Legalized Medical and Recreational Marijuana Use Appear to Hurt Alcohol Sales

High times.  In a recent Bacon’s Rebellion column … Will Virginia Legalize Recreational Marijuana Use … I noted that well over 20% of Americans now live in states that have legalized the recreational use of marijuana.  In the column I wondered whether our General Assembly’s reluctance to address the question in a meaningful way might be attributable to Virginia’s unholy trinity of political corruption:

  1. Unlimited campaign contributions
  2. Opposition by well heeled vested interests (i.e., the alcohol manufacturing, distribution and retail industry)
  3. Essentially non-existent rules on the use of, or reporting on, campaign contributions

My hypothesis was that a river of money flows from Virginia’s alcohol industry into the pockets of our elected officials.  The alcohol industry is opposed to legalizing marijuana since legalization hurts alcohol sales.  Meanwhile, our elected officials want to keep the money flow going since it funds not only their re-election plans but also dinners at Bookbinders, golf outings, private clubs and all sorts of other goodies.  Therefore, legalization of marijuana is intentionally stalled in Virginia.  Virginia’s reputation as America’s Most Corrupt State is, in my opinion, well established.  However, the question of whether legalized marijuana use hurts alcohol sales needs to be further examined.

Paging Doctor Weed.  The best information about the impact of marijuana legalization on alcohol sales comes from studies of medical marijuana legalization.  Medical marijuana has been legalized for longer and in more states than recreational marijuana.  Some would say that medical marijuana is a poor proxy for recreational marijuana because medical marijuana is only used to combat disease and therefore is not a substitute for booze.  Yeah, right.  A university study using retail scanner data from 2006 – 2015 found that alcohol sales fell 15% in jurisdictions that legalized medical marijuana.  For the sake of emphasis – this was a study of legal medical marijuana on alcohol sales, not legalized recreational use of marijuana.

The Oregon Trail.  The relationship between legalized recreational marijuana and liquor sales has been studied in Oregon.  In that state, recreational marijuana use is legal at the state level but localities have the right to ban it in their jurisdictions.  A study comparing Oregon localities that allow marijuana sales vs those that don’t found the growth rate of liquor sales for the “booze only” places was faster than in the “booze and reef” areas.  Early days.  Only one year of data.

Miller Time.  A 10-K disclosure by the Molson-Coors company cites legalized cannabis sales as a potential risk to their business. “Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer. As a result, a shift in consumer preferences away from our products or beer or a decline in the consumption of our products could result in a material adverse effect on our business and financial results.”  Four months after citing the business risks of legalized marijuana Molson-Coors announced they are considering the sale of ganja infused beer in Canada.

Rocky Mountain High.  Earlier this year the Aspen Times reported that Aspen’s legal marijuana dispensaries outsold its liquor stores in 2017.  As far as anyone knows, this is the first time such a shift has happened.  I’ll wager it will be far from the last time.

— Don Rippert

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14 responses to “Legalized Medical and Recreational Marijuana Use Appear to Hurt Alcohol Sales

  1. It’s a bit of a complex issue that involves generational attitudes.

    Lower alcohol sales MAY also mean less alcohol abuse because apparently this also happens: ” Opioid Use Lower In States That Eased Marijuana Laws”.

    So could it be that marijuana actually has a “beneficial” effect by diverting those who abuse alcohol and opioids into a drug that “may” be less harmful?

    By the way, what keeps the marijuana companies from “corrupting” politicians or for that matter, companies that sell alcohol from adding marijuana to their product line?

  2. OK, I’m persuaded — increased legal marijuana use will cut into alcohol sales, which supports your contention that the beer & wine distributors likely view medical marijuana as a threat to their businesses. You can close the loop on your argument if and when their trade associations begin posting anti-marijuana material online and their lobbyists start getting active in marijuana-related legislation.

    • Fair point. However, it’s always tough to document what happens in the rat and smoke filled back rooms of the swamp in Richmond. Why post material when you can just keep funding the Good Time Charleys of the Virginia General Assembly? Elsewhere citizens can initiate referenda whether the sniveling political class and their lobbyist lackeys like it or not. The evidence will have to come from those states.

  3. Another entry for the famous science journal, “Well, Duh.” Simple logic, really.

    Drinking, smoking, toking – all tools of the Devil! Drive stoned and you will kill yourself and somebody else. Smoke weed and you will get lung cancer. Interchangeable risks. I doubt the liquor industry will fight that hard but instead will get in on the action. There were all these urban myths decades ago about the tobacco companies having reserved the rights to Mary Jane-related product names…

    • https://www.forbes.com/sites/thomaspellechia/2018/01/22/alcohol-sales-dropped-15-percent-in-states-with-medical-marijuana-laws/#717a58ee5f22

      “Another aim of the study appears to have been to determine whether legalized marijuana promises to replace alcohol consumption altogether. The jury is still out on that question. But in a recent Webinar concerning the state of the wine industry, host Rob McMillan, Silicon Valley Bank Wine Division president, joined by two wine industry guests stated flatly they see no evidence and do not believe legalized marijuana will be a major substitute for wine consumption. McMillan pointed out that beer is more likely than wine to suffer sales reductions. His reasoning: wine compliments a meal, marijuana doesn’t.

      McMillan has a point, but something else needs to be considered: after smoking pot, many people eat–and drink–considerably more. With that in mind, it’s not hard to imagine that instead of decreasing alcohol sales recreational legalization of marijuana across the country might increase the sales.

      The wine and marijuana industries are poised to discover. Stay tuned.”

      The liquor industry is still largely in denial.

    • Marijuana is still illegal at the Federal level. This complicates everything for the marijuana companies. Banks won’t take their deposits, insurance companies don’t want to insure them, etc. They are ingenious in getting business done but they have no legacy business to protect. The booze companies won’t take the risk of getting involved in the US at this time. They have too much to lose of their existing business.

      Molson-Coors announced the possibility of marijuana infused beer in Canada. In Canada, recreational marijuana use was passed as a national law and left to the provinces to implement. No risk of running afoul of Ottawa for Molson-Coors.

      Liquor companies in the US … damned if they do, damned if they don’t.

  4. Gee, if my sales are down because customers are buying other products from other vendors, maybe I need to improve the product, improve customer service, reduce prices and do a better job of marketing.

    • Exactly. Those slide rule makers were idiots. If they just would have offered an extended warranty and a help desk the calculator would never been able to eat their lunch.

      Sometimes a new product (legalized marijuana) is perceived by a significant percentage pf the population as a better choice no matter what the companies who make the old product (legal alcohol) do.

  5. Any data out there about snack food sales? The Frito Lay and Mondelez and Mars folks should be all over legal marijuana!

    • I liked Clear Eyes as an investment but the conglomerate that owns the brand (Prestige Brands) also makes Goody’s Headache Power which may see a decrease in sales as hangover-based headaches are reduced.

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