Dive Brief:
-
Former AB InBev marketing executive Chris Burggraeve has been investing in cannabis-related businesses since leaving the beer giant five years ago, according to Bloomberg. He is on the advisory board of GreenRush Group, a San Francisco-based startup that wants to be "the Amazon of weed." He also co-founded Toast, a manufacturer of dosed, pre-rolled joints.
-
Burggraeve, a Belgian who has a master's degree in economics, said he thinks cannabis could play the same disruptive role for large beer companies as small, independent craft brewers have been doing for the past 20 years.
-
"The same way that craft beer started and, for the longest time, was ignored and then exploded, there’s no reason why the same thing wouldn’t happen in this space," Burggraeve told Bloomberg. "There will be part supplementing and part complementing. The jury is out on how and where that will happen."
Dive Insight:
Americans' views on marijuana legalization have shifted from just 12% approval in 1969 to a record high of 64% today, according to a Gallup poll that came out last month. The firm noted that while pot is still illegal at the federal level, eight states and the District of Columbia have fully legalized marijuana, and more than one in five Americans live in a state where they can legally use it.
Because of the legalization trend, cannabis is big business today. In a research report published last year, Cowen & Co. said industry is worth about $6 billion in annual sales that are projected to reach $50 billion by 2026.
Vivien Azer, a Cowen & Co. managing director and senior research analyst for the beverage, tobacco and cannabis sectors, discussed the relationship between marijuana and beer in an April video presentation. She said a decline in per-capita beer consumption is being seen in those states where recreational marijuana has been legalized.
If additional states legalize recreational pot, projections are that beer sales could be hit even harder. A June report from Cannabiz Consumer Group estimated the beer industry stands to lose more than $2 billion in retail sales to legal marijuana. Twenty-seven percent of beer drinkers have already substituted cannabis for beer, or would substitute retail beer purchases with cannabis in the future if it were legalized, the report noted, adding that sales of wine and spirits also may decline.
Some food and beverage companies are getting into the game by buying into marijuana-related businesses. Constellation Brands, which makes Corona and Modelo Especial, announced last month that it was acquiring a 9.9% minority stake in Canopy Growth Corporation, a Canadian marijuana company. The $191-million deal will allow the alcoholic beverage giant and Canopy to develop cannabis-infused beverages and "stay ahead of evolving consumer trends," Constellation said in a statement.
Constellation said it plans to develop cannabis-based beverages that don't contain alcohol, joining the ranks of marijuana-infused soda, coffee and fruit drinks that are sold in U.S. states where the substance is legal.
Bruce Linton, Canopy CEO, told The Wall Street Journal he hopes the deal will be a turning point for the growing marijuana market and a sign to investors that “a cannabis company that fully complies within legal jurisdictions would be the right place to invest." The marijuana market in the U.S. next year is projected at $10.2 billion, the paper said, citing data from research firm Euromonitor International.
Constellation isn't the only alcoholic beverage player to dip a toe into this market. In September, Lagunitas Brewing launched an IPA made with marijuana terpenes, the aromatic compounds of fragrant oils from the cannabis plant. However, the beer, which is only available for a limited time in California, doesn't contain tetrahydrocannabinol, the active ingredient responsible for causing a euphoric high.
As the taboo surrounding marijuana continues to dissipate, the food and beverage industry can expect to see disruption across a number of categories. But if the beer sector wants to withstand consumer fascination with marijuana product innovations, it should look for opportunities to roll out premium product innovations of its own, such as more craft hard sodas or gluten-free varieties. Or, they could do what Constellation has and strike a partnership.
The disruption factor would be large if federal marijuana deregulation occurs, but that does not appear to be imminent. Meanwhile, more states are likely to join the deregulation push, leaving the beleaguered beer industry to face the impact.