Can the alcohol giant help the cannabis industry?

It's been a difficult few months for the cannabis industry. Could the alcohol industry help in another difficult period?

The cannabis industry was worth $33 billion in 2023 and is full of mom-and-pop businesses. With the majority of the population having access to legal marijuana, consumer use is increasing, states are filling their coffers, and more patients are using medical marijuana. It's so widespread that even the staid AARP has acknowledged that a significant portion of boomers use it for medical reasons. But despite the growth, federal restrictions are crippling the industry. The industry needs government help. Can the alcohol industry help the cannabis industry? Alcohol is available in most grocery stores, restaurants, hotels, resorts, airplanes and homes. They understand consumers and sell $260 billion worth of alcohol per year, not counting the second tier market. The alcohol industry spends over $20 million annually on lobbying, down from the over $220 million spent on pharmaceuticals, but an impressive sum. But Congress, the DEA and members of the administration are not fans… and help is needed.

Alcohol invests more than $14 billion in the industry and has a voice in Congress. Cannabis is more of a brand and sales extension for alcohol than a competitor. A major change in the beverage industry came with the introduction of purified water by PepsiCo (Aquafina) in 1994 and Coca-Cola (Dasani) in 1999. The two soda giants see it as a way to reach more consumers and revenue and are now the owners of the two largest bottled water companies in North America. With a stake in the outcome, major liquor companies could push Congress to become more open to cannabis. This would give both industries access to more customers and more revenue for everyone, including government entities.

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“While alcohol and cannabis can play in the same sandbox, we are more often seeing consumers using cannabis as a substitute for more harmful substances such as alcohol. “We are experiencing a paradigm shift with cannabis – entertainment and relaxation without the physical and social costs of alcohol,” shares Jesse Redmond, managing director at Water Tower Research, LLC.

Like bottled water, alcohol could open markets to an additional group of consumers. They have the expertise and relationships that most cannabis companies lack. Hemp drinks are already available in major retailers such as Total Wine (Texas) and convenience stores.

The new administration has few cannabis advocates with the Speaker of the House and the President of the Senate, and the Cabinet does not appear to be focused on marijuana legalization at all. But the majority of members are fans of alcohol and this can be used to the advantage of marijuana.

“With the future of cannabis reform uncertain, some are looking to other industries to support fundamental changes to the laws and regulations surrounding cannabis. One of the two seemingly most frequently cited industries, the alcohol industry, could be a key player in the fight for change. While many have pitted the alcohol and cannabis industries against each other, arguing that legal and accessible cannabis will reduce alcohol consumption, it is clear that cannabis will never truly replace alcohol. The capital and lobbying power of alcohol industry players cannot be underestimated, and their involvement could have significant implications for the future of cannabis reform. The question remains: What interest does the alcohol industry have in the expanding cannabis industry? Well, the answer to that question probably varies depending on the player. Some alcohol makers, like Tilray Brands, are all-in on cannabis and would likely benefit from relaxing cannabis laws. There are also several alcohol companies that entered and have since exited the cannabis industry, whose future involvement remains to be seen. It is also possible that certain alcohol companies may want to influence how cannabis reform is implemented – certain more limited reforms or a focus on approving certain types of products could be a form of protection against the widespread legalization and accessibility of cannabis. The alcohol industry could still be a major player in the future of cannabis, and the cannabis industry would benefit greatly from being on their side.” states Andrew Cooper, Chair of the Cannabis & Psychedelics Practice Group at Falcon Rappaport & Berkman LLP.

Both would benefit from product development and the production and marketing of cannabis-infused beverages and edibles. From a marketing perspective, it also makes sense to consider consumer reach. Additionally, research shows that people often combine cannabis with alcohol rather than replacing one with the other. The proportion of consumers combining cannabis with spirits or spirits increased from 12% in 2018 to 22% in 2022. The next 14 months will shape the path of the cannabis industry for years to come. Let's see if the big alcohol companies play a role.