Beer Man

Craft-Beer Trade Group Finally Addresses the Possible Effect of Legalized Marijuana

Pot sales didn't hurt the Great American Beer Festival last year.
Pot sales didn't hurt the Great American Beer Festival last year. Brandon Marshall
Like a stressed-out dad who ignores the fact that his kids smell of pot whenever they come home from school, the Brewers Association has been dodging the issue of marijuana for a while. Although the Boulder-based organization, which represents the craft-beer industry nationwide, is located in the first state to allow the legal sale of recreational marijuana, it hadn’t formally addressed the obvious connections between the two industries, or whether legalization could be beneficial or harmful to brewers.

While the topic still appears to make the group uncomfortable, Brewers Association economist Bart Watson recently offered an online analysis called "Marijuana and the Beer Industry." The piece was a reaction to the growing concern among brewers big and small that marijuana legalization is hurting sales, particularly in Colorado, Washington and Oregon, where pot is legal. With California, Nevada, Maine and Massachusetts also legalizing recreational marijuana in November,  the issue was particularly timely.

Before the November 8 vote, Boston Beer Company, the publicly traded maker of Sam Adams, warned shareholders that legalization could “adversely impact the demand” for beer. Meanwhile, two Massachusetts alcohol-distribution organizations donated a combined $75,000 to the anti-legalization effort in that state.

“Generally, we see our business as the beer business and hadn’t seen the need to weigh in on marijuana,” Watson tells Westword. “This seemed like the appropriate time to add our voice.” So he dug into the issue and what statistics were available.

Watson starts his analysis with this:  “Although I don’t purport to know what the long-term effects of marijuana legalization will be, I can say that I see no evidence that legalization has had an effect on beer sales in the short term.” Then he lays out the reasons why.

For starters, Watson takes issue with the data that other studies have used, in particular a November report by research-analysis firm Cowen & Associates, which made national headlines after appearing on Brewbound. In the report, researcher Vivien Azer wrote that beer sales in Colorado, Washington and Oregon have “underperformed” in the past two years, calling it a trend that “increased notably.”

She pointed out that retail pot sales were legal in all three states and said that the decline in beer sales was “perhaps not surprising, given that U.S. government data for the states of CO, WA and OR all show consistent growth in cannabis incidence among 18-25 year olds.” The big brewers — Anheuser-Busch InBev and MillerCoors — were particularly vulnerable, she added.

But Watson believes the analysis was overly simplistic and missed several variables. In Denver, for instance, the sixty or so taprooms are selling a lot of beer directly to customers — and that wasn't taken into account in the national numbers. In 2015, on-premise sales “were equal to 3.3 percent of total shipments in Colorado, the highest percentage in the nation," he writes. "That doesn’t even count to-go sales and other ways brewers are selling beer that isn’t being measured.”

Furthermore, Watson thinks there are too many variables involved to connect marijuana legalization directly to declining beers sales. “The first would be to look at population growth, since per capita consumption is going to tell us more about long-term trends than absolute consumption in any given year," he writes. "Next would be to look at other factors that affect the beer industry, such as unemployment, other parts of beverage alcohol, etc. Many of the analyses I’ve seen ignore these other variables and simply look at sales in a place before and after a change in marijuana regulation. Although that may tell part of the story, doing these types of comparisons without controls makes it very easy to confuse noise for signals."

And finally, Watson says he sees no evidence that consumers are replacing booze with pot or that they have less money to spend on beer because they are spending it on marijuana.

"Part of my point in writing this was underlining how many things affect beer sales. It’s more complicated than just drawing a line and saying, ‘If sales go down, it must be because of marijuana,’” he tells Westword. “I don’t want to say that marijuana won’t have an effect on beer sales in the long term. It could. Or it could not. But there are a lot of moving pieces.”

At least seven more states are considering marijuana legalization in 2017.
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Jonathan Shikes is a Denver native who writes about business and beer for Westword.
Contact: Jonathan Shikes