A Blog by Jonathan Low

 

Sep 24, 2016

Are Breweries and Alcohol Distributors Getting Unnecessarily Nervous About Weed Legalization?

The data suggest that in US states where marijuana sales are legal, beer and alcohol are up. Furthermore, since they already control distribution for these leisure time products, why not invest in or help sell the additional products? Or just combine the two...JL
 
Ben Gilbert reports in Slate:

Beer and alcohol distributors are part of the conversation about marijuana legalization. (But) after legalization, governments will regulate the marijuana industry similarly to the beer and alcohol industry, with distributors acting as middle-men between brewers/wholesalers and customers. They've already got the trucks, routes, employees, and established systems. In Colorado, beer and alcohol sales are up alongside marijuana legalization.
Big players in the alcohol business are pushing back on a major marijuana legalization initiative.

Massachusetts is one of five states with a ballot initiative this year that could legalize recreational use of marijuana, and the alcohol industry is leading the charge to stop the initiative. In Massachusetts, a political action committee that represents 16 of the state's beer distributors is among the top three donors to an anti-legalization group, The Intercept's Lee Fang discovered.
Boston Beer Company (the folks behind Sam Adams) are also worried about the potential for Massachusetts cannabis legalization, Fang pointed out. "Certain states are considering or have passed laws and regulations that allow the sale and distribution of marijuana. It is possible that legal marijuana usage could adversely impact the demand for the Company’s products," the company noted in an SEC filing back in February.
There's a crucial difference between the former group and the latter—beer distributors are the middle-men of the beer world, acting as the go-between for brewers and retail. Both distributors and brewers (in the case of Boston Beer) are worried about a negative sales impact, though it's surprising to see the distribution side of the beer industry negatively react.
In other states considering legalization this November, such as California, beer and alcohol distributors are part of the conversation about marijuana legalization.
 
So the logic goes: After legalization, state government will regulate the marijuana industry similarly to the beer and alcohol industry, with distributors acting as middle-men between brewers/wholesalers and customers. After all, they've already got the trucks, routes, employees, and established systems.
Even more bizarrely, in Colorado, beer and alcohol sales are up alongside marijuana legalization. "Tax records show that alcohol sales have continued to grow in Colorado despite the rapid rise of recreational marijuana," The Guardian wrote in August 2015, roughly one-and-a-half years after it became legal in Colorado. "Even as tax revenues from marijuana nearly tripled between June 2014 through May 2015, alcohol sales continued to steadily increase as well, with alcohol excise taxes rising 2.1%, the same increase as the year prior."
Though the worries from alcohol and beer groups in Massachusetts are inspiring financial pushback, it's not clear that the fears driving that pushback are based in logic.
It's also not clear if the recreational marijuana initiative will even pass in Massachusetts. The latest poll, care of conservative political action committee Gravis Marketing for Jobs First and the Boston Globe, has 51 percent of respondents opposed, 41 percent in favor, and 9 percent undecided.

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