THE GIST
The Brewers Association has challenged a report suggesting legal marijuana might be bad news for the beer industry. Writing this week in response to findings that beer is underperforming in Colorado, Washington, and Oregon due to the proliferation of retail marijuana infrastructure, BA staff economist Bart Watson says he sees “no evidence that legalization has had an effect on beer sales in the short term.”
More specifically, Watson calls into question the comprehensiveness of research conducted by the financial services group Cowen and Company, adding the scan data from Nielsen used by the firm, while “great,” doesn’t count a number of “other ways brewers are selling beer that isn’t being measured.”
If you’ll recall, Cowen’s findings—that “the magnitude of [beer’s] underperformance has increased notably” in the three abovementioned states where weed is legal—went semi-viral earlier this month following a Brewbound report.
WHY IT MATTERS
The conversation surrounding how legal weed might affect demand for beer—negatively or otherwise—has been an interesting one. Because recreational use of the drug has only been made permissible in a handful of states, and only in recent years, any talk of how weed might already chew into beer’s market share relies on small sample sizes across a short timeline.
No less, some members of the beer industry outside of those legal zones are already scared shitless of the drug, having taken to funding anti-reform efforts in their own territories. But since four more states voted to legalize weed for recreational use this past November, while another three OK’d pot for medicinal use, it seems pretty clear at this point in which direction the country is headed on the issue. For those reasons, we should consider the research we do have at our disposal as Watson does: critically.
Indeed, while Cowen suggests Colorado is hurting, Watson is able to draw just the opposite conclusion. Going by tax revenue, he notes, beer consumption is actually up in the state. As for what could create such a discrepancy in two sets of findings, Watson points to premise use (brite tank sales) being up 57%, according to TTB data. (“That could explain a large portion of any declines being seen,” he writes.) He continues: “More generally, even pointing to a change in consumption isn’t enough to prove anything, since there are a ton of confounds in trying to figure out whether beer consumption is increasing or decreasing and why.”
That’s merely one piece of Watson’s argument, but his repudiation is hardly the only one that belies Cowen’s assertions. In fact, prior to Cowen’s claims to the contrary (which were picked up and run with by many in the beer press and mainstream media alike), it seemed as if the opposite were starting to emerge as true.
In September, Jason Notte at MarketWatch reported beer tax revenue in Colorado has in fact increased each subsequent year since legalization. In 2015, it tax revenue increased in Washington, too, while Oregon saw its beer volume grow from 54,272 barrels to 62,800 barrels in that same year. And that’s in a trio of already mature beer markets. Which is to say: it would ultimately make sense if beer growth slows in those places, and weed might not be entirely to blame, if at all.
This all leaves us at this point with the two sides essentially horn-locked. The reality, though, is that it’s probably still too early to say what legal pot will mean for beer long term.
—Dave Eisenberg
READ MORE
Marijuana and the Beer Industry [Brewers Association]