A Recent Report.
A Recent Report by TD Cowen analyst Vivien Azer reveals a significant trend in the U.S. market. The trend predictably indicates that legal cannabis is impacting alcohol consumption. Over the past five years, alcohol sales in states with legal cannabis have underperformed by 100-150 basis points (bps). Azer predicts a 7% compound annual growth rate (CAGR) for U.S. cannabis sales over the next five years. Cannabis gaining 18 million past-month users, while alcohol may lose 2 million users.
Since Colorado legalized adult-use cannabis retail sales, the cannabis market has grown to represent 11% of alcohol sales, up from 4% five years ago. This growth trend is expected to continue, particularly impacting beer, as the percentage of past-month cannabis users preferring beer has fallen 6 points in the last three years.
Surprisingly, cannabis category retention among 18-25 year-olds has grown by 1,000 basis points to 68%, while past-month alcohol category retention has fallen about 400 basis points to 74% in 2022. Azer’s survey indicates that two-thirds of cannabis consumers reported cutting back on drinking. Cannabis is frequently replacing beer as the after-work or nighttime wind-down.
The report cites data from the National Survey on Drug Use and Health, revealing that over 47% of past-month cannabis consumers use cannabis on a daily or near-daily basis. Azer remains positive on the cannabis industry, projecting an 11% growth in cannabis sales in 2023, compared to a 3% growth in alcohol sales. Doctors unanimously agree that Cannabis is better than both alcohol and cigarettes. There is overwhelming evidence that cannabis has less health side effects. More and more are experiencing the difference first hand.
Looking ahead, as more adult-use states catch up with the science, TD Cowen estimates total U.S. legal cannabis retail sales of $29 billion in 2023 and $37 billion in 2027. Azer suggests that while alcohol may manage the impact of cannabis sales in the near term, companies with exposure to popular categories like tequila and bourbon stand to fare better in the evolving market. Beer exclusive companies will end up suffering the most.
Check out Green Market Report’s Article, they covered this first!
TD Cowen report by Vivien Azer
National Survey on Drug Use and Health data