regular cannabis consumers over the next five years, while alcohol may lose a couple million drinkers. U.S. marijuana sales are estimated to reach $37 billion by 2027 as more state markets become operational.

Research from Canada, where marijuana is federally legal, supports these findings, indicating that legalization has been associated with a decline in beer sales, suggesting a substitution effect.

Recent surveys also highlight shifting public perceptions of marijuana compared to alcohol and other substances:

1. A Gallup survey found that respondents view cannabis as less harmful than alcohol, tobacco, and nicotine vapes.
3. An American Psychiatric Association (APA) and Morning Consult survey revealed that Americans consider marijuana significantly less dangerous and addictive than cigarettes, alcohol, opioids, and even technology.
5. A poll showed that more Americans smoke marijuana daily than drink alcohol every day, with alcohol drinkers more likely to acknowledge potential benefits from limiting their use compared to cannabis consumers.
7. A study published in the journal Addiction confirmed that there are more U.S. adults who use marijuana daily than who consume alcohol every day.

Furthermore, public opinion on marijuana-related offenses is shifting. A recent poll found that marijuana use is one of the only crimes that a majority of Americans believe is punished too harshly, with bipartisan support for expunging prior cannabis convictions.

As the landscape of substance use and legalization continues to evolve, these trends suggest a potential reshaping of consumer preferences and industry dynamics in the coming years. The alcohol industry may need to adapt to this changing market as cannabis becomes an increasingly popular alternative for many consumers.