A new analysis of market trends in both industries projects that the legal and regulated marijuana sector will add 20 million more customers over the next five years.
Philosophers, educators, and a wise parent or two have been sharing nuggets of wisdom with students, children, and anyone willing to listen about the power and constancy of change in day-to-day life and the longer term for millennia. Without change, there can be no growth. And when humans and other life forms stop changing and adapting, the quick and precipitous fall toward death begins to accelerate rapidly.
A large segment of those philosophers and teachers dedicated to understanding the relentless and remarkable magnitude of change are economists. Among the many areas of interest in which economic analysts and researchers focus their skills and attention is shifting market behaviors.
A classic example is the rapid rise, sustained success, and equally quick collapse of the video rental industry. Throughout the 1980s, 1990s, and early part of the 21st century, video rental behemoths like Blockbuster dominated the weekend entertainment market, particularly for families.
However, archaic delivery systems like VHS tapes and DVDs quickly became obsolete with the advent of breakneck broadband internet speeds and a commitment to creating a global infrastructure to bring the World Wide Web to every home, business, and mobile device.
Practically overnight, Blockbuster Video and others went from multi-billion dollar Wall Street darlings to forgotten relics of the past. Intelligent and flexible competitors like Netflix quickly pivoted from mailing DVDs to customers to creating one of the largest and most successful streaming services in global economic history.
Charles Darwin, the famous and controversial 19th-century naturalist and geologist who wrote the groundbreaking “On the Origin of Species” detailing his Theory of Evolution, once said, “It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that [...] is able to best adapt and adjust to the changing environment in which it finds itself.”
"It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that [...] is able to best adapt and adjust to the changing environment in which it finds itself.”
- Charles Darwin, Naturalist, Geologist and Father of The Theory of Evolution
In other words, those species that can deal with change the best survive over those that do not. Such is the current state of affairs for the alcohol industry in the face of a rapidly expanding legal cannabis market in the United States. Once states like Colorado and Washington took the brave and risky leap of legalizing adult-use cannabis, a countdown began toward the inevitable decline of the massive American alcohol industry.
Now, a new report by a multinational investment bank says that cannabis has become a “formidable competitor” to alcohol, projecting that nearly 20 million more people will regularly consume cannabis over the next five years while the alcohol industry loses a couple million drinkers.
The analysis, prepared and published by the firm TD Cowan, determined that revenue from legal adult-use marijuana sales topped $29 billion in 2023. Likewise, the study projects that cannabis sales should reach $37 billion by 2027 as more and more states begin legalizing the magical flower.
That $29 billion revenue accomplishment represents roughly 11% of the total revenue generated by the alcohol industry in 2023, up from 4% just five years ago. Based on TD Cowan’s projections, the marijuana market sector is also expected to expand by another 7% annually over the next five-year period.
“As such, we believe that over the next five years, the cannabis category will add 18 million past-month consumers, while alcohol will lose 2 million past-month consumers, as consumers increasingly embrace cannabis and temper their alcohol consumption,” the report, titled “Cannabis Beats Booze,” says.
"As such, we believe that over the next five years, the cannabis category will add 18 million past-month consumers, while alcohol will lose 2 million past-month consumers, as consumers increasingly embrace cannabis and temper their alcohol consumption.”
- "Cannabis Beats Booze" Report by Investment Firm TD Cowan
In the short term, marijuana poses no significant threat to the much larger and nationally legal alcohol sector. However, researchers say that alcohol could be “at risk” of a substantial decline over the next five to ten years due to increased substitution among consumers, especially young people. The study also cited another proprietary survey that discovered more than two-thirds of cannabis users have reduced their alcohol consumption.
According to the report, that reduction is most prevalent in states where recreational marijuana consumption and sales are legal for adults over 21. The report said, “In turn, we are seeing divergent revenue growth trends in states where consumers have access to legal cannabis. Alcohol will continue to underperform in legal cannabis states […] which we believe is partially attributable to the impact cannabis has had on alcohol consumption.”
“In turn, we are seeing divergent revenue growth trends in states where consumers have access to legal cannabis. Alcohol will continue to underperform in legal cannabis states […] which we believe is partially attributable to the impact cannabis has had on alcohol consumption.”
- "Cannabis Beats Booze" Report by Investment Firm TD Cowan
It is no great secret why cannabis is having this effect on the alcohol industry. Study after study indicates that Americans consider marijuana much less hazardous than cigarettes, alcohol, and opioids. Moreover, they believe that cannabis is far less addictive than any of those substances, as well as technology.
The COVID-19 pandemic revealed a lot about the collective American psyche, particularly when it concerns issues like alcohol versus cannabis. Marijuana sales went through the roof as individuals tried to cope with the anxiety, trauma, and pain from that overwhelming physical and psychological experience.
While alcohol sales also increased during that time, those numbers have not continued on the same upward trajectory as cannabis and hemp sales (those topped $28.4 billion in 2023) since the end of the lockdowns.
What the study ultimately demonstrates is that an inevitable seed change is on the horizon for cannabis and alcohol. The destructive nature of alcohol juxtaposed with the healing and calming effects of cannabis indicates a glaring shift in American preferences and attitudes. Getting “hammered” and “wasted” on booze is no longer funny, charming, or desirable for a growing majority of consumers, most notably among younger people.
Economists and industry experts will someday look back on this period as when the “horse and buggy” of alcohol was finally and forever supplanted by the “hot rod automobile” known as cannabis.
