Legal marijuana is having an unexpected effect on the beer industry — and Anheuser-Busch should be worried

Updated

Beer sales are taking a hit in states where marijuana is legal.

So far this year, beer volumes have dropped roughly 2% in Colorado, Oregon, and Washington, which have all legalized recreational pot, according to Neilsen data cited in a recent report from Cowen & Co.

At the same time, marijuana consumption has grown in those states.

The data indicates that many beer drinkers are swapping their six-packs for marijuana instead, and that has major implications for the beer industry — especially for makers of cheaper beers like Anheuser-Busch and Molson Coors Brewing Company.

"Mainstream beer" including Bud Light, Coors Light, Miller Lite, is "under siege" from legal marijuana, with volumes down 4.4% in the states studied, according to Cowen and Co. analysts.

Craft beer sales growth is slowing in those states, but not to the same degree.

Screen Shot 2016 12 07 at 9.27.33 AM
Screen Shot 2016 12 07 at 9.27.33 AM

REUTERS/Lucy Nicholson

The trends show significant overlap between buyers of cheaper beers and users of marijuana.

"The pressure we are seeing on lower-priced beers is consistent with the trends we are seeing in cannabis use by income group nationally," analysts wrote. "Indeed, while cannabis incidence has been on the rise nationally, over the last 10 years (through 2014, the most recently available) we have seen the biggest increases among lower-income households, where cannabis use is also highest."

Screen Shot 2016 12 07 at 9.28.13 AM
Screen Shot 2016 12 07 at 9.28.13 AM

REUTERS/Lucy Nicholson

As additional states consider legalizing marijuana, beer companies will be at an even greater risk.

"With Anheuser-Busch and Molson Coors Brewing Company controlling roughly 70% of the overall beer category in the US, there is clear risk that growing cannabis use will weigh on their businesses," analysts wrote.

NOW WATCH: We did a blind taste test of wings from Pizza Hut, Domino's, Papa John's, and Buffalo Wild Wings — the winner was clear

See Also:

SEE ALSO: Sears is on the brink of catastrophe as store closures loom and top execs flee the company


Advertisement