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Earlier this week, we looked at how the COVID-19 pandemic could impact current sales and future availability of cannabis. As legal cannabis has expanded into new states in recent years, one of the key points of curiosity has consistently been any impact on beer.
To date, there hasn't been significant evidence to suggest beer sales decline because of the availability of cannabis, posing a fight over the "share of buzz." But Michael Uhrich, former chief economist of the Beer Institute, and current founder and chief economist of Seventh Point Analytic, says there is something worth watching if you dig deep enough. As Americans deal with loss of incomes and the possibility of a prolonged recession, that status of bank accounts could have a real impact on weekly decisions related to buying alcohol, cannabis, or neither at all.
"Among people who were consuming cannabis, the ones who were buying less beer once they started to buy cannabis tended to have lower incomes on average," he tells GBH. "Then there was another group of people starting to use cannabis who were also buying more beer and had higher incomes."
On the aggregate, looking at all cannabis vs. alcohol sales across all people doesn't show significant changes. But start breaking apart groups by income, and trends emerge. Uhrich says that his research doesn't necessarily mean people are using beer and cannabis as complements but clearly showed that people who had more money bought more beer while also simultaneously buying cannabis.
The lines extend well below or above the most recent national median household income of $61,937, set in 2018. Uhrich found that homes earning below $40,000 annually would be likely to drink beer or consume cannabis, swapping one for the other. "Super high" household incomes above $95,000 would be customers for both at the same time.
"If you have a median income, it may not be the strongest driver of individual choices you make. But if you have a lower income, income is always on your mind," Uhrich says. "And if you have a super-high income, it's pretty much never on your mind. If you have a lot of disposable income, it's really easy to think, 'do we want beer tonight, or cannabis, or both?'"
This difference may matter a bit more as the country works its way through a recession and a spiraling economy due to COVID-19. Jobs losses are at “Great Depression-era highs,” savings decimated, and people are thinking about spending differently than they were just a few months ago.
"In the short term, there will be less spending on all kinds of goods and services with less economic growth," Uhrich says. "How that manifests is people are just buying less stuff."
As it happens, the largest unemployment rate increases in March came in Nevada (+2.7 percentage points) and Colorado (+2 points), states where cannabis is legal for recreational use. Washington State and California also had unemployment rate losses well above national averages.
Spending patterns are different enough household-to-household, but even in states where beer culture is long-established, these areas may be of particular note for breweries keeping tabs on how off-premise sales may dip slightly from pandemic highs should drinkers out of work need to shift spending to beer or cannabis. More so, whenever on-premise sales are allowed again as states slowly reopen, the behaviors established now with budgets that could remain constrained should give breweries reason enough to track their local cannabis market in states where it’s legal.
Based on this limited data and how things stand today, there are at least two scenarios that could emerge:
Economies open quickly and job losses recover, along with a return to previous income levels and spending behaviors. Beer and cannabis could benefit together so long as things return to some semblance of "normal" and spikes of COVID-19 cases remain low.
Given that a vaccine isn't set to be available for emergency use until early 2021, any recovery could remain long and drawn-out, forcing Americans to continue to make either/or decisions in all areas of spending. This includes beer or cannabis for households earning less than $40,000, a decision that could be more common for some middle-class households forced economically downward due to loss of income.
What's selling: According to cannabis market research firm Headset, edibles saw strong growth in March in California, Colorado, and Washington State. Three of the longer-tenured states in the U.S. with legal recreational cannabis. Andrew Zens, vice president of talent acquisition and development at Grassroots Cannabis, says flower and vape products are tops in raw and percentage growth in Grassroots' Illinois stores. As noted earlier this week, being homebound might have people rethinking smoke in their direct living areas or in a home where smoking isn’t allowed
"Flower supply is all over the place right now because of sheer volume of demand," he says. "People may be adding on [edibles] but it's not taking away from other things for us."
COVID adaptations for the future: Deemed as "essential" business in most states where cannabis is legal, that's just one way these companies may have stronger arguments for legalization post-COVID. Services like curbside pick-up are making it easier for buying, and Zens says that being able to point to another mode of positively serving customers could be beneficial in future discussions.
"Any time we can show that we meet standards that are asked of us, and offering something new in a compliant manner, that's a positive thing for us," Zens says of the industry at-large. With support for legalization at an all-time high with U.S. citizens and progressive leaders like Bernie Sanders openly calling for national legalization, giving proof to skeptical lawmakers about the value and (for better or worse) behavior of these companies can matter later on.This week we also saw bipartisan calls in Congress for stimulus funds like the Paycheck Protection Program be made available to cannabis companies.
"With the extra spotlight on essential workers of the world right now, we're lucky to be in that space and showing we can uphold expectations," Zens says.
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