Company plans to focus on alcohol use disorders.
Company plans to focus on alcohol use disorders.
As talks revolving around the federal legalization of cannabis splinter in Congress, the question of whether the nascent industry can eat beverage alcohol’s margins remains a growing one.
In a report, titled, “Is Cannabis a Threat to Alcohol Sales?” BDSA Consumer Insights contends that while the crop is as popular as ever, any real breakthrough of consumer participation in adult-use and medical markets remains stymied in D.C. – casualties of political animosity and procedural acrobatics aimed at slowing progress.
“In just a few short years, attitudes towards cannabis across the country have shifted rapidly, with the share of those who have “bought-in” to cannabis consumption skyrocketing while fewer and fewer report not being open to consuming cannabis,” the report said.
BDS Analytics data showed that this past Spring, 51% of Americans in adult-use states claim to have consumed cannabis in the past six months, up 15% from Spring 2020. At the same time, the share who claim to be rejecters (non-consumers who are not open to consuming in the future) fell from 31% in Spring 2020 to just 23% in Spring 2022.
Overall consumer participation is lower in medical markets, yet BDS Analytics data suggest that consumer participation is growing at a similar rate.
The share of those who report past six-month consumption ballooned from just 26% to 41% between Spring 2020 and Spring 2022 – as the share of rejecters fell from 34% to 28% over that same period.
These realities have left many companies considering what they can learn from the alcohol industry — or how they can partner — as it continues to languish within its own prohibition.
“When we look deeper into the data, we see a cannabis consumer base that is knowledgeable, open to trying new product formats, and willing to experiment with incorporating cannabis consumption into more occasions throughout their lives,” the report said.
While consumer usage rates are starting to near beverage alcohol levels, experts generally agree that significant cannibalization of alcohol by cannabis would likely only occur over the course of at least another generation.
“While the trend toward alcohol’s displacement by cannabis is a durable one, especially among young adults, it is likely going to be a generational one, rather than one manifested in the next few years,” BDS Analytics Andy Seeger said. “Furthermore, it is expected that growing social acceptance will both increase substitutability and strengthen public preferences for cannabis over alcohol, though not completely dissuade cannabis consumers from drinking.”
Together, U.S. legal and illicit sales have been estimated to be $97 billion in 2021 – edging out against $87 million in spirit sales. Demand for cannabis in the U.S. now exceeds what the nation annually spends on spirits – and roughly matching what it spends on beer – according to a report by New Frontier Data.
Two-thirds of cannabis consumers surveyed by New Frontier said that they drink alcohol at least once per month, but 61% say that given a choice, they prefer cannabis.
Additionally, one-third of respondents said that they would like to quit drinking alcohol altogether, “though it is likely that the significant difference in social acceptability between alcohol and cannabis makes it more difficult to stop drinking entirely,” New Frontier wrote.
In another study, Colorado households – compared to all other states that did not legalize recreational cannabis – showed a 13% average monthly decrease in purchases of all alcoholic products combined and a 6% decrease in wine, according to a July 2021 report published in the Journal of Cannabis Research.
However, complicating the idea that cannabis will hurt alcohol sales, researchers’ findings showed that Washington saw an increase in spirits purchased while Oregon showed a significant decrease in monthly spirits purchased when compared to all other states without legalized recreational cannabis.
The conclusion was that the results “suggest that alcohol and cannabis are not clearly substituted nor complements to one another.”
“Future studies should examine additional states as more time passes and more post-legalization data becomes available, use cannabis purchase data and consider additional methods for control selection in quasi-experimental studies,” it said.
While the nature of cannabis consumption typically resides within the home, finding margins outside of those living spaces has been an ongoing challenge that has frustrated entrepreneurs in the industry.
Those who consume are consuming more often as consumers are pairing cannabis with alcohol and a variety of activities, BDS Analytics said in its report – though the lack of a three-tier system and on-premise regulation prevents cannabis companies from creating social hubs with experiences tied to their product.
“There is very, very little on-premise spending right now, which does add the margin,” Seeger said. “And that’s one of the things that the market, in general, is fighting right now – is a way to find margin. Those kinds of occasions would do that. That’s certainly what we see in beverage alcohol.”
According to BDS Analytics, the share of consumers in adult-use markets who report pairing cannabis with spirits or liquor rose from 12% in Spring 2018 to 22% in Spring 2022, while the share who report cannabis with cocktails doubled to a total of 20% in Spring 2022.
Additionally, BDS Analytics found that consumers are increasingly pairing cannabis with activities not typically associated with cannabis.
The share of consumers in adult-use markets claiming that they pair cannabis with fine dining rose from 14% in Spring 2020 to 25% in Spring 2022, while the share of those who report using cannabis while exercising rose from 18% in Spring 2020 to 26% in Spring 2022.
“While these increases may not seem shocking to savvy industry insiders, they demonstrate that the use occasions for cannabis are incredibly varied,” the report said. “They also show opportunity for brands that can produce product with form factors and targeted formulations that speak to these varied need states and use occasions.”
Innovations in rapid-onset technology help push cannabis-infused, non-alcoholic beverage products to create a standard beverage serving of Delta-9 THC, such as Keith Villa’s non-alcoholic, cannabis-infused, Belgian-style ale — Ceria Brewing Co. — which sold out in Colorado dispensaries four hours after it’s release; or corona importer Constellation Brands multi-billion dollar investments in Canopy Growth.
More recently, distributing partnerships between cannabis companies and the alcohol industry are sprouting.
Fresh Hemp Foods, a part of Tilray’s Wellness (NASDAQ: TLRY) division, signed a distribution agreement on Wednesday with Southern Glazer’s Wine & Spirits — one of the nation’s largest distributors of wine and spirits.
The pact will provide Tilray Wellness with direct access to the alcohol distributor’s network, “reaching consumers everywhere from local bars and restaurants to independent and national grocery chains and convenience stores.”
“This agreement helps Tilray uniquely position itself to enter the multi-billion-dollar adult beverage category with a non-alcoholic, CBD beverage alternative, for consumers who want to relax and unwind,” said Tilray Wellness and Fresh Hemp Foods president Jared Simon.
The agreement allows Tilray to develop a U.S. CBD beverage portfolio within retail channels, “which will transition the category out of the fringe and into the mainstream,” the company said.
Currently, marketing cannabis products toward specific experiential outcomes are limited without a legal framework.
Despite that, the industry has found creative ways to circumvent some of these limitations — even finding parallels with the brewery model.
Operators can establish deeper relationships with customers as people travel to and within states where cannabis is legal to visit the farms where the product is grown, similar to visiting wineries — also known as “cannatourism”.
“It’s a really big opportunity for states that have legalized cannabis to capitalize on that, not just for their own residents but also for tourists that might travel particularly for that,” said Christina Sava, an attorney at Troutman Pepper.
Other services help people find “Bud and Breakfast” spots — onsite consumption lounges in adult-use states such as a 420-friendly bed and breakfast type hotel.
“We kind of take it for granted that you can consume alcohol in entertainment venues and at bars and at restaurants,” Sava said, “but there really aren’t that many sanctioned spaces outside the home to try cannabis and share cannabis with your friends. I think this is an area that is ripe for evolution and will continue to grow.”
According to a substance use study, alcohol use disorder accounts for a majority of substance use disorder cases in the U.S., with 14.5 million or 5.3 percent of Americans aged 12 or older meeting diagnostic criteria for an alcohol use disorder in 2017 (AUD). It is a significant medical and social problem in American society, accounting for 88,000 deaths per year and more than $250 billion in annual costs. Alcohol misuse is also implicated in cancer, liver disease, and heart disease.
There are just four medications approved by the Food and Drug Administration (FDA) for the treatment of AUD: disulfiram, acamprosate, oral naltrexone, and injectable naltrexone. One is very old (disulfiram was approved in 1951), most are expensive (injectable naltrexone costs $1,100-$1,200 per monthly dose), and all have limited to moderate efficacy, according to a study.
Clearly, there is a need for something new, something better, to treat alcoholism. Over the last few years, early speculation about psychedelic therapy for alcoholism has turned into progress to find out how to use psychedelics to not only treat alcoholism but perhaps even cure it.
One of the first studies to find out how psilocybin can treat alcoholism was in 2015, which was a proof-of-concept clinical trial that showed promising results.
In 2019, researchers at Johns Hopkins University conducted an anonymous online survey of 343 people (mostly white males) with up to seven years of AUD who reported quitting entirely—or reported a significant reduction—in their use of alcohol following psychedelic use in non-clinical settings. After the psychedelic experience, 83 percent no longer met the criteria of being an alcoholic.
Then there is the pilot trial underway since February 2021, which is expected to be completed in July, designed to test a strategy for optimizing set and setting for psilocybin-assisted therapy of alcohol use disorder, initiated because results suggested that patients with AUD may be less likely to have a mystical experience with standard doses of psilocybin.
Participants in the pilot trial will view nature-themed video programs during the preparation session and during the ascent phase of the psilocybin experience that researchers believe will help improve outcomes of psychedelic-assisted therapy without the need for higher psilocybin doses. It is sponsored by Saint John’s Cancer Institute in Santa Monica, California.
Another study by Johns Hopkins University, beginning in April 2021, will look at whether a single high (25 mg) oral dose of psilocybin will lead to reductions in depressive symptoms and the amount of drinking compared to placebo in patients with both major depressive disorder and AUD.
But it’s not just psilocybin. Awakn Life Sciences (OTC: AWKNF), a biotechnology company researching, developing, and commercializing therapeutics to treat addiction with a near-term focus on AUD is using ketamine for treating alcoholism, is heading into its Phase III trial, generally the last step to FDA approval. The company is also working with MDMA for treating alcoholism.
And scientists are returning to examine how LSD can curb alcoholism, or even stop alcoholism, after work in the 1960s was curtailed when LSD was criminalized.
During the 1950s and 1960s, the popularity of psychedelics as a treatment for various conditions was soaring, with more than 40,000 people being administered LSD between 1950 and 1965.
One of those “experiencers” was the co-founder of Alcoholics Anonymous (AA), Bill Wilson, who promoted the use of LSD to treat alcoholism in the late 1950s and early 1960s. He reportedly believed that LSD, by mimicking insanity, could help alcoholics achieve a central tenet of the twelve-step program proposed by AA. It was a matter of finding “a power greater than ourselves” that “could restore us to sanity.”
Other psychedelics being tried for alcoholism include ibogaine. The first controlled clinical trial studying ibogaine for treating alcoholism is currently underway at the University of Sao Paulo, Brazil.
Researchers are also diving deeper into how ayahuasca can stop alcoholism—with the caveat that it isn’t necessarily about the psychedelic substance being used, but the “fluid, adaptable forms of caregiving” that play a key role in the success of addiction recovery with any psychedelic substance, according to one study. “Feeling part of a community has an important therapeutic potential,” the study found.
In states where legalization has occurred, recreational marijuana consumers are now using far less alcohol and over-the-counter medications, according to a new report by High Yield Insights.
The consumer behavior company looked at feedback from recreational users in states where recreational cannabis is legal. They found that more than 20 percent of people who consume marijuana recreationally are using 27 percent less OTC pain relievers and 21 percent less alcoholic beverages. Those weren’t the only steep drops found, either. The report also indicated those consumers are using 22 percent fewer sleep aids, consuming 20 percent less beer, and 18 percent less wine.
“We are just starting to grasp how legalization has impacted consumer behavior, be it spending, usage occasions, or shopping habits. Understanding these changes will lead to new growth opportunities for cannabis and further disruption for other categories,” said Mike Luce, co-founder of HighYield Insights. “Our findings uncovered promising consumer niches for the industry as well. For example, many older consumers 55+ are reengaging with marijuana, with 56 percent reporting a return to marijuana after having tried cannabis products at a younger age.”
The High Yield Insights report concluded that people are using recreational cannabis for pain, anxiety, and sleep due to the fact that the largest total decline in use was in pharmaceuticals. Prescription pain reliever use dropped 13 percent; anxiety medications, 13 percent; and prescription sleep aids, 11 percent.
According to the survey, when asked which type of occasion they typically use cannabis for, the top answers were for relaxation, as a sleep aid and to socialize at casual get-togethers. Other reasons or occasions included creativity, anxiety and before a meal with a friend or partner. People between the ages of 35-44 were more likely to use cannabis for relaxation, while younger consumers used it before various social activities.
Nearly half of the people surveyed use marijuana multiple times a week. Men are more likely to be heavy users, with 50 percent of them using it multiple times a week. Women were close behind at 47 percent. Sixteen percent of consumers use cannabis 3-4 times a month, while 13 percent use 1-2 times a month. Twenty-one percent of people surveyed use cannabis less than once a month.
The report showed that convenient forms, such as edibles and pre-rolls, are in high demand.
It concluded that packaging explaining a product’s effects is necessary to assist people who may not be familiar with the strain they’re purchasing.
The survey found that 65 percent of recreational cannabis consumers see legalization as positive for their communities, even though some are concerned with underage users.
High Yield Insights believes the report can be used by everyone in the cannabis industry to better understand consumers and their wants and needs. More information can be found in their “Recreational Cannabis Consumer” report.
A new report from Moody’s highlights the impact that legalized marijuana could have in the U.S. and Canada and the implications for other recreational substances, such as alcohol could be damning.
Moody’s estimates that marijuana could replace alcohol “on some occasions,” but spirits makers aren’t sitting on their laurels. Beer maker Constellation Brands (NYSE: STZ) purchased a 9.9 percent stake in Canopy Growth, a Canadian cannabis company. Additionally, Scotts Miracle Gro (NYSE: SMG) and leaf tobacco company Alliance One International have both acquired or invested in cannabis-related companies.
In the report, Moody’s notes that the legalization of marijuana could impact tax revenue from alcohol and potentially create “modest downward pressure on the use of pharmaceutical products,” especially those used to treat pain, anxiety, and depression as marijuana would theoretically replace them for treatment.
The negative effect would be felt greater at smaller pharmaceutical companies, particularly those with nascent drug pipelines, Moody’s says.
“Some small, unrated pharmaceutical companies are developing products based on the chemical cannabidiol, with one product advancing to the FDA review stage,” said Michael Levesque, a Moody’s Senior Vice President. “Thus far, large, traditional pharmaceutical companies haven’t invested heavily in cannabidiol, but that could change if smaller drug makers develop a market for these products.”
There is uncertainty about how the U.S. tobacco companies would enter the sector if and when marijuana is legalized at the federal level. Altria (NYSE: MO) and Vector Group (NYSE: VGR) have seen cigarette smoking on the decline for several years and there remain several questions about heated tobacco products and their long-term viability.
Still, the legalization is likely to have some modest positive impact on tax revenue, especially for the areas where it’s already legal.
“For US states and local governments that allow retail sales of marijuana, the related tax revenue is marginally credit positive,” said Grayson Nichols, a Moody’s Vice President-Senior Analyst in a press release. “Even for states with mature industries, such as Colorado, and large states like California expected revenue will remain only a small share of annual general fund revenue, given the limited opportunities for significant market expansion.”
In the U.S., 29 states have legalized some form of marijuana use. Nine states, including the District of Columbia, allow it to be used for recreational use, though it is still illegal at the federal level.
Canada is expected to legalize marijuana across the entire country sometime this summer. However, recent industry reports have noted that Prime Minister Justin Trudeau and his team could push that back to the fall, as opposed to July, as had been previously thought.
As with the U.S., Moody’s notes its difficult to anticipate how legalization would impact tax revenue in Canadian provinces.
“Given Canadian provinces’ limited experience with legalization, competitive pressures and calls to offset the costs of increased policing, we anticipate limited fiscal gain from legalized marijuana,” observed Michael Yake, a Moody’s Vice President – Senior Credit Officer. “On the other hand, legalization has the potential to reduce judicial burden, boost employment and offer a new revenue stream for First Nations populations. Suffice to say, if passed, the transition to adopting legal cannabis is expected to be complicated in the medium-term.”
That uncertainty has impacted the share price of many Canadian-based cannabis companies, including those in the Green Market Cannabis Index.
From Mesopotamia to ancient Rome, people have been infusing alcohol with cannabis for as long as cannabis has been around. In recent years, cannabis-infused alcohol has seen a resurgence of public interest, due largely to the spread of legalized cannabis in the United States. Most recently, the creators of Blue Moon announced that they would develop and release their own brand of craft cannabis beer.
But while cannabis beer and liquors have generated some interest, the bulk of the public’s attention has been centered squarely on the idea of cannabis wine, or cannawine as some call it, and it is easy to see why. Both cannabis and wine have a rich tradition of craftsmanship, which perfectly lends itself to the artisanal craft markets.
Perhaps the most famous brand of cannawine on the market at the moment is Know Label Wine Tincture, which is owned by singer-songwriter Melissa Etheridge. As the name implies, Know Label is technically not a wine but rather a “wine tincture.” The reason why it’s called a tincture is largely for legal purposes.
No U.S. state allows for the production of cannabis-infused alcoholic products. By calling Know Label a tincture, which is defined as “a medicine made by dissolving a drug in alcohol,” and by only selling it to medical cannabis patients, Etheridge is able to just barely skirt around the law. Other brands aren’t so lucky.
Currently, Know Label is the only product on the market that offers both THC and alcohol in one product. Instead, most other “cannabis-infused” alcoholic products on the market, from cannabis vodka to cannawine, will usually contain cannabidiol (CBD); a trend which Warren Bobrow finds disappointing and dishonest.
Known as the Cocktail Whisperer, Bobrow is a chef and mixologist who has made a name for himself in recent years as a cannabis cocktail guru. In 2016, Bobrow wrote the book “Cannabis Cocktails, Mocktails, and Tonics: The Art of Spirited Drinks and Buzz-Worthy Libations,” a how-to guide on creating cannabis-infused cocktails.
“They’re selling these hemp-flavored vodkas, and people see the marijuana leaf and immediately think they’re going to get high,” lamented Bobrow. “This is a product that has absolutely no THC, yet it is being framed as sold as something that gets you stoned, and I have a lot of difficulty with that.”
Bobrow went on to say that not only do many of these products pull a bait-and-switch, they’re also generally poor products to begin with. One brand in particular that Bobrow singled out was the California-based Mary Jane Wines, which he described as tasting like a “muddled mess.”
“The wine was out of balance,” added Bobrow. “There were no refreshing qualities and it certainly didn’t taste like something that I would be proud to serve on my dinner table.”
But while some try to pull a bait-and-switch or skirt the law by reclassifying their product, other brands are trying to redefine what cannawine means altogether, like Rebel Coast Winery. Offering a cannabis-infused sauvignon blanc, Rebel Coast sets its cannawine apart by taking out the alcohol and leaving in the THC.
To do this the company makes a normal batch of sauvignon blanc, which is then sent to a third party processor to remove the alcohol. The company then infuses the alcohol-free wine with cannabis using a proprietary process. According to Rebel Coast Co-Founder & Chief Operations Officer, Alex Howe, the end result is a product that tastes very similar to regular bottle but with a cannabis kick.
“One aspect that we have probably put the most time and resources into is making it taste it good, ” said Howe. “We’re trying to stay as close to the wine bottle experience as possible, we’re just swapping out one key component for another.”
Rebel Coast’s cannawine is not quite on the market yet, but you can pre-order a bottle online. Pending a successful rollout, the company hopes to start selling their cannawine in states outside of California where cannabis is legal.
So far that looks more like an inevitability than a maybe. The company has already received a large number of pre-orders for their cannawine, which Howe believes is thanks in large part to the massive consumer interest in finding an alternative to alcohol.
“I meet so many people who have either given up drinking or are looking to cut back on alcohol because they don’t like the negative side effects, and they’re looking for a better alternative,” said Howe. “I think a lot of people look to cannabis as that alternative.”
Not a big fan of wine? Not to worry, cannabis and hemp based beers are quickly coming to market. Stay tuned for when Green Market Report takes you into the world of cannabis beer.
In states where marijuana has been legalized, alcohol sales have started to slide. Big alcohol companies admit they are keeping an eye out for this new competition for recreational dollars.
The latest to make a comment is Molson Coors Brewing Company (TAP) whose history goes back to the state of Colorado, ground zero for legalized recreational marijuana. In the company’s 10K filed yesterday it stated, “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.”
The company even noted during its conference call that 21 to 24-year-olds have “primarily walked away from beer.”
In 2017, cannabis sales topped alcohol sales in the ski town of Aspen, CO. There are now more dispensaries in the town than there are liquor stores.
At a Bloomberg event, it was reported that Alexandre Ricard, who runs the Beefeater gin and Havana rum maker Pernod Ricard (PDRDY), said his company was “watching it closely” when asked whether he was monitoring the cannabis sector.
Constellation Brands (STZ) seems to be the only alcohol company so far that is fighting its competition by buying in. Last fall, the company which is known for its Corona beer brand bought a 9.9% stake in Canadian cannabis company Canopy Growth.
“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Constellation Brands CEO Rob Sands in a statement. “Our company’s success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction.”
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