Photo: Wine Australia

Cannabis in the USA: its impact on alcohol sales, according to the data

Market Bulletin | Issue 119
Photo: Wine Australia
07 Aug 2018
tagged with USA , sales , analysis
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Legalised recreational cannabis is a new competitor for alcoholic beverages in the United States of America (USA). Nine states (mainly on the West Coast) and Washington DC have legalised cannabis for recreational use for adults over the age of 21, even though federal law still recognises the drug as illegal. Medical cannabis is legal in a further 30 states and it has been decriminalised in another 13 states. To put this in context, 64 per cent of the USA’s population now lives in a state where cannabis has been legalised.

According to the 2018 Annual Marijuana Business Factbook, in 2017, retail sales of recreational cannabis totalled almost US$3 billion and they are estimated to grow to between US$4 and US$5 billion in 2018. The report also estimates recreational cannabis sales will reach between US$12 and US$15 billion by 2022. In 2018, it is estimated that sales of recreational cannabis will overtake medical cannabis sales for the first time.

Figure 1

Transitioning from the black market to legalised sales

When compared with cigarettes and beer, sales of cannabis on an annual basis are quite small. However, it is estimated by Marijuana Business Daily that the total demand for recreational cannabis in the USA, including the black market, is around US$50 billion. If the USA Government legalised cannabis across the country, sales might start out around that level but they would possibly rise as cannabis gained greater mainstream acceptance. Eventually, cannabis could surpass cigarette sales – with the potential to rival beer (the biggest alcohol category) in the value of overall sales.

On 12 July 2018, the Wine & Spirits Wholesalers of America (WSWA) announced it was in favour of legalised cannabis in states that pledged to regulate the category like beverage alcohol. The trade organisation (which represents the wholesale tier of the USA wine sector and provides members with representation before Congress and other regulatory bodies) has urged the federal government to respect a state's right to legalise cannabis and to create a path that leads to federal regulation similar to that of the alcohol industry.

Figure 2

Of the nine states where the use of recreational cannabis is legal, those with the biggest wine consumption are California, Massachusetts, Washington, Colorado and Oregon.

In Vermont and Washington DC, although the recreational use of cannabis is legal, neither allows cannabis to be sold or purchased.

Table 1: States where recreational cannabis is legal

State

Recreational cannabis sales in 2018 (US$ million)

Total wine consumption in 2017 (‘000 9L cases)

Adult wine per capita consumption (litres per head)

Alaska

70 to 100

847

14.84

California

800 to 1,200

50,545

15.48

Colorado

1,200 to 1,300

6,514

16.05

Maine

Sales to begin in 2019

1,524

12.57

Massachusetts

150 to 250

12,396

22.07

Nevada

500 to 600

4,395

17.15

Oregon

500 to 550

6,117

18.21

Vermont

N/A

1,122

19.31

Washington

1,000 to 1,100

11,191

19.12

Sources: 2018 Marijuana Business Daily, 2018 Shanken’s Impact

Different consumption habits provide an opportunity for positioning 

Currently, there are mixed positions regarding the effect of cannabis legalisation on alcohol sales. Some studies evidence a decided drop in alcohol sales in states that have legalised cannabis, while others show no significant effect.

Recent research conducted through the TABS Analytics 2018 Wine and Liquor Study concluded that, as legalised, recreational cannabis becomes available in more states, it is not expected to have a significant impact on the purchasing of wine and liquor. This position is supported by the WSWA. ‘The data is not conclusive’, says Dawson Hobbs, acting executive vice president of external affairs for WSWA.

For wine, it is more likely to affect the low-priced end of the market rather than commercial or premium wine sales due to the occasion when cannabis is used – for relaxation rather than with meals. In California, cannabis is already popular, so one would assume that the impact on wine sales would be minimal. In Colorado, it is understood that cannabis is impacting on day-time drinking. However, wine is more often consumed in the evening, therefore, it appears that the potential impact on wine sales would be minimal there also.


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This content is restricted to wine exporters and levy-payers. Some reports are available for purchase to non-levy payers/exporters.