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Zillenials Opt for Cannabis Over Alcohol, Posing Challenges for Beverage Industry

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In a notable trend that signals a potential paradigm shift in consumer preferences, Zillennials are increasingly opting for cannabis over alcohol, according to a recent report by a leading multinational investment bank. The report, titled “Cannabis Beats Booze,” projects that nearly 20 million more individuals will regularly consume cannabis over the next five years, while alcohol is expected to lose a couple of million drinkers.

The analysis from TD Cowen reveals that marijuana sales reached $29 billion in 2023, representing approximately 11 percent of the alcohol industry's revenue. This marks a significant increase from four percent just five years ago, with marijuana sales anticipated to grow by seven percent annually over the next five years.

Vivien Azer, the team lead on the analysis, highlighted the report's findings, stating that the growing trend aligns with existing market research indicating cannabis as a formidable competitor to alcohol sales. Azer mentioned that the data projecting an even greater underperformance for alcohol sales in legal marijuana states was “a little surprising.”

The report suggests that over the next five years, the cannabis category is poised to gain 18 million past-month consumers, while alcohol is projected to lose 2 million past-month consumers. This trend reflects a broader shift in consumer behavior as individuals, especially young people, increasingly embrace cannabis while tempering their alcohol consumption.

Although marijuana sales currently constitute only a fraction of the dominant alcohol market, analysts caution that the alcohol industry could be “at risk” of declining due to increased substitution among consumers. The report cites a proprietary survey showing that over two-thirds of cannabis users report reducing alcohol consumption.

The study emphasizes that evolving state marijuana markets, along with potential legislative changes in states that recently legalized cannabis, could result in estimated sales of $37 billion in 2027. The short-term impact on alcohol companies navigating changing consumer trends may be manageable, but the report suggests that certain brands may face competitive challenges in the medium- and long-term.

The analysis indicates that alcohol will continue to underperform in legal cannabis states, with beer sales identified as the most at-risk category. The average number of drinks consumed on a given occasion is lower in cannabis states, partially attributed to the impact of cannabis on alcohol consumption.

While there has been speculation about the alcohol industry's interest in entering the marijuana market, Azer anticipates significant movement only with “legislative or administrative” regulatory changes at the federal level.

TD Cowen's report extends its analysis to Canada, which legalized marijuana at the national level in 2018, finding that Canadian cannabis sales now represent 20 percent of the size of the alcohol market.

The findings align with separate research indicating a substitution effect, with young adults reducing their use of alcohol and cigarettes after cannabis legalization. Public perception surveys also consistently position cannabis as less harmful and addictive than alcohol, cigarettes, and opioids. State-level market data further reinforces the analysis, with cannabis sales outpacing alcohol in various regions across the United States. As the landscape evolves, the beverage industry may face challenges in adapting to changing consumer preferences.

This story was originally published by Marijuana Moment.

 

Lydia K. (Bsc. RN) is a cannabis writer, which, considering where you’re reading this, makes perfect sense. Currently, she is a regular writer for Mace Media. In the past, she has written for MyBud, RX Leaf & Dine Magazine (Canada), CBDShopy (UK) and Cannavalate & Pharmadiol (Australia). She is best known for writing epic news articles and medical pieces. Occasionally, she deviates from news and science and creates humorous articles. And boy doesn't she love that! She equally enjoys ice cream, as should all right-thinking people.