How Will Legalization Impact the Beer Industry?
October 13th, 2014
Policy, Top News
The legalization of adult-use marijuana in Colorado and Washington has created an enormous new market worth billions of dollars per year. With about $83 billion in 2013 sales, according to a report by Mintel, the U.S. beer industry has grown a bit concerned, particularly as other states consider legalization.
CNBC’s Arjun Kharpal recently posited that people who drink and smoke likely file beer and weed under the same line in their personal budgets, suggesting that the two industries could be competing in the same market. That is, the increase in marijuana consumption could reduce spending on beer.
A 2-year study seemed to confirm these findings, according to Bloomberg, showing that alcohol sales slumped as much as 5% in states where marijuana use was permitted. However, Bernstein analyst Trevor Stirling claims that beer consumption per capita actually increased about 0.5% in the 10 largest states that legalized weed.
Craft beer could become an especially large target, given the shared demographics with those who smoke marijuana. With 2,700 breweries in the U.S. and 1,000 new brands launched last year, the niche industry has seen a boom with many new brewery start-ups facing a long road to breaking even.
Of course, craft breweries have been stealing market share from larger beer-makers like Anheuser-Busch Inbev [stockquote symbol=BUD], Molson Coors [stockquote symbol=TAP], and SABMiller [stockquote symbol=SMBRY]. These dynamics could offset any slowdown in business and keep the sector growing strong.
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