Hop Law

Can the Beer Industry and the Marijuana Industry Co-Exist?

A number of alcoholic beverage industry members have taken a strong stance against the legalization of marijuana.  A beer distributor political action committee (PAC), for example, gave $25,000 to a group in Massachusetts that was opposing the ballot measure to legalize marijuana.  Some larger breweries, including Boston Beer Company (producer of Sam Adams beers) have stated in securities documents filed with the Securities and Exchange Commission (SEC) that laws allowing for the sale of marijuana may “adversely impact the demand” for alcoholic beverages.

Intuitively, there is an argument to be made for the proposition that legalizing marijuana will result in declining beer and liquor sales.  A person that drinks beer in order to get a “buzz,” may seek the “buzz” elsewhere if marijuana were legal.  There is, however, no empirical data to support this.

Anecdotally, in fact, beer sales appear to have increased in those states that have legalized marijuana.

• In 2015, Washington State’s tax revenue from marijuana was $64.6 million, but beer tax revenue actually increased to $30.8 million without an increase in the tax rate for beer.
• In Colorado, state tax revenue from beer increased by 2.7 percent in 2014, and 1.6 percent in 2015, despite the state’s legalization of marijuana in 2014.

This doesn’t necessarily tell the full story though.  In Colorado, for example, liquor license fees and liquor taxes have declined overall in May of each year – it generated $4,327,036 in May 2013, $4,172,417 in May 2014, and $3,934,207 in May 2015.  Thus, liquor producers and wholesalers trying to combat marijuana legalization may not be entirely off-base.  That said, liquor license fees and liquor taxes have increased overall in August of each year – it generated $4,031,776 in August 2014, $4,105,785 in August 2015, and $4,527,961 in August 2016.

So what does the data tell us?  Not a whole lot.  There is no clear evidence to support some beer industry members’ arguments that consumers will substitute marijuana for beer, but there is also no clear evidence that marijuana legalization will have no impact on the alcohol industry.  Part of the problem is that marijuana legalization is still a recent trend and therefore, there just is not enough data available.

Craft brewers, wineries, and distilleries are not likely to spend much time or money addressing the politics of marijuana legalization, but it is something they need to keep an eye on.  Some craft brewers have even gone so far to try to directly engage the marijuana industry.  Dads and Dudes Breweria, for example, has created Secret Stash IPA, a beer infused with cannabinoids (CBDs) (although not with THC, the psychoactive component in marijuana).  There are also a number of beer and marijuana pairing guides that craft brewers can use to tie their products to various strains of marijuana – perhaps a rising marijuana tide could float all boats.  This type of marketing, however, raises legal concerns about what type of advertising involving marijuana is permissible, as well as ethical concerns about promoting the consumption of marijuana and beer simultaneously.

Despite the uncertainty that comes with a lack of sufficient data, the craft alcoholic beverage and beer industry and legal marijuana industry may not need to be at odds at all.  It is not new news that locally crafted products, be they beer, food, spirits, clothing, or marijuana (where legal), are in high demand.  The type of consumer that enjoys knowing the brewer and the sources and types of the grains and hops that go into their beer, may also be just as interested in learning from their local dispensary about the different strains offered, the amount of THC in each, the type of high to be expected, and the background of the farmer who grew the plants.  These producers could in fact work together to promote and support the consumption of locally crafted high quality products.