Recreational marijuana use continues to be on the rise nationwide, especially in states that have recently legalized its use. This rise in marijuana usage has also seen a decrease in searching and using alcohol and other drugs, suggesting that sales volume of alcohol will decline as recreational cannabis becomes more widespread.
The Journal of Marketing Science conducted a study looking at anonymized data from 28 million searches and 120 million ad impressions from 2014 to 2017. The “Asymmetric Effects of Recreational Cannabis Legalization” study found that in the states implementing recreational cannabis, there was a 11% reduction in online searches of alcohol and a simultaneous 17% increase search for recreational marijuana. This translates to an future purchase behavior, suggesting that alcohol sales volumes will decrease, as recreational cannabis becomes more prevalent.
Recreational cannabis legalization across the US could generate $22 billion in sales per year. The alcohol industry will likely be immediately negatively impacted as the substance is legalized, which explains much of the investment by the alcohol industry into the cannabis industry.
Canopy Growth, which is listed on the New York Stock Exchange, was already Canada’s largest cannabis producer when Constellation Brands—which owns alcohol brands including Corona, Modelo, and Robert Mondavi wines—poured $4 billion into its coffers last year.
The impact to Big Pharma will be far greater, but the pharmaceutical companies will wait for federal legalization before making direct investments. At the end of 2018, Tilray (a Canadian cannabis giant) announced an agreement with Swiss pharmaceutical company Novartis to facilitate product development, co-branded products, and pharmacist and physician education.