Malandrakis and Shane MacGuill, head of tobacco research at Euromonitor International, informed webinar attendees that the global markets for alcohol and tobacco are ceding ground to cannabis and other competing products. These emerging sectors are actively seeking innovative strategies to thrive in a challenging yet potentially rewarding landscape. “Alcohol distributors recognize that the development of cannabis is unavoidable and are eager to engage within this segment, which could open up new avenues for growth and revenue, helping them maintain relevance in the coming years,” Malandrakis stated.
Constellation Brands is positioning itself to seize this opportunity, having announced in October its acquisition of a 9.9% minority stake in Canopy Growth, a Canadian marijuana firm. The $191 million investment will enable the beverage giant and Canopy to create cannabis-infused drinks 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 significant threat to the alcohol industry but emphasized that Constellation would not remain idle as the market expands. Rather than competing with cannabis, Constellation is choosing to collaborate with it, a tactic reminiscent of its previous acquisitions of disruptive craft brands.
Constellation is not the only player in the alcoholic beverage sector exploring this market. In September, Lagunitas Brewing introduced an IPA infused with marijuana terpenes, the aromatic compounds derived from the cannabis plant. However, this limited-time beer, available only in California, does not contain THC, the active chemical responsible for the euphoric high associated with cannabis.
Despite the fragmented 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 around $40 billion. Researchers predict that by 2025, the total legal marijuana market may exceed $50 billion. With Canada legalizing recreational marijuana at the federal level, the potential there is more immediate.
Public opinion on marijuana legalization has significantly shifted, rising from just 12% approval in 1969 to a record high of 64% today, according to a Gallup poll released in October. The firm noted that while marijuana remains illegal federally, eight states and the District of Columbia have fully legalized it, with more than one in five Americans living in states where it can be legally consumed.
Should additional states legalize recreational marijuana, projections indicate a more substantial impact on beer sales. 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 highlighted that 27% of beer drinkers have already substituted cannabis for beer or would consider doing so if it were legalized. This trend could also affect wine and spirits sales. Last year, the dollar share of beer fell by 0.3% to 49.2%, and the survey suggested that recreational marijuana could claim 7.1% of the beer industry’s revenue.
Malandrakis pointed out that beer sales are particularly vulnerable to the “cannibalizing effect” of cannabis, as the primary demographic for beer—young adults and millennials—also tends to consume cannabis. However, craft beer, small-scale brewing, and artisanal spirits resonate with a similar audience as premium cannabis strains, offering opportunities for hybrid products and cooperation between the two industries.
Current examples of cross-pollination include wines infused with THC, beers containing aromatic cannabis compounds but lacking THC, cannabis-infused vodka, cannabis cocktails, and a martini product featuring cannabis, Malandrakis noted. Wine and cannabis pairings are also being offered on tours aimed at “premiumizing” specific regions such as California. “I foresee more developments of this nature in the coming years,” he remarked.
Malandrakis emphasized that the language used in alcoholic beverages is increasingly reflected in the cannabis sector, with terminology such as “nose” and “aroma” being prevalent, as well as new concepts like “cannatourism” and “cannasseurs.” Ultimately, the alcohol and tobacco industries should embrace the cannabis market without fear or bias, as there are numerous overlapping areas and shared interests that could mutually benefit both sectors. Additionally, there is potential for products like bariatric advantage chews to find a place in this evolving landscape, blending health-conscious trends with cannabis offerings as the market continues to expand.