Marijuana Legalization Linked To ‘Decline In Beer Sales,’ Indicating Substitution Effect, Canadian Study Finds

Marijuana legalization has been “associated with a decline in beer sales,” suggesting a substitution effect where consumers shift from one product to the other, according to a new Canadian study.

As Canada sees cannabis tax revenue surpass that generated from beer and wine, the study published in the journal Drug and Alcohol Dependence found that, since the country legalized adult-use marijuana in 2018, beer sales have continued to drop.

“Canada-wide beer sales fell by 96 hectoliters per 100,000 population immediately after non-medical cannabis legalization and by 4 hectoliters per 100,000 population each month thereafter for an average monthly reduction of 136 hectoliters per 100,000 population post-legalization,” the researchers from University of Manitoba, Memorial University of Newfoundland and University of Toronto found.

The study authors said the data indicates a substitution effect may be at play, with consumers increasingly opting for marijuana over beer as their intoxicant of choice.

“Beer sales continued to decline in the post-legalization period, suggesting that individuals are moving away from beer towards legal cannabis.”

“While increased use of cannabis is not necessarily harmless and further research is needed to understand the health effects of the switch from alcohol to cannabis, the reduction in beer sales associated with the non-medical cannabis legalization suggests that individuals are likely not using alcohol and cannabis concurrently,” the study concluded.

The trend didn’t apply to sales of spirits, however. And broken down by beer type, “legalization was associated with declines in sales of canned and kegged beer but there was no reduction in sales of bottled beer.”

“One possible explanation is that cans may be preferred to bottle in the context of individual consumption at home due to the increasing popularity and availability of cans as well as the better taste and drinking experience that they offer,” the study says. “Thus, as cannabis substitutes at-home beer consumption, we find a substitution of cannabis for canned beer but not for bottled beer.”

“Non-medical cannabis legalization was associated with an immediate decline in beer sales… Although the magnitude of decline in beer sales appears to be modest, it is economically meaningful.”

Related to these findings, newly released data shows that Canada generated more excise tax revenue from marijuana ($660 million) than wine ($205 million) and beer ($450 million) combined in the 2022-23 fiscal year, as MJ Biz reported.

At the state level in the U.S., cannabis sales have also been outpacing booze in several legal jurisdictions.

For instance, Michigan marijuana sales outpaced purchases of beer, wine and liquor combined during the most recent fiscal year, according to a report from the legislature’s nonpartisan House Fiscal Agency.

Also during the last fiscal year in Illinois, legal cannabis brought in $451.9 million—about $135.6 million more than alcohol.

Colorado in 2022 state generated more income from marijuana than alcohol or cigarettes—and nearly as much as alcohol and tobacco combined. Similar milestones have been seen in Arizona and Washington State.

Accordingly, a multinational investment bank said in a recent report that marijuana has become a “formidable competitor” to alcohol, projecting that nearly 20 million more people will regularly consume cannabis over the next five years as booze loses a couple million drinkers. It also says marijuana sales are estimated to reach $37 billion in 2027 in the U.S. as more state markets come online.

A separate study published in November also found that marijuana legalization may be linked to a “substitution effect,” with young adults in California “significantly” reducing their use of alcohol and cigarettes after the cannabis reform was enacted.

Data from a Gallup survey published last August also found that Americans consider marijuana to be less harmful than alcohol, cigarettes, vapes and other tobacco products.

A separate survey released by the American Psychiatric Association (APA) and Morning Consult last June also found that Americans consider marijuana to be significantly less dangerous than cigarettes, alcohol and opioids—and they say cannabis is less addictive than each of those substances, as well as technology.

In 2022, a survey showed that Americans believe that cannabis is less dangerous than alcohol or tobacco.

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