Profit from the legalization of cannabis could be as big as the entire alcohol industry within three to five years, experts say. Even with disruption from craft breweries in the United States in recent years, analysts believe alcohol companies should start watching their backs. Both medical and recreational marijuana are becoming legal in the US and its territories, and this has been creating a bold impact in both the cannabis and alcohol industries.
In Colorado, for example, marijuana sales already surpassed that of alcohol in 2017 specifically in Aspen. This disruption brought $11.3 million for cannabis retail while only $10.5 million for alcohol, which experts believe won’t be the only time such a takeover will happen. Wherever cannabis becomes legalized, a natural growth in the industry is expected.
Recreational marijuana is legal in eight states: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, and Washington. Additionally, Washington DC also legalized recreational use, but the city and Congress are still debating about the program. Medical use is legal in Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maryland, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, and West Virginia, as well as US territories Guam and Puerto Rico.
With northern neighbors Canada also looking to legalize marijuana within the next few months, and the decriminalization of marijuana in many other American states and territories, experts think cannabis could give the alcohol industry a run for their money. Torsten Kuenzlen, former executive for both the Coca-Cola Company and Molson Coors, thinks legal cannabis holds a great advantage over the entire alcohol industry.
Cannabis: Friend or Foe to Alcohol Businesses?
“All alcohol is consumed only as a liquid. Cannabis meets more consumer needs and motivations in the way that it’s consumed,” he stated. He also added that it wouldn’t take long until cannabis companies begin acquiring alcohol companies. As the new chief executive officer (CEO) of Canadian medical cannabis company Sundial Growers, Kuenzlen wants to build the “Absolut Vodka or Coca-Cola equivalent of cannabis” in his new venture.
However, rather than viewing cannabis as a threat, analysts say alcohol companies should see the situation as an advantage. Kuenzlen affirmed this, saying the approach of Constellation Brands (the makers of Corona beers, Svedka vodka, and Robert Mondavi wines) is an interestingly good one. “They made a seed investment (in Canopy Growth) to learn more about cannabis and figure out where there will be synergies,” he said. “There’s no doubt there will be synergies between cannabis and alcohol businesses.”
Alcohol companies are now looking at the cannabis industry in a partnership perspective, whether it’s partial ownership or something else like innovation alliances between pharma and nutraceuticals [pharmaceutical-grade nutrients, regulated by the Food and Drug Administration (FDA) as either food additives or dietary supplements].
“It’s probably not worth getting in a big debate right now about whether it’s cannibalistic or complementary,” said Rob Sands, chief executive of Constellation. “There’s just not enough information to really say how that’s going to effect [sic] beverage alcohol generally moving forward. What we do know is it’s going to be a big market worldwide,” he explained.
Vivien Azer, a senior analyst at Cowen and Co., says the $200 billion US alcohol business should feel the threat. “While the alcohol beverage category has looked insulated from cannabis thus far—from a revenue perspective—with the legal market still in its infancy we think the risk to alcoholic beverage consumption will become increasingly apparent,” she said.
With many men essentially replacing alcohol use with marijuana, the past decade has shown use of alcohol falling and use of marijuana exceeding that. In her report, she noted beer and whiskey are the alcohol businesses most at risk. “Over the last decade, while we have seen a rise in drinkers who use cannabis, we have also seen declines in cannabis users who drink,” she said.
“It’s probably not worth getting in a big debate right now about whether it’s cannibalistic or complementary,” said Rob Sands, chief executive of Constellation. “What we do know is it’s going to be a big market worldwide,”
“Upon federal legalization, big tobacco could leverage its expertise to explore the legal cannabis market through vapor,” Azer furthered. “Our bull case assumes big tobacco achieves a 20% market share in overall cannabis, which by 2036 would have cannabis adding over 20% to the top line, and nearly doubling tobacco’s underlying growth.”
Obviously, the alcohol-marijuana connection is something to be leveraged by business owners. If the time comes that cannabis does out-sell alcohol (or completely take over like it did in Aspen), you should expect stocks related to cannabis to reach record highs as well.
Top 10 Cannabis Companies
As of January 2018, the following countries have legalized the use of marijuana to some extent: USA, The Netherlands, Spain, North Korea, Uruguay, Peru, Jamaica, Canada, Portugal, Australia, Switzerland, Argentina, Cambodia, Costa Rica, Czech Republic, Ecuador, Italy, Estonia, Mexico, Israel, and Germany.
With the marijuana market growing exponentially, here are the top 10 companies:
- Scotts Miracle-Gro (Marysville, Ohio, USA)
- Canopy Growth (Smiths Falls, Ontario, Canada)
- GW Pharmaceuticals (Cambridge, United Kingdom)
- Aurora Cannabis (Vancouver, British Columbia, Canada)
- Aphria (Ontario, Canada)
- MedReleaf (Markham, Ontario, Canada)
- INSYS Therapeutics (Chandler, Arizona, USA)
- Sprott (Toronto, Canada)
- CanniMed Therapeutics (Saskatoon, Saskatchewan, Canada)
- Horizons Marijuana Life Sciences Index ETF (Toronto, Canada)
With seven of the top 10 companies hailing from Canada, it’s surprising how far its medical use has gone in the country. First banned in 1923, it’s now allowed for regular medical use as of 2001. The remaining three companies hail from the US and the UK. The US has 29 states with legal use in some form.
It should be noted that because of GW Pharma’s stocks skyrocketing, experts believe the UK could become the world’s biggest prescription cannabis grower and processor soon. Ironically, in the UK anybody possessing cannabis can be sent to jail for up to five years, along with a fine.
The many prescriptive benefits of cannabis were used by proponents as the reason to legalize marijuana use in the US. It’s reasonable to conclude they’ll be used to justify legalization in the UK as well. The medical uses of cannabis range from treatment of mild anxiety disorders to lessening end-stage cancer pain. Here are a couple of books that chronicle the many uses of cannabis. Click either image below to purchase them on Amazon.
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