The Elephant in the Fermentation room
Alcohol Companies Confront the Legalization of Cannabis
Recreational cannabis is now legal in nine states and the district of Columbia, with medical marijuana permitted in 30 others. Most of the liberalization has occurred within the past five years. It would be fair to characterize the reaction of the alcohol industry as a progression. Vintners, brewers and distillers were generally unconcerned at first, since they viewed their product to be unique and distinct from cannabis. Concern mounted as marijuana began to cut into alcohol sales, and now the industry is fighting back: many companies are making investments in the pot market, positioning themselves for an uncertain future.
The gold rush began last year when beverage giant Constellation Brands bought a 10% stake in the Canadian cannabis company Canopy Growth for $190 million (they have the option to increase their share to 50% of the company’s $2 billion market cap). Given what was happening on the state level, Constellation CEO Rob Sands said it was “highly likely” that pot would be legalized nationally. You might assume that Constellation’s primary concern was the future of wine sales: baby boomers are aging and drinking less, and millennials have shown stiff resistance to spending more than $15 on a bottle of wine.
The real problem, however, is beer. While craft beer remains wildly popular, overall beer sales are down sharply in America. In the first quarter of 2018 alone, AB InBev dropped 4.1%, Miller Coors declined 3.8%, and Heineken reported a “high single-digit” decrease. Those companies are taking measures to staunch the bleeding. Heineken’s Lagunitas brand launched a label called Hi-Fi Hops, which consists of sparkling water infused with THC (the active ingredient in cannabis); it’s now for sale in California, and presumably the other eight states as well. Molson Coors plunged into a joint venture with marijuana producer Hydropothecary to make and market beverages spiked with cannabis.
Marijuana-infused wine has been an urban legend for years, but now it actually exists. Rebel Coast winery in California makes a Cannabis-Infused Sauvignon Blanc for sale within the state. Each bottle contains 20 mg of THC, or 5 mg per glass (the state limit is 10mg per serving). You won’t hallucinate, in other words, but you might eat an entire cheesecake.
For the moment, Canada is the epicenter of most of the cannabis trade, as it becomes the second country (along with Uruguay) to make pot completely legal. Estimates of the prospective weed market in Canada range from $4-10 billion; the U.S. market could easily reach $15 billion if we were to follow their example. Far from watching nervously from the sidelines, the alcohol industry is taking refuge in the old adage: if you can’t beat ‘em, join ‘em.
Mark Spivak is an award-winning writer specializing in wine, spirits, food, restaurants and culinary travel. He has written several books on distilled spirits and the cocktail culture. His first novel, Friend of the Devil, is available on amazon.com; his second novel, a political thriller set during the invasion of Iraq, is due out in Spring 2019.