In November, 2017 Canopy (WEED.T) announced they received a $245 million CAD investment in large alcohol participant Constellation Brands (STZ.N) in trade for 9.9% equity in Canopy. At June 2018, Constellation Brands increased its bet and gained $200 million CAD value of convertible debt securities issued by Canopy.
Constellation might be gambling on Canopy’s victory to hedge against a possible drop in earnings from their alcohol brands. Georgia State University found that alcohol purchases decreased by 15 percent in counties in states with medical marijuana legislation. Counties where cannabis might be legally obtained had 20% reduced alcohol sales compared to neighboring counties across country boundaries where it was still outlawed.
California legalized cannabis on January 1st, 2018. California has always been known as a key destination for partiers from the US and across the world.
The legal marijuana sector may emerge to become among the greatest threats to the multi-billion dollar drink alcohol industry, according to a new report from a top analytic company.
The IWSR, the leading source of information and intelligence on the alcoholic beverage market, together with and BDS Analytics, says an increasing number of consumers, especially millennials, are showing a preferences to consume both booze and buds, compared to older generations which are inclined to stick with only one. That could cut into long-term loyalty efforts by beverage makers, especially those from the beer and spirits fields.
“Our study indicates that around 40% of adults 21 and over eat cannabis in states in which it is legal,” said Jessica Lukas, vice-president at BDS Analytics. “Cannabis presents considerable opportunities across consumer businesses, including new events that alcohol can’t and will not play. Consumers may continue to seem to cannabis products over alcohol for events when they are feeling creative, want to get motivated, or seeking health, medical or health benefits.”
Surely, cash spend on cannabis isn’t necessarily cash taken away from alcohol businesses. But the IWSR is warning that manufacturers of adult drinks need to start anticipating consumer’s shifting demands now if they would like to avoid trouble in the future.
This past year, Americans drank 3.345 billion instances of alcohol, a 0.8% decrease from 2017. That worked out to about 7.9 billion gallons of booze, roughly 160 million bathtubs full.