“There’s no way to stop this now,” says Spiros Malandrakis, Euromonitor’s senior analyst, about the tidal wave of legalised cannabis sweeping across North America. Next month Canada will become the first G7 country to follow Uruguay’s lead and allow recreational use of the drug. It will join nine US states, including California, with the numbers expected to grow after November’s mid-term elections. Many states have already legalised medicinal cannabis, and according to Andrew Faulkner, vice-president at the American Distilling Institute, there are now “only six states where it is outright, absolutely illegal”.
US Attorney General Jeff Sessions is doing his best to hold back the tide by denying federal approval and thus the cannabis industry’s access to banks. In this quasi-legal state, anomalies abound, like the tinctures sold in some Californian bars. “Lawyers are tearing their hair out because there’s no legal definition of ‘tinctures’, though bartenders know what they’re talking about,” says Faulkner.
But with polls showing 64% of Americans now in favour of legalisation, compared with just 12% during 1969 and ‘the summer of love’, federal approval is expected. If that happens, the US cannabis industry could be worth a staggering US$75 billion (£57bn) by 2030. That’s the conclusion of investment bank Cohen & Co in its latest cannabis report, compiled by senior analyst Vivien Azer.
Canopy Growth CEO Bruce Linton
Of course, the big question concerns the impact on the drinks industry, and whether a market worth US$231bn last year will, at least partially, go up in smoke. In Canada, the country’s Imperial Bank of Commerce predicts the value of cannabis will reach C$6.5bn (£3.77bn) by 2020, overtaking a spirits industry that was worth C$5.1bn last year.
Asked how industry bosses should respond, Azer says: “They should embrace it and recognise that alcohol and cannabis are substitute social lubricants.” Malandrakis agrees, and says: “They can complain, but this is going to happen.
They can either sit in their office and say ‘Oh my God, our industry’s going to die’, or they can do something and evolve alongside it.” Constellation Brands became the first to jump, buying a 9.9% share in Canopy Growth, Canada’s biggest traded cannabis firm, for US$191m last October.
With a portfolio that includes Robert Mondavi and Svedka vodka, Constellation set up GreenStar brands in Toronto to develop cannabis-infused drinks. Julian Cohen, GreenStar’s senior vice-president, explains that ‘edibles’, which include drinks, are “expected to become legal some time later next year” in Canada. “We’re not ready to provide specifics, as we’re still in the developmental phase,” he says, “but, what I can tell you is that these beverages will be non-alcoholic.”
Malandrakis believes such drinks have a massive opportunity as much for their lack of alcohol as for their psychoactive buzz from the Tetrahydrocannabinol (THC) in the cannabis. “There are two trends coming together with the fact that millennials perceive cannabis to be safer and healthier,” he says. “People want to cut down on alcohol and if given an alternative that has an intoxicating effect, I can see this becoming huge.”
Clearly, he is not thinking of soft, fizzy drinks with THC, but something more adult such as Seedlip – a self-styled ‘non-alcoholic spirit’ that is 20% owned by Diageo’s Distil Ventures. Seedlip’s founder, Ben Branson, says: “The legalisation of cannabis is a threat to the alcohol industry and a huge opportunity for the non-alcoholic category as the paradigm shifts in the way people drink continue to disrupt how and where we socialise. Cannabis cocktail bars anyone?”
Maybe not in the UK, but it makes you wonder if he and Diageo are secretly cooking up Weedlip for Canadians to enjoy. “I know I would,” says Malandrakis. Meanwhile, Constellation’s GreenStar offshoot is not the only venture actively engaged and happy to talk. At Ebbu, a Colorado-based cannabis-research company, general manager Damon Michaels says: “The drinks industry should definitely embrace this, and they are.
Some have tried to fight it, and now have a ‘can’t beat ‘em, join ‘em’ philosophy”. Ebbu is developing a range of beers under the Ceria label with Keith Villa, the ex-Molson Coors brewer who created Blue Moon, which claims to be America’s favourite craft beer.