Alcohol Sales Drop 15% In States With Legal Marijuana: Study

Jan 23, 2018

As the dust begins to settle, it’s becoming clearer and clearer that marijuana sales directly impact alcohol sales in states where marijuana is legal. And not just a little. This is a big deal. And it’s likely to get bigger.

A 10-year-long joint study undertaken by two US universities and one in Lima, Peru has shown an overall 15% reduction in monthly wine sales in US counties where marijuana has been legalized. When the results are broken up by alcohol type, wine showed an average of 16.2% decrease in sales, while beer dropped 13.8% after marijuana was legalized.

To come up with real numbers, rather than undertake a poll, researchers made use of Nielsen Retail Scanner alcohol sales data gathered between 2006-2015 from 90 alcohol chain stores in all 50 states. Sales booked before and after legalization were compared.

The results of the study, which also take into account age, race, and income data, show that marijuana and alcohol have a widely overlapping consumer base.

According to a report in Forbes,  in a recent Webinar concerning the state of the wine industry, host Rob McMillan, Silicon Valley Bank Wine Division president, stated that he and the two other panelists see no evidence that legalized marijuana will take away significant market share from wine sales, adding that beer is more likely than wine to take a hit from marijuana sales (because wine goes better with meals than marijuana, he reasoned).

This isn’t the first study to show a link between legalized marijuana and a corresponding drop in alcohol sales.

A 2017 National Survey on Drug Use found that only had alcohol sales taken a hit, cannabis use among youth had hit a 15-year low.

Another study which took place in 2016 showed beer sales falling in states with recreational marijuana programs. This study performed, by the New York-based research firm Cowen & Company found sales of larger domestic producers had "collectively underperformed" over the past two years in Colorado, Oregon, and Washington.

The report stated, "With all three of these states now having fully implemented a [marijuana] retail infrastructure, the underperformance of beer in these markets has worsened over the course of 2016." Data published that same year was used to predict that sales of marijuana products are on pace to overtake sales of alcohol.

Further back, a 2014 scientific review published in the journal Alcohol and Alcoholism which looked at whether or not alcohol user were substituting marijuana for booze concluded, "While more research and improved study designs are needed to better identify the extent and impact of cannabis substitution on those affected by AUD (alcohol use disorders), cannabis does appear to be a potential substitute for alcohol."

This latest study, undertaken by Michele Baggio, University of Connecticut, Storrs; Alberto Chong, Georgia State University, Atlanta and Universidad del Pacifico, Lima; and Sungoh Kwon, University of Connecticut, Storrs, tested substitutability, creating a parameter which essentially set alcohol sales the same in all states before medical marijuana laws were enacted. (This is why, in the chart below, the pre-MML data points cluster around zero.) The parameter was tracked over time. Using this parameter, data showed that sales of alcohol were, on average, 15% lower in states where marijuana was legalized.

The domestic brews category which includes mass brewers such as Anheuser Busch, Miller, and Coors have apparently seen the largest drop, with “light” beers leading the way. Sales volume of light beers such as Coors Light and Bud Light dipped by 4.4%, while Budweiser and Coors—dipped by 2.4%. According to the data, Denver’s beer sales plummeted by 6.4% since legalization. And, although craft beer sales continue to grow, they, too, are being affected by marijuana sales.

“We find that marijuana and alcohol are strong substitutes.” The authors write. “Counties located in MML states reduced monthly alcohol sales by 15 percent, which is a consistent finding across several empirical specifications. When disaggregating by beer and wine we find that legalization of medical marijuana had a negative effect on corresponding sales by as much as 13.8 and 16.2 percent, respectively.”

The study also looked at sales of alcohol in counties bordering legal counties and found the similar results across the board.

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