Worcester Business Journal

10 Worcester Business Journal | October 29, 2018 | wbjournal.com The beer industry is confident recreational cannabis won't chip away at its market VICE COMPETITION P retty soon, two of the Massa- chusetts most sinful indus- tries will compete for the same kind of customers. With recreational mari- juana already legal in the state and set to begin retail sales this fall, breweries are optimistic, armed with data showing the weed and beer markets complement each other. However, competing data shows there is a limit to how much legal depressants people will buy, with pot eating into alcohol sales. Keith Sullivan of Hudson's Medusa Brewing Co. said he has seen no decline in brewery success or any kind of customer shi since recreational marijuana first became legal in 2016. "It almost seems as though the two help one another while still catering to different audiences," said Sullivan, in an email to WBJ. "I anticipate that this will also be the case here in Massachusetts." However, in Massachusetts, legal adult-use cannabis has only been available if people grew it themselves at BY ZACHARY COMEAU Worcester Business Journal Staff Writer home. With the state Cannabis Control Commission having now approved licenses to retailers like Cultivate in Leicester, marijuana products will soon become more widely available, as sales are expected to begin by November. Positive data from brewers Bart Watson, chief economist of the national trade group Brewers Associa- tion, said little data suggests any kind of a relationship between the weed and alco- hol markets, but beer seems to be doing well in states where cannabis is legal. States allowing adult-use cannabis are reported a 1.1-percent decline in beer shipments per capita through July. In states with just medical marijuana, that decline was 1.8 percent. In states with no legal marijuana of any kind, that decline in shipments was 2.3 percent. For now, brewers are focused on con- sumer preferences, demographics and competing with other brewers, he said. "I wouldn't say this 100 percent means that cannabis isn't having an effect on beer, but it's pretty hard to construct an argument about how it's having a purely negative effect when the beer trends are the best in recreationally legal states," Watson said. But maybe it's not so positive Data from New York City financial services firm Cowen Group suggests lo- cal cra brewers might want to get ready to take a hit from the cannabis market. In an April 2017 report, Cowen said alcohol consumption could be under pressure for at least the next decade, partly due to cannabis, as per capita alcohol tax growth dipped in Colorado, Oregon and Washington in the years following the legalization of weed. e figures coincide with consumer prefer- ences in those states. In Colorado, where cannabis sales began in January 2014, cannabis inci- dence among consumers aged 18 to 25 increased about 70 percent in 2014-2015 compared to 2003-2004. Alcohol incidence over that same time period fell from an all-time high of about 71 percent in 2007-2008 to about 68 percent in 2014-2015. In another study from this April, Cowen Group researchers found states with adult-use cannabis binge drink 5 percent less frequently per month than medical cannabis states and 13 percent less frequently than non-cannabis states. Cannabis could be a "substitute social lubricant for alcohol, and will likely continue to present an incremental headwind to alcohol sales, in particular beer," the 2018 Cowen report said. Beer consumption has been falling for years while cannabis use continues to rise, according to data Cowen pulled from the National Survey on Drug Use and Health and the National Institute on Alcohol Abuse and Alcoholism. According to the survey, almost 45 percent of respondents said they consumed cannabis in 2015, which is up from below 30 percent in 1979. On a per-capita basis, beer consump- tion has fallen from about 1.35 barrels to about 1.1 barrels. On the ground, in Colorado In Colorado, with legal recreational pot since 2012, beer industry experts say consumers choose both vices. Since legalization in Colorado, the beer industry has continued to thrive, said Andres Gil-Zaldana, executive director of the Colorado Brewers Guild. Sure, the business of pot has nearly Source: Cowen Group Per capita alcohol excise Per capita alcohol excise State tax growth - Pre-legal tax growth - Post-legal Data collected by New York City investment researcher Cowen Group suggested alcohol sales were less robust after states legalized recreational marijuana Colorado 1.9% (2011-2013) 1.0% (2014-2016) Washington 3.0% (2011-2013) 1.3% (2014-2016) Oregon 4.4% (2011-2014) -0.6% (2015) More weed, less beer Beer from Worcester's Wormtown Brewery and marijuana for sale at Curaleaf Keith Sullivan, co- owner of Medusa Brewing Co.

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