You are here:

Despite Conflicting Evidence, A New Report Finds Legal Marijuana Does Not Impact Alcohol Sales

by Contributor Tara Nurin Forbes, posted 10 01 2019

Weighing in on an issue that weighs heavily on alcoholic beverage suppliers, the Distilled Spirits Council released new research that shows the sale of legalized marijuana does not impact alcohol purchases, at least in the three states that have allowed recreational pot smoking the longest. In announcing its findings Thursday, the council, which represents the majority of large American distillers, concludes that despite conflicting reports, beer, wine and liquor sales patterns in those states simply mirror the national average.

“The same trends we see in those states, we see nationally,” says Chief Economist David Ozgo. “There’s no impact we can detect on the sale of distilled spirits or beverage alcohol in general.”

Ozgo analyzed tax and shipment data in Colorado, Washington and Oregon, beginning two years before recreational dispensaries first opened their doors and three to four years after. Recreational cannabis laws took effect in 2014 in Colorado and Washington and 2015 in Oregon.

Orzo found that per capita, spirits sales increased between 3.6% to 7.6% in that time, depending on the state; beer sales declined between -2.3% to -3.6%; and wine sales were mixed. Overall, alcohol sales remained flat.

“We did this study because there is a lot of misinformation circulating about the impact of recreational marijuana legalization on distilled spirits and the wider alcohol market,” Ozgo said in a statement.

Investment banking firm Cowen and Company has made its name in this space being bullish about marijuana’s potential to eat into alcohol’s share of consumers. Just this week Cowen reported that between 60-70% of current and former users say they drink less when they get high, and around 20% say they seamlessly substitute cannabis for alcohol.

Those users’ beverage of choice? Beer.

“We would expect another challenged year for beer, driven by cannabis substitution,” wrote analysts Tuesday.

But both Ozgo and Brewers Association Chief Economist Bart Watson agree Cowen might be blowing at least a bit of smoke, and Watson’s been challenging Cowen’s pot predictions for years. When evaluating sales numbers, Cowen relies on Nielsen purchase scan data, which do, in fact, strongly suggest that booze sales dip into the red once states give the green light to pot.

However, scan data ignores the on-premise channels of bars and restaurants and the burgeoning popularity of brewery and distillery taprooms, particularly in Colorado. Orzo estimates Nielsen captures no more than 20% of spirits purchases nationwide, and Watson wrote in 2016, “Denver is probably one of the markets where scan/POS misses the most volume given the incredibly strong craft on-premise scene.

In 2015, premises use (brite tank sales) were equal to 3.3 percent of total shipments in Colorado, the highest percentage in the nation. That doesn’t even count to-go sales and other ways brewers are selling beer that isn’t being measured.”

It’s true that overall U.S. beer sales are slowing but statistics show that spirits are picking up every single market share point that beer is putting down. When one studies the actual number of shipments and amount of taxes collected, not so much for marijuana.

“Many of the analyses I’ve seen ignore these other variables and simply look at sales in a place before and after a change in marijuana regulation. Although that may tell part of the story, doing these types of comparisons without controls makes it very easy to confuse noise for signals,” Watson wrote.

As for the substitution effect, Orzo says, “I’m sure you can find somebody out there who swaps one for the other but when you look at the macro level data and talk to people we use them on different occasions.”

Neither Cowen nor Nielsen could be reached for comment at press time.

The council hasn’t taken a position on legalized cannabis but recommends that states tax and regulate it in a way that’s similar to alcohol.

 

Tara Nurin

I cover the business of beer and alcohol, mixed with a little politics

I’m a freelancer who primarily covers lifestyle trends with a focus on craft beer, alcohol, culinary tourism and sustainability. My writing has been published in Food + Wine, USA Today, US Airways, Eater, Thrillist, Philadelphia magazine, New Jersey Monthly and numerous national beer magazines, which has won me a 1st place business writing award from the NJ Society of Professional Journalists and helped me get voted the Food Writer of the Year in a competition hosted by the Wine School of Philadelphia. I co-founded Ferment Your Event to lead craft beer pairings and seminars (specialty is beer + chocolate), and I co-host a weekly radio show called “What’s on Tap” in addition to teaching the Craft of Beer course at Wilmington University. I volunteer as the historian for the international Pink Boots Society for the advancement of women in beer and founded NJ’s original beer-education group for females. I’m an official beer judge, a Cicerone Certified Beer Server and an urban pioneer on the scenic Camden, NJ, waterfront. Please visit my website, www.taranurin.com.

get our book

Drugs: It’s just not worth it

Drugs: It’s just not worth it

Our 35-page book gives clear and easy to read facts and advice aimed at teenagers and young people.

£3.00

Buy Now