Alcohol consumption has declined among millennials and gen Z, with both groups being among the most powerful consumer groups driving food consumption habits in the US and worldwide. Congruently, cannabis consumption among the same groups is higher. This shift is primarily driven by the legalization of recreational cannabis. This has meant that the CBD and THC beverage market is taking off.

With cannabis sales hitting over $21.6 billion in the US, and $210 million from cannabis beverage sales alone, the irony here is that some of those cannabis beverages are also alcoholic. So how do both the alcoholic and cannabis industries fare in the rise of this contradictory trend?

IN THE THC BEVERAGE MARKET TECHNOLOGY BREEDS COMPETITION

For years, the cannabis industry struggled to migrate into the beverage space, marketing cannabis beverages in the form of tea-like extractions, leaving behind an undesirable taste and smell, as well as low effectiveness.

But recent technological advancements in creating water-soluble cannabinoids and nanoemulsions have made cannabis more palatable, more bioavailable, faster acting, and much easier to dose in various drinks. From seltzers to beers to energy drinks, THC, CBD, and even terpene-infused drinks are becoming not only the new social drink but the new health drink as well.

The CBD and THC beverage market is expected to reach $2 billion by 2026 in the US market alone, already taking up a 33% share of US alcohol sales. And cannabis is significantly outpacing its competitor market as the alcoholic beverage industry experiences decreasing consumption rates, having seen a 6% decline in weekly drinking across beer, wine, and liquor categories within the past year. Market analysts attribute this decline to consumer spending cuts due to the COVID-19 pandemic and inflation, but other factors are at play, such as preference, culture, and health.

A New Frontier Data report revealed that 69% of 18-24-year-olds prefer marijuana to alcohol, indicating a social shift that may be reflective of the broader and more accessible availability of legal cannabis, with gen Z being the first generation to come of legal consumption age during the era of legalized recreational marijuana use.

As society moves towards a more health-conscious state, consumers are also becoming more educated about the products they buy and are weighing health options more heavily. In fact, statistics show that 74% of Americans believe that cannabis is safer than alcohol.

There is statistical and empirical data supporting this public opinion, finding that alcohol use ranks #8 in death rates by risk factor worldwide, killing at least 2.8 million people annually. And with a recent study identifying that even moderate alcohol use can have long-lasting neurological effects on the brain and significantly influence human addiction behavior, sobriety is becoming less taboo among the general public. And cannabis addition – while very real – is much rarer and poses a much lower public safety risk.

TWO INDUSTRIES COLLIDE

Amid a move towards more health-friendly drinks, cannabis beverage brands have divided themselves into two categories: cannabis-infused non-alcoholic drinks and cannabis-infused alcoholic drinks, with both categories incorporating the same technology.

Cannabinoid-infused non-alcoholic drinks are often marketed as an alternative to smoking marijuana or drinking a traditional alcoholic beverage, often with microdoses of 5mg for a fast-acting, mild high, allowing people to dodge the heavy drug effect often associated with smoking while remaining social. This is especially true with CBD-infused drinks due to the non-psychoactive cannabinoid’s clinical status as sleep, anxiety, and epilepsy aid, bolstering the immediate health connotation and easing social anxieties in communal settings similarly to alcohol.

But as brands like Keef or Cann take their share of the THC beverage market where consumers of healthy soft drink alternatives like LeCroix and Spindrift are, alcoholic beverage companies are looking to stay afloat and culturally relevant within the new market space. For example, Constellation Brands, one of the world’s leaders in beer, wine, and spirits, invested $5 billion for a 38% stake in the Canadian cannabis company, Canopy, with plans to introduce a line of cannabis-infused drinks.  

Then there are infused alcohol brands like Squared that is designed and sold on the same shelf as alcohol and in all the same places you’d expect to fine a beer, wine, and spirit section.

These trends may sound great for younger generations with lower incomes just barely entering the workforce, but what about older generations like Baby Boomers, Generation X, and older millennials with higher incomes!? These generations still prefer alcohol and are less likely to consume cannabis-infused food and beverages than their younger counterparts.

SPIRIT COMPANIES MOVING INTO THC BEVERAGE MARKET

Cannabis-infused beverage brands – both with and without partnerships with alcoholic beverage companies – like Artet and Pamos Beverage Co. are looking to capture the older, more affluent market with cannabis products aimed exclusively for ‘cocktail moments.’

Brands like these envision THC and CBD-infused mixers or spirits as just one ingredient in a wide variety of cocktail recipes at bars. And for craft beer enthusiasts, there are cannabis-infused beers, like UK-based Thornbridge Brewery. Brands like these, while slower growing, seek to offer a new experience to consumers that genuinely enjoy the alcoholic experience.

And by ensuring the same care and quality of ingredients and craft, beverage companies on both sides of the market are finding common ground in providing an elevated encounter with first-time users of cannabis beverage formats.

For alcohol companies, it is disadvantageous not to explore the marriage of cannabis into their family of existing offerings and expand into altogether new categories of beverages. The alcoholic beverage industry’s ability to embrace the cannabis-infusion wave will ultimately dictate how well it navigates changing consumption trends because the cannabis industry will continue to grow regardless of support from big alcohol.