Cannabis will Soon Smash Beer Sales
The prevalence of legal cannabis is having a serious impact on beer sales, according to the Wall Street firm Cowen. The beer industry’s problems are not going away for another decade, according to analysts. Cowen recently lowered its rating for Molson Coors, which is just one of the beer companies that’s now directly competing with legal cannabis.
Beer sales underperformance is a trend that’s nothing new, and the troubles are not going away anytime soon. “We believe alcohol could be under pressure for the next decade, based on our data analysis covering 80 years of alcohol and 35 years of cannabis incidence in the U.S.,” managing director and senior analyst Vivien Azer wrote. “Since 1980, we have seen 3 distinct substitution cycles between alcohol and cannabis; we are entering another cycle.”
The analyst found a “notable inverse correlation with cannabis use.” Alcohol drinking among 18- to 25-year-olds has dropped for five consecutive years through 2015, as cannabis consumption has increased. During the 1980s and 1990s alcohol consumption dropped 22 percent, while cannabis consumption rose 18 percent. Since 2011, cannabis sales to young adults has been outpacing beer sales. For this reason, Azer decreased her target for Molson Coors from $120 to $105.
The shift has been happening since the latest economic recession. “Coming out of the recession, alcohol’s recovery has been uneven, while cannabis incidence (and legal sales) have both risen markedly. We believe this sets up the alcoholic beverage category for another cycle of falling per capita consumption,” Azer added. “With cannabis adoption accelerating, alcohol volumes will remain under pressure.”
It’s no mystery why young adults are turning to cannabis instead of beer. With cannabis, there is no hangover and the long-term side effects are arguably less harsh than that of alcohol. Young adults have caught on, and will continue to spend less money on beer.
