CANADA LEGALIZES CANNABIS - WHAT THE DRINKS INDUSTRY NEED TO KNOW ABOUT 'CANADA-BIS'
This week, Canada legalizes Cannabis and stores all over the country will soon open their doors to sales of a multi-billion dollar product. And what’s more, the list of products for marketers and brands to profit from is seemingly endless.
Cannabis infused gummies, beef jerky, brownies (ok we’ve known about those for a while) even cannabis infused lip balm or perfume.
Yes, since California’s Prop. 64 passed (the Adult Use of Marijuana Act “AUMA”) on November 8th 2016, dollar signs started appearing in some very hazy bloodshot eyes.
With the “green tide” washing over Canadian shores today, what does this mean for marketers and drinks marketers especially?
Let’s take a look…
WHERE ELSE IS CANNABIS LEGAL?
While Canada legalizes cannabis just today, medical marijuana has been legal in California for over the last two decades. This full legalization in the state is the checkered flag for the now rapidly growing cannabis industry.
Marijuana is legal to some extent in 30 states in the US and is also available for recreational use in Uruguay too.
It’s also being decriminalized and is widely available in places like the Netherlands and Spain. Counties like Lebanon are currently legalizing marijuana farming in an effort to boost their economy.
“Canada fully legalizing marijuana for adult use is a historic moment that the whole world should celebrate”
Daniel Yi, a spokesman for MedMen – California-based marijuana dispensary
HOW MUCH IS THE INDUSTRY WORTH?
When weed became legalised (somewhat) in the States, sales erupted. There’s a joke here about sales being high but let’s not go there.
Apparently the industry took $16 billion in sales in 2017. For reference, total alcoholic beverage sales in the US amounted to approximately $223.2 billion in 2016.
So in it’s first year, and despite being not made federally legal, compared to the total alcoholic beverage sales (that’s beer, wine, cocktails, everything) weed sales collected are 7.1% of alcohol sales in the US.
In terms of how it’s growing, a report titled “US Legal Cannabis: Driving $40 Billion Economic Output” by Arcview Market Research, in partnership with BDS Analytics states:
“The total economic output from legal cannabis will grow 150% from $16 billion in 2017 to $40 billion by 2021.”
Now us folks in drinks marketing are quick to jump on a hot trend, especially when numbers like the above are in play.
Even drinks giants Coke said in a statement last month that it is “closely watching” the growth of CBD, as an ingredient in what it called “functional wellness beverages”.
Constellation Brands, the maker of Corona beer, Svedka vodka and Casa Noble tequila, announced last month that it is investing an additional $4 billion in the Canadian cannabis company Canopy Growth.
Lagunitas was the first brewery to launch a cannabis infused drink earlier this year, using THC (the bit which causes the high) not just CBD (that part which kind of just chills you out).
Whilst technically a beer, labelled as a ‘cannabis infused hoppy sparkling water’ it’s clear the company know’s what’s up. I’ll be going into further detail on this particular venture in another article coming out soon…
As for categories besides beer, there’s Cannawine now on the market – running under the promises of no hangovers, something sure to win over a portion of the alcohol market.
CANADA LEGALIZES CANNABIS: SO IS IT NORMAL NOW?
In 1969 a Gallop poll showed 12% of Americans favored legalisation, rising to 64% now in 2018. To quote Jon Oliver:
“Marijuana is just something we’ve all gradually decided is OK, like Mark Wahlberg as a serious actor”
Staunch Republicans and even Christian groups from both sides of politics in the US are slowly coming over to the green side, now that the law deems it ok. This rapid normalisation is something alcohol marketers need to be taking notes on.
Making it easy for consumer to find information coupled with this “open door” feeling, with products entering the market featuring clear and understandable branding is to be applauded. To any beer brand waxing lyrical on which yeast strains are in fashion currently, while at the same time wondering why new audiences are staring blankly at them. Look below…
Dosist, one of Fast Company’s most innovative companies of 2018, developed their range of pens for the newcomer to the market.
The briefest of glances at their product range makes it clear what each one does, how it can help and what you should chose.
If this isn’t a great example of branding which educates and on-boards new consumers then I don’t know what is!
HOW WILL CANNABIS IMPACT ALCOHOL INDUSTRY SALES?
This is the main question. One article claims that of its ninety grocery, convenience, drug, and mass distribution stores surveyed alcohol sales have dropped almost 15% in states with medical marijuana laws.
The study concludes that marijuana and alcohol are in fact strong substitutes for each other. In that, from a marketing sense both products share a similar audience.
If this is to be believed (and I have several holes to pick on that massively sweeping statement), then of course by governments introducing legal marijuana and companies releasing marijuana products, we will see an impact on alcohol sales where it once reigned supreme.
A wider, even more fascinating question is whether legalised weed products will overshadow or “canna-balize” that’s right, alcohol altogether.
According to the Cannabiz Consumer Group (C2G), 27% of 40,000 people surveyed last year said that cannabis already does replace beer in their lives or could if the former were legalized.
Rob McMillan, Silicon Valley Bank Wine Division president was discussing this very subject with two wine industry guests.
The group stated they see no evidence for this and do not believe legalized marijuana will be a major substitute for wine consumption. McMillan pointed out that beer is more likely than wine to suffer sales reductions. His reasoning, “wine compliments a meal, marijuana doesn’t”.
Seems like Rob has never tasted the pairing of a family sized bag of Doritos with a smoke if he truly believes marijuana doesn’t work with food!
But he is onto something. We need to look at the occasion here.
Fine dining may not be under threat from switching out your merlot with some Mango Kush, and I doubt family 4th of July BBQs or Father’s Day pub sessions will evolve to a passing your Dad a vape pen over crushing a few cold lagers. But the shifts in consumer perceptions outlined above are coming rapidly, so don’t feel like it’s never going to happen.
IN MY HONEST OPINION
This category will continue to boom, and this definitely isn’t all just hype. There are learnings to be had already and changes in consumer culture that’ll potentially leave your brand in the dust if you’re not paying attention.
Users of these products fall into distinct camps. Social – that’s both long terms users and new users – and medical. Both areas are full of potential, with strong consumer needs.
By understanding these needs, brands can help minimise consumers moving elsewhere. My strongest feeling is that most marketers are misunderstanding the needs of the consumer here. If you still think of weed as something you smoked at Uni (college) pre, during and post party then you’re in need of a crash course.
Some consumers will leave the market if they will find that marijuana answers their needs better than alcohol – that’s to be expected. But by acknowledging these needs and aiming to answer them in some part, you can help safeguard your brand.
Consumers are always changing and evolving and laws like these will effect the wider marketplace beyond drinks, guaranteed. Even so much so that we could be seeing products on UK shores very soon. What do you think?
Hope you enjoyed the article. For more good reads, interviews and news from the wonderful world of alcohol, you can sign up to our monthly ‘Top 5 Alcohol Marketing Stories‘ newsletter or follow YesMore Agency on Linkedin.
If you want to get back to the main site just click this way.