Rabobank Takes A Look At How Cannabis And Drinks Mix

Food & Drink

Photocredit: GettyGetty

A recent podcast, hosted by three Rabobank executives, looked at how cannabis is affecting the wine and spirits market in Canada and abroad. The three analysts were Boucard Nesin, a beverage analyst; Steve Watson, a senior beverage analyst; and Stephen Rannekleiv, Rabobank’s executive director of food and agribusiness research. All three are based in New York City and were joined by Jennifer Maloney, who covers the beverage industry for The Wall Street Journal.

The most import drinks trend of last year, they concluded, is the entry of legalized, recreational cannabis into many states. The panel explored  how legalized cannabis is currently affecting the Canadian market and made predictions about what is likely to happen in the U.S. over the next year.

The New Cannabis Frontier

Nesin shared that by far the most important drinks trend of last year was the entry of legal cannabis into multiple U.S. states. “The marriage of the cannabis and the drinks industry has been fascinating and interest from large beverage companies is universal,” he added.

He said that most of the drinks industry has been looking to Canada to try to understand what the emerging trends might be. “ We are anxious to learn what results are going to be coming back from Canada. How will brand building evolve in the space and once legalized, could marijuana-infused beverages start to pose a greater risk to the beverage alcohol category?”

Major alcoholic-beverage industry players have also entered the Canadian cannabis market such as Aphria Selects Great North Distributors, which is a Canadian subsidiary of wholesaler Southern Glazer’s Wine & Spirits. “It almost seems now like the companies that aren’t investing in [cannabis] have to justify to their shareholders why they aren’t doing it… [and] they have to address this issue one way or another,” added Rannekleiv.

The panel also addressed what may hit the market next in terms of  Cannabidiol (CBD)-infused foods. Its use in foods, noted Maloney, “is still in legal limbo as we wait to see if the FDA’s stance will evolve.” She added that, “The big beverage companies and a lot of startups are focusing on the health and wellness category, which is hot right now.”

Marijuana buds in a heart shaped, valentine’s day chocolate box on a white background with rose petals and cannabis buds. Photocredit: GettyGetty

She noted that CBD is also supposed to have “a lot of anecdotal benefits from helping with anxiety and inflammation and sleep… it could help your skin. So that’s why you have players like Coke and Pepsi are looking at [CBD] as a potential functional beverage… The non-alcohol beverage companies are going to have to explain their thinking more clearly on CBD as an ingredient.”

Does One Replace Another?

While much research has been done in both Canada, and in states like Colorado where cannabis has been legalized for some time, it is not yet clear if weed is indeed cannibalizing the alcoholic beverage market.

“When it comes to alcohol and cannabis, the question is ‘are they substitutes or complements?’ ” Nesin questions. “That is, if somebody chooses to use cannabis does it increase their likelihood of consuming alcohol [complement] or does it cause a decrease in alcohol consumption [substitute]. Unfortunately, the only right answer also happens to be the least satisfying: nobody knows.”

Nesin focuses on the ever-changing drinks market. Credit: Mandy Demuth Photography.  . Mandy Demuth Photography.

He cited a recent study on the topic that was inconclusive. “A survey of previous research in the journal Substance Use & Misuse, looked at 29 studies exploring the relationship between marijuana and alcohol consumption. They found that 16 studies support substitution, 10 support complementarity and 13 found no net effect.”

While many in the wine business don’t think cannabis will ever replace sharing a great bottle of wine at dinner, Nesin said “I would argue that marijuana is both a substitute and a complement for alcohol depending on which individual and product we are talking about. Research on younger populations, for example, suggests marijuana consumption is correlated with an increase in alcohol consumption, while research on older populations suggests marijuana use is associated with a decrease in alcohol consumption.”

What Lies Ahead

 

All bets on how the market may change are currently out as Canada moves into its first year of federally legalized cannabis use and more American states are likely to legalize it. As “2019 will be the first full year of cannabis legalization in Canada. We should start to see what brand-building will look like in a fully legal cannabis market,” he said. In addition, there may eventually be enough data to more accurately answer the question, “Will marijuana legalization affect alcohol sales?”

Nesin added that “in the short-term, the impact of cannabis recreational legalization on alcohol sales is either marginal or non-existent. It is certainly going to be difficult to detect using state-level data.”

He went on to note that many of the current studies on the matter are also irrelevant. “I would also encourage people to ignore data coming from unscientific studies that ask consumers questions like ‘Do you drink less when you use marijuana?’ Those kinds of questions are not going to get accurate answers. Only large-scale, carefully-crafted scientific surveys will be able give use the answer.”

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