North American sales of cannabis are expected to grow to $24 billion by 2021, Jessica Lukas, vice president of consumer insights at BDS Analytics, shared during the final day of the Beer Institute’s annual meeting in Milwaukee, Wisconsin. That figure, she added, doesn’t account for a potential end to the federal ban on marijuana in the United States.
The nascent legal U.S. marijuana market currently processes about $9 billion in sales, Lukas said, noting that it trails the $350 billion beer industry by a wide margin. She added that it’s too soon to predict how the growth in the marijuana industry and legalization of adult recreational use will affect beer sales.
BDS, a Boulder, Colorado-based market research firm that tracks sales in the cannabis industry, has processed and analyzed more than 800 million legal cannabis transactions along with 17,000 consumer survey responses. This data helps explain when, where and at what price point legal cannabis is selling for, Lukas said.
In markets that have legalized cannabis for either recreational or medical use, Lukas said sales are continuing to grow. Adult-use sales have seen compound annual growth rate (CAGR) increase 42 percent in Colorado, 43 percent in Oregon and 49 percent in Washington state since January 2014. Nevertheless, Lukas said medical marijuana sales have declined in states such as Oregon and Colorado as recreational use has become legal.
In the Colorado market, Lukas said marijuana flower has lost dollar share since the first quarter of 2014, when it accounted for 70 percent of the market. At the end of 2017, marijuana use in flower form accounted for 46 percent of the market. Lukas attributed the decline to “an evolution in the marketplace” as consumers turned to new methods of consumption, such as vaping and edibles.
Lukas added that edibles, concentrates and vape cartridges “tend to be more price protected.”
Still, the majority (72 percent) of cannabis consumers said they prefer inhalables while 23 percent prefer edibles and 5 percent like topicals.
In legal cannabis markets, BDS found that the average consumer is about 40 years old, and skews slightly male. So who are these consumers? BDS found that:
◾ 52 percent work full time
◾ 42 percent live in cities
◾ 31 percent are very social
◾ 49 percent are creative
◾ 58 percent are outdoorsy
◾ 45 percent spend more money for quality
◾ 44 percent like to try new products
◾ 40 percent are more satisfied with life
BDS also found that 75 percent of cannabis users said they consume for recreational or social reasons. Meanwhile, 52 percent said they use cannabis for health or medical reasons. And 42 percent said they use cannabis for relaxation.
“People almost don’t want to tell you that they consume cannabis to get high,” she said. “It’s part of their lifestyle or part of their wellness. It’s kind of the opposite of what you see with alcohol where people don’t want to say they use alcohol to aid in making their life better.”
According to the company’s research, 72 percent of cannabis users also consume alcoholic beverages. BDS found that cannabis consumers are more likely to also drink alcoholic beverages, compared to non-cannabis users who accept its use but abstain from alcohol. In fact, 54 percent of cannabis users drink beer compared to 45 percent of “acceptors” and 30 percent of “rejecters.”
“The vast majority of cannabis consumers consume alcohol, and they’re more likely to consume alcohol than non-cannabis consumers,” Lukas said. “These people are already your consumers.”
Of cannabis users who consumed alcohol in the last six months, BDS found 82 percent of them drink beer. Of those who drank beer, the majority — 45 percent — drank mainstream domestic beers while 39 percent said they drank Mexican imports, 37 percent chose national or mainstream craft beer and 31 percent drank regional or local craft beer.
According to Lukas, about half of cannabis consumers who also drink alcohol do not see the two products as appropriate for the same occasions.
“Not every cannabis occasion is an alcohol occasion,” she said.
Only 15 percent of cannabis users say they “often” consume alcohol and marijuana products during the same occasion, Lukas said. Meanwhile, just 6 percent of cannabis consumers pair often with alcohol but drink less while pairing, she added.
Nevertheless, only 13 percent of cannabis consumers said they paired marijuana with craft beer. Just 10 percent said they paired cannabis with non-craft beer offerings.
“People are more likely to pair cannabis with exercise and fine dining than they are alcohol,” Lukas said.
Lukas added that BDS found that when cannabis users do pair with alcohol, 54 percent said they drink less alcohol. BDS also found 26 percent of cannabis users said they drink less craft beer and 29 percent said they drink less beer.
Nevertheless, Lukas said more than half of cannabis consumers have not changed their alcohol consumption. In fact, 68 percent of cannabis users said their consumption of craft beer stayed the same, and 65 percent said their beer consumption was unchanged.
So what are cannabis users giving up? 47 percent said they use less prescription drugs and 51 percent said they gave up over-the-counter drugs.
In a separate presentation, Rick Garza, a non-cannabis user and director of the Washington State Liquor and Cannabis Board, said legal cannabis has generated $3.6 billion in sales activity in the state since July 8, 2014. The number has steadily climbed, from $259.6 million in 2015 to $1.37 billion in 2017. He added that the average daily sales of cannabis products in the state is about $4 million.
Those sales have generated $1.3 billion in excise tax revenue for the state, which collected $314.8 million last year. So far this year, legal cannabis sales in Washington have generated $327 million in tax revenue on more than $1 billion in sales.
Garza added that cannabis sales in the state continue to outpace projected excise tax forecasts. Last year, the state projected $119.8 million in revenue while actually collecting $314.8 million.
This all comes as the average retail price of marijuana sold in the state is now less than $7 per gram, Garza said.
“As soon as those prices started falling, the market took off,” he added.