It has been a rough few months for the cannabis industry…could Big Alcohol help during another rough patch?
The cannabis industry was worth $33 billion in 2023 and is filled with mom and pop businesses. With the majority of the population having access to legal marijuana, consumer use is up, states are filling their coffers, and more patients are using medical marijuana. Â It has become so mainstream, even the staid AARP has acknowledge a signifiant portion of boomers are using it for medical reasons. Â But federal restrictions are crippling the industry, despite the growth. The industry needs federal help, can Big Alcohol help the cannabis industry. Alcohol is in a majority of grocery stores, restaurants, hotels, resorts, planes and homes. Â They understand the consumers and sell $260 billion in booze a year, not counting the second level market up. Â The alcohol industry spends over $20 million annually on lobbying, a drop compared to the $220+ million pharmaceutical spends, but an impressive amount. But Congress, the DEA, and members of the administration are not fans…and help is needed.
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Alcohol has a $14+ billion investment in the industry and has a voice in the Congress. Cannabis is a brand and revenue extension for alcohol rather than a competitor. A major change in the beverage industry came with the introduction of purified waters by PepsiCo (Aquafina) in 1994 and Coca-Cola (Dasani) in 1999. Â Seeing it as way to reach more consumers and revenue, the two soda giants are now the owners of the top two bottled water companies in the North America. WIth a stake in the outcome, the big liquor companies could guide Congress to open up more for cannabis. This would provide both industries access to more customers and more revenue for everyone, including government entities.
“While alcohol and cannabis can play in the same sandbox, we more often see consumers using cannabis as a replacement for more harmful substances like alcohol. In cannabis, we find a paradigm shift—entertainment and relaxation without the costs of alcohol’s physical and social tolls.” shares Jesse Redmond, managing director at Water Tower Research, LLC.
Like bottled water, alcohol could open up markets to an additional set of consumers. Â They have the expertise and relationships most cannabis businesses lack. Already, hemp beverage are in mainstream retailers like Total Wine (Texas) and in convenience stores.
The incoming administration has few cannabis champions with both the Speaker of the House and the President of the Senate and the cabinet doesn’t seem to be focused on marijuana legalization at all. But the majority of members are a fan of booze and that can be used to marijuana’s advantage.
“With the future uncertain for cannabis reform, some are looking to other industries to help support fundamental changes to the laws and regulations surrounding cannabis. One of the two industries seemingly cited most frequently, the alcohol industry, could be a significant player in the fight for change. While many have pitted the alcohol and cannabis industries against one another under the argument that legal and accessible cannabis will reduce the consumption of alcohol, it is clear that cannabis will never truly replace alcohol. The capital and lobbying power of the players in the alcohol industry are not to be underestimated, and their involvement could significantly impact the future of cannabis reform. The question remains, what interest does the alcohol industry have in the expanding cannabis industry? Well, the answer to this question likely varies by player. Some alcohol manufacturers such as Tilray Brands, have been all-in on cannabis and would likely benefit from the relaxation of laws surrounding cannabis. There are also several alcohol companies who had entered and since left the cannabis industry, who’s future involvement remains to be seen. It is also possible that certain alcohol companies may wish to influence how cannabis reform is implemented – certain more limited reforms or a focus on the allowance of certain product types, could be a form of insulation from widespread cannabis legalization and accessibility. The alcohol industry may yet be a key player in the future of cannabis, one that the cannabis industry would greatly benefit from having on their side.” states Andrew Cooper, Chair, Cannabis & Psychedelics Practice Group at Falcon Rappaport & Berkman LLP.
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Both would benefit from product development, Â producing and marketing cannabis-infused beverages and edibles. From a marketing point of view it also makes sense consider the consumer reach. Â In addition, research shows that people often pair cannabis with alcohol rather than replacing one with the other. The proportion of consumers pairing cannabis with spirits or liquor increased from 12% in 2018 to 22% in 2022. The next 14 months will shape the cannabis industry path for years to come, let’s see if Big Alcohol plays a role.
