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Beer Sales are Down in US States Where Recreational Marijuana is Legal

Beer Sales are Down in US States Where Recreational Marijuana is Legal

$BUD, $TAP

Year to date, beer volumes have fallen roughly 2% in Colorado, Oregon, and Washington, which have all legalized recreational marijuana, according to Neilsen data cited in a recent report from Cowen & Co.

At the same time, marijuana consumption has grown in those states.

The data indicates that many beer drinkers are swapping their 6-packs for marijuana, and that has major implications for the beer industry, especially for makers of cheaper beers like Anheuser-Busch (NYSE:BUD) and Molson Coors Brewing Company (NYSE:TAP).

“Mainstream beer” including Bud Light, Coors Light, Miller Lite, is “under siege” from legal marijuana, with volumes down 4.4% in the states studied, according to Cowen’s analysts.

Craft beer sales growth is slowing in those states, but not to the same degree.

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The trends show significant overlap between buyers of cheaper beers and users of recreational marijuana.

“The pressure we are seeing on lower-priced beers is consistent with the trends we are seeing in cannabis use by income group nationally,” the analysts wrote.

“Indeed, while cannabis incidence has been on the rise nationally, over the last 10 years (through 2014, the most recently available) we have seen the biggest increases among lower-income households, where cannabis use is also highest.”

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As additional states consider legalizing marijuana, beer companies will be at an even greater risk.

“With Anheuser-Busch and Molson Coors Brewing Company controlling roughly 70% of the overall beer category in the US, there is clear risk that growing cannabis use will weigh on their businesses,” analysts wrote.