Will Cannabis Displace Alcohol?

Though there has been a lot of discussion on whether the marijuana industry will morph from cottage industries into giant conglomerates, there has been little discussion regarding the impact big marijuana will have on other industries. We’ve said before that we think the days of “big marijuana” are far off, but a recent article poses a different question about the threat of big marijuana: “Should the Liquor Industry Be Worried About Legal Cannabis?”

According to one major player, Jack Daniel’s, the answer is yes. Luke Jacobi of Benzinga reports that Brown-Forman’s annual report (Jack Daniel’s parent company), cited increasing marijuana legalization as potentially luring away market share, noting that, “Consumer preferences and purchases may shift due to a host of factors, many of which are difficult to predict … including … the potential legalization of marijuana use on a more widespread basis within the United States.” In other words, Jack Daniel’s is acknowledging to its shareholders the possibility of a “substitution effect” – the notion that consumers will give up one legal vice (whiskey) for a newly legal one (pot).

This substitution effect has not been thoroughly studied, but at least one survey suggests that as many as 75% of cannabis users imbibe marijuana instead of alcohol or harder drugs. If that is true, Jack Daniel’s may have a good reason to sweat. Still, as Jacobi correctly points out, “synergies” between alcohol and marijuana may exist, creating new and cross-over opportunities for both industries. For what it is worth, our lawyers are already doing cannabis legal work for a number of clients that own micro-breweries, micro-distilleries, and wineries and are seeking to diversify. It would not surprise us a bit if alcohol brands get ported over to do double duty as marijuana brands when cannabis becomes legal nationwide (if not even before).