Alcohol sales still growing in the face of cannabis legalization

Canada passed legislation over the summer to legalize recreational marijuana nationwide, and the law just went into effect last week. Certain medicinal marijuana has been legal in Canada since 2001, but it’s only the second nation to completely legalize the drug since Uruguay did so in 2017.

Regulating the high

It’s been a tumultuous week with growers, sellers and the general Canadian public getting used to what’s allowed and what isn’t. An important distinction is that cannabis has not been simply decriminalized, as it has in other countries. Canada’s new law allows the taxation of legally produced cannabis.

There are still regulations according to each province, however, and products like cannabis-infused food and beverages, concentrates and extracts are still unavailable.

According to the Backgrounder notes on the Cannabis Act, “Other products, such as edibles, will be permitted for legal sale within one year following the coming into force of the Cannabis Act, at which time federal regulations for their production and sale will have been developed and brought into force.”​

Dried and fresh marijuana, oils, seeds and plants are what’s currently legal to purchase. In most places, consumers have to be 18 or 19 years old to buy it and one person is allowed to carry up to 30 grams, though some provinces allow more to be kept in residences.

Since the law went into effect, more than 100 stores nationwide have opened their doors to the public, battled long lines and struggled to keep enough marijuana in stock to meet demand.

Alcohol coexisting with cannabis growth

According to TABS Analytics, a software and analytics platform that provides solutions for sales and marketing analytics in alcohol, there has been a big shift away from beer and wine in the last few years while spirits have grown significantly. Because cannabis is such a new player in the adult substance category, they report there’s a lot of uncertainty in wine and liquor about the industry’s lobbying efforts.

Wholesalers in alcohol are the most concerned, as they are a legislatively required and imposed role in the supply chain. They touch everything that goes through to the end consumer and would be most affected by a threat from cannabis.

However, in TABS Analytics’ recent 2018 Wine and Liquor Study, researchers found that only a small margin of US consumers said they would drink less if cannabis was legalized where they live. It found that 5% of regular wine consumers and 9% of regular liquor consumers strongly agreed they would cut back on their alcohol purchases in favor of cannabis.

Even without posing a major threat to alcohol sales, the edibles market in North America is still on the brink of explosion. Arcview Market Research estimates that the edibles market in the US and Canada combined could hit $4.1bn by 2022 despite the current market uncertainty.

Getting a slice of the brownie

Cannabis-infused beverage companies are cropping up constantly in the western US, mostly targeting recreationally-viable states like California, Nevada and Colorado. Start-up brands producing cannabis-based sodas, sparkling waters, alcohol alternatives, smoothies and more have flooded the market in 2018, all eager to get in on the ground floor of the craze.

More established beverages are looking to get involved in the market as well. Beer and wine giant Constellation Brands made headlines this year by announcing its investment of $4bn in Canadian cannabis company Canopy Growth. Coca-Cola said in September that it is eyeing the cannabis drink market and was rumored to be in talks with Canadian-based Aurora Cannabis.

The marijuana market growth is also affecting processing and manufacturing companies. Confectionery production equipment is in high demand for the development of cannabis gummies, hard candies and chocolate, selling out to Canada and the western US. Illinois-based Savage Bros made record sales of its machinery to Canadian edibles manufacturers​ in the last few months since the Cannabis Act passed. Others are just starting to learn about the market’s potential, sparking innovation, new marketing strategies and a cannabis-infused ripple effect.