Alcohol and Marijuana: Not Necessarily Enemies
After recreational marijuana was legalized in Washington and Colorado, there was a good deal of worry from alcohol retailers and producers that business would suffer due to business shifting to marijuana sales.
This was such a worry that it led the Brown-Forman Corporation (NYSE: BF.B, BF.A) to note in its 10-K report filed with the United States Securities and Exchange Commission that marijuana was a potential threat to business. Brown-Forman manufactures many top-selling brands of liquor, including Jack Daniel’s, Woodford Reserve, Southern Comfort and Finlandia.
According to recent numbers, though, this turned out not to be the case at all. Colorado alcohol sales actually seem to be rising in tandem with the sale of recreational marijuana. This was not a delayed effect either—the same year that marijuana became available for sale in the state, there was a year-over-year increase in Denver’s alcohol sales of 6.7 percent. The previous year only saw a 3.9 percent increase.
The cannabis tourism industry in Colorado is thought to be one of the factors that helped the alcohol industry. Marijuana tourism has been booming, with companies like High Country Cannabis Tours offering their services throughout Denver and Aspen and The MaryJane Group (OTCQB: MJMJ) offering services in Denver, Silverthorne and Colorado Springs.
These are not your typical hospitality providers. HCCT offers tours around shops and growers, but also marijuana-friendly accommodation services, growing classes and workshops about the various aspects of the plant. The MaryJane Group provides canna-lodging with amenities such as meals, drinks, smoking devices and social cannabis common areas.
Colorado saw the sales of recreational marijuana increase $7.6 million from May to June of 2015, bringing the state to a sales high. As this is a record for the industry, it will be interesting to see how the sales numbers stack up to last year’s once the summer tourism season has concluded. In 2014, Colorado tourism as a whole actually hit record numbers, with a total of 71.3 million visitors spending $18.6 billion.
This massive influx bolstered many industries, including alcohol. Justin Martz of Mr B’s Wine & Spirits in Denver explained to The Guardian that the sale of marijuana has actually ended up being a “non-issue,” and that “if anything it’s kind of helped us.”
While this increase has been seen almost across the board, there is a lingering long-term worry: as recreational legalization spreads, the newly generated marijuana tourism will fall off. This would deflate both marijuana and alcohol sales figures, perhaps even revealing that marijuana has actually moved in on alcohol’s sales.
According to Marijuana Business Daily, Harry Schuhmacher likened this to the legalization of the lottery. As the publisher of Beer Business Daily and Wine & Spirits Daily, he noted that the markets would be going after the same money, like how a “guy used to go into the convenience store to buy a 24-pack … . Now he buys two lottery tickets and a 12-pack.”
While Washington numbers are not in just yet, it is not out of the realm of possibility that something akin to Colorado’s results could be mirrored as there is a similar, though not quite as robust, tourism industry. However, the fairly recent privatization of alcohol and liquor sales in the state could skew the numbers a bit and will not be quite as telling with regard to their relationship with marijuana.