Deschutes CEO Suggests Legal Marijuana Played a Role in Beer Industry Slowdown

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Deschutes CEO Suggests Legal Marijuana Played a Role in Beer Industry Slowdown

Ever since states in the U.S. began to legalize recreational marijuana, there have been voices in the alcohol industry concerned over how access to the drug on a recreational level might ultimately impact consumption of their products. According to the latest research? They may have good reason to be concerned.

According to the results of a new 10-year-long joint study between two U.S. universities and one in Lima, Peru, there has been an average 15 percent overall reduction in “monthly wine sales” in U.S. counties where recreational marijuana has been legalized. Beer sales, meanwhile, were down roughly 13.8% in the same counties, according to the same study.

These numbers are a direct comparison between pre-marijuana legalization data, and post-legalization data. Researchers had access to Nielsen Retail Scanner data on alcohol sales between 2006-2015 from 90 alcohol chain stores across all 50 U.S. states. One could argue that alcohol consumption may have decreased nationwide, but the way the study controlled for countries that had specifically introduced recreational pot, before and after, seems to provide strong evidence that access to weed on some level replaces a degree of alcohol consumption. The results of the study also reportedly “take into account age, race and income data.” They confirm similar findings from two previous professional studies on the same topic, all of which have suggested a link between marijuana legalization and a decrease in alcohol sales.

Meanwhile, business owners with significant positions of visibility in the craft beer industry are also starting to weigh in on the question of pot vs. beer. In particular, Deschutes Brewery CEO Michael LaLonde was recently quote in Oregon publication The Bulletin, saying that he also believes pot has played a role in the beer industry’s 2016-2017 slowdown, wherein the growth of the craft segment has decreased substantially.

“I believe cannabis has affected sales,” said LaLonde. “It’s so potent today. Someone might go and have a beer and do some edibles, and the combination of those two things means they don’t consume as much alcohol.”

Like it was for many of the larger craft breweries (Deschutes is #10 in terms of size, according to the Brewers Association), 2017 was a tough year for Deschutes—the first time in 30 years that sales declined rather than grew. That was certainly extra concerning for the brand, given that they recently closed on a $3.2 million parcel of land in Roanoke, Virginia for a planned East Coast expansion. That expansion is still planned to break ground in June of 2019, according to The Bulletin and LaLonde.

“We wanted to go ahead for flexibility so we can monitor the craft beer landscape in Roanoke,” LaLonde said. “We don’t know what the future is for that facility. We have committed to the location.”

2016 was the first full year of business for recreational marijuana in Oregon, and the state has recorded some interesting statistics regarding alcohol (and craft beer) consumption since. Oregon was already an outlier on the beer front, given that a huge 28.8 percent of all beer consumed in Oregon is craft—much higher than the national average of around 13 percent. However, the growth of craft beer in Oregon was only 0.3 percent in 2017, which is lower than the nationwide growth of 3.8 percent, according to analytics firm IRI. That points to a definite slowdown in Oregon state-wide that echoes the national slowdown in craft growth, but also surpasses it.

Of course, it should be obvious that the overall industry slowdown can’t be pinned on a scapegoat so simple and convenient as “legalized pot.” A saturated market with more than 6,000 breweries has led to an intensified competitive landscape for all breweries, as has pressure from the growth of spirits and wine. Legal marijuana is just the latest potential challenge, and one that may affect all sectors of the alcohol industry just as much as it does beer. Suffice to say, breweries are facing a challenging new era. Here’s hoping that most find a way to thrive.

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