Malandrakis and Shane MacGuill, the head of tobacco research at Euromonitor International, informed webinar attendees that the global markets for alcohol and tobacco are losing ground to cannabis and other competing products. These emerging products are seeking innovative ways to grow in a challenging yet potentially profitable landscape. “Alcohol distributors recognize that cannabis development is inevitable and are actively engaging in this segment, as it could create new opportunities for growth and revenue while helping them remain relevant in the coming years,” Malandrakis stated.
Constellation Brands is positioning itself to capitalize on this opportunity, having announced in October its plan to acquire a 9.9% minority stake in Canopy Growth, a Canadian marijuana company. This $191 million investment will enable the beverage giant and Canopy to create cannabis-infused beverages and “stay ahead of evolving consumer trends.” Rob Sands, CEO of Constellation Brands, told The Wall Street Journal at the time that he does not view marijuana as a serious threat to the alcohol industry, but emphasized that Constellation is not going to “stand around twiddling [its] thumbs” as the market expands. Instead of competing against cannabis, Constellation is opting to collaborate with it — a strategy reminiscent of its numerous acquisitions of disruptive craft brands.
Constellation isn’t the only player in the alcohol industry exploring this market. In September, Lagunitas Brewing introduced an IPA infused with marijuana terpenes, the fragrant compounds found in cannabis. However, this limited-edition beer available in California does not contain tetrahydrocannabinol (THC), the psychoactive component of cannabis that induces a high.
Due to varying state regulations, the current legal marijuana market in the U.S. is valued at approximately $5.4 billion, while the illegal market is estimated at $40 billion. Researchers project that by 2025, the total legal marijuana market could exceed $50 billion. With Canada legalizing recreational marijuana at the federal level, the potential for growth in that market is more immediate.
Public opinion on marijuana legalization has shifted dramatically, with approval rising from just 12% in 1969 to a record high of 64% today, according to an October Gallup poll. The firm pointed out that while marijuana remains illegal at the federal level, eight states and the District of Columbia have fully legalized it, meaning more than one in five Americans now reside in a state where they can legally use marijuana.
If more states legalize recreational cannabis, projections suggest that beer sales could face even greater challenges. A June report from Cannabiz Consumer Group estimated that the beer industry could lose over $2 billion in retail sales to legal marijuana. The report indicated that 27% of beer drinkers have either switched to cannabis or would consider substituting cannabis for beer purchases if it were legalized. This trend could also negatively impact sales of wine and spirits. Last year, beer’s dollar share decreased by 0.3% to 49.2%, with the survey estimating that recreational marijuana could capture 7.1% of the beer industry’s revenue.
Malandrakis highlighted that beer sales appear most vulnerable to the “cannibalizing effect” of cannabis, particularly because the core demographic for beer — young adults and millennials — also tends to be cannabis users. However, craft beer, small-scale brewing, and artisanal spirits appeal to a similar audience as premium cannabis strains, which can help bridge the gap between the two industries through hybrid products and collaboration.
Some existing areas of cross-pollination include wines infused with THC, beers that incorporate aromatic marijuana compounds but lack THC, cannabis-infused vodka, cannabis cocktails, and even martinis containing cannabis, Malandrakis noted. Wine and cannabis pairing experiences are also being offered on tours, aimed at “premiumizing” specific regions, such as California. “I can definitely envision more of this type of innovation in the coming years,” he added.
Malandrakis also pointed out that the language used in the world of alcoholic beverages is prevalent in the cannabis industry, with terms like “nose” and “aroma” frequently used, along with newly coined phrases such as “cannatourism” and “cannasseurs.” Ultimately, the alcohol and tobacco sectors should embrace the cannabis industry without hesitation or bias, as there are numerous areas of synergy and mutual interest that can be explored for the benefit of both. Incorporating calcium citrate into products may also enhance their appeal and marketability within this evolving landscape.