How will cannabis legalisation affect the alcohol industry?

In light of the recent changes to marijuana legislation in the US, there are grounds to believe cannabis might become a serious threat to the alcohol industry. This scenario is heightened by the growing numbers of young people shunning booze.

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A recent NHS study revealed the proportion of 16-24-year-olds in the UK who state they never drink alcohol rose from 18 per cent in 2005 to a significant 29 per cent by 2018. According to LSN, as alcohol loses favour among consumers, cannabis-infused drinks offer an alternative for those still seeking some form of intoxication.

In the US, many drinks brands are experimenting with tetrahydrocannabinol (the principle psychoactive compound in marijuana) to offer intoxication without a hangover. Others are turning to cannabidiol (CBD), a non-psychoactive cannabinoid found in the cannabis plant, to offer mellow alternatives.

AB InBev is among the major alcoholic drinks firms jumping in to develop new products. It created the Fluent Beverage Company through a joint-venture with cannabis business Tilray. Meanwhile, California Dreamin’, a cannabis soda laced with 10mg of THC, is sweeping the States, offering consumers a light, fun buzz without the aftereffects of alcohol.

According to Sid Patel, CEO of Beverage Trade Network, the rise in popularity of alternative forms of intoxication is “real competition, not only to spirits but to the entire alcohol category”.

The same may occur in the UK. The legalisation of medical marijuana in 2018 led many to speculate the government would allow its recreational use. Consumers are increasingly fighting shy of alcohol, aware of the potential detriment to health. A quarter of millennials were teetotal in 2018, according to the ONS.

If the UK government makes marijuana legal and alcohol continues to lose popularity, the question must be asked whether this generational shift represents an existential threat to the powerful alcoholic drinks manufacturers.