Declining beer consumption as more consumers shift to cannabis

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Did you know that beer consumption is on the decline? It seems that more and more people are shifting their preferences to cannabis instead. According to Vivien Azer, Managing Director and Senior Research Analyst at TD Cowen, younger age groups are intentionally abstaining from alcohol and turning towards cannabis consumption instead. In fact, the cannabis industry has seen a staggering $26 billion in revenue, which is making a dent in the alcohol market. This trend is particularly evident among 18 to 25-year-olds, who are reporting a decline in alcohol consumption and a rise in cannabis incidents. It seems that consumers are opting to take a break from alcohol by substituting it with cannabis. Stay tuned to learn more about the current state of beer and wine consumption and the impact of this shift to cannabis.

The Decline in Beer Consumption

Shift in Consumer Preference

In recent years, there has been a notable decline in beer consumption, with many consumers shifting their preference towards other alternatives. This shift can be attributed to various factors, including changing consumer tastes and preferences. Younger age groups, in particular, are showing a growing preference for alternatives to traditional alcoholic beverages like beer.

Impact of Intentional Abstinence

One significant factor contributing to the decline in beer consumption is intentional abstinence among younger age groups. More and more individuals, especially in the 18 to 25-year-old demographic, are choosing to take breaks from alcohol consumption for extended periods of time. Popular events like Sober October and Dry January have gained traction, emphasizing the importance of abstaining from alcohol.

Rise of Cannabis Consumption

Another major reason behind the decline in beer consumption is the increasing popularity of cannabis. The cannabis industry has experienced substantial growth in recent years, with revenues reaching a staggering $26 billion. This significant rise in cannabis consumption has led to what industry experts refer to as a “dislocation” from alcohol to cannabis. Many individuals are substituting alcohol with cannabis as a way to take a break from traditional alcoholic beverages.

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Trends among Younger Age Groups

Within the shifting landscape of beer consumption, younger age groups have been at the forefront of these changing trends. Over the past decade, there has been an evident divergence in alcohol consumption among 18 to 25-year-olds. While the consumption of alcohol has been on the decline, reported cannabis incidents have been on the rise. This shift in behavior highlights the changing preferences and attitudes towards alcohol among younger individuals.

The Rise of Cannabis

Revenue of the Cannabis Industry

The cannabis industry has experienced remarkable growth, with revenues reaching $26 billion as of 2022. This significant figure represents over 10% of the alcohol market, indicating the sizable impact cannabis has had on consumer behavior and choices. As the cannabis industry continues to expand, it is expected to further disrupt the alcohol market.

Dislocation from Alcohol to Cannabis

The rise of cannabis consumption has resulted in a notable “dislocation” from alcohol to cannabis. Many individuals who previously consumed alcohol have shifted their preferences towards cannabis, leading to a decrease in alcohol sales. This dislocation highlights the changing landscape and consumer preferences within the beverage industry.

Substituting Alcohol with Cannabis

Among those who choose to take a break from alcohol, substituting it with cannabis has become a popular option. Cannabis offers an alternative experience for individuals looking to relax and unwind without the negative effects associated with alcohol consumption. The substitution of alcohol with cannabis has been particularly evident among younger age groups seeking new forms of recreation.

Trend among 18 to 25-year-olds

The trend of substituting alcohol with cannabis is particularly pronounced among the 18 to 25-year-old demographic. This age group has shown a consistent decline in alcohol consumption over the past decade, while cannabis incidents have been on the rise. The changing preferences of these young consumers highlight the increasing acceptance and normalization of cannabis use as an alternative to traditional alcoholic beverages.

M&A Activity in the Beer Industry

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Reversal of Craft Beer Acquisitions

In recent years, there has been a noticeable reversal in M&A (mergers and acquisitions) activity within the beer industry. Craft beer acquisitions, which were once a major trend, have seen an unwind in recent times. Companies like Constellation Brands, known for their strategic acquisitions, have seen a shift in their portfolio as they unbundle previously acquired craft beer brands.

Portfolio Cleanup by Major Operators

Major beer operators have been engaging in portfolio cleanup activities, streamlining their offerings and focusing on their core products. This cleanup process involves divesting from certain brands and assets that no longer align with their strategic vision. This shift in focus allows these companies to concentrate on their main offerings and adapt to the changing consumer preferences within the industry.

Focus on Distilled Spirits

As M&A activity within the beer industry experiences a reversal, major operators are shifting their attention to the distilled spirits market. This particular segment of the beverage industry has seen an increase in bolt-on acquisitions, where companies add complementary products to their existing portfolios. The focus on distilled spirits allows companies to diversify their offerings and remain competitive in the evolving market landscape.

Overall, the decline in beer consumption, the rise of cannabis, and the changing M&A landscape within the beer industry indicate a significant shift in consumer preferences and behaviors. As the industry continues to adapt to these changes, it will be interesting to see how companies navigate this evolving landscape and find new growth opportunities.

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