Increasing numbers of consumers are shifting away from alcohol in favour of healthier and lower-alcoholic options, which many have perceived as an opportunity for cannabinoid-containing drinks. But to what extent can they compete with alcohol?
CannIntelligence’s market analyst Jonathan Darnell commented: “Of course, cannabis beverages will not overtake the traditional alcohol industry, but there definitely is space in the market for cannabis drinks and it is something that the alcohol industry has already acknowledged. The potential to be a disruptive industry is certainly there, especially if future regulations are favourable.”
Current regulatory restrictions, particularly in the EU and UK, have restricted new product development to the US, where the legal status of cannabis in many states has enabled the launch of innovative drinks, including some containing delta-9 THC and even intoxicating hemp-derived cannabinoids (IHDCs) such as delta-8 THC on top of those containing non-intoxicating cannabinoids such as CBD.
Many of these beverages are attempting to compete in the same space as traditional alcoholic drinks. Some brands market their products as alternatives to alcohol, aiming to attract the growing number of younger consumers who are shifting away from the booze and experimenting with new products.
In CannIntelligence’s latest consumer survey on delta-8 THC usage in the US, it was found that certain consumer segments – such as high-income consumers – are more likely to experiment with new delta-8 THC product formats such as beverages.
No clear and simple answer
“The big question for the correlation between alcohol and cannabis consumption can be summed up with, ‘Is it a complementary good or a substitute good?’” said Darnell (below).
He asks whether increased alcohol consumption leads to increased cannabis consumption and vice versa, or whether consumers are using cannabis products to help reduce and even replace alcohol consumption.
“Unfortunately, the answer is not simple and clear. It depends on the individual consumer and the reason for consumption, but there has been some data to suggest that consumers might be replacing alcohol consumption with cannabis consumption,” he said.
He cites a US survey from CivicScience, which indicated that cannabis products were the most popular alcohol substitute: used as a replacement by one in five respondents.
Research from Euromonitor also shows that a significant element of consumers believe cannabis can be a substitute for alcohol. Its Voice of the Consumer Cannabis Survey in 2022 found 20% of the general population saw cannabinoid products as possible rivals to alcohol.
An educational challenge
Despite these findings, Euromonitor’s consultant on drinks, nicotine and cannabis, Linda Lichtmess, remains sceptical of the extent of the market in the current climate. Outside regulatory challenges, issues remain around perception and education, she said.
“I’m not sure THC drinks are significant competition for alcohol because there’s still a lot of education needed in many countries. Many people still don’t know the difference between CBD and THC, particularly in Europe,” she said.
In addition to the educational challenge, Lichtmess believes Europe is a risky market in which to launch cannabinoid-infused beverages because there’s still some stigma around cannabis that will outlast current restrictions on ingestible products containing cannabinoids as well as restrictions on intoxicating cannabinoids.
“I see innovations that have happened in the US not working here,” she said. “I don’t think there’s no opportunity whatsoever, but in Europe regulation does not currently permit such innovations and there’s still some taboo around cannabis, which makes it quite a risky investment for the reputation of more established, traditional brands.”
She believes there will eventually be a market for cannabinoid drinks in countries such as Germany but it’s “a long way off”.
Although the German government and other decision-makers want to legalise recreational cannabis, there is still a strong conservative element in the German population, particularly in rural areas and Southern Germany. Recreational legalisation will also be a slow incremental process and there will be no chance of a commercial market in the country for some time yet. And German courts continue to pursue retailers over the sale of ingestible hemp products due to potential for intoxication.
The stigma remains
“Overall, the German consumer tends to be cautious and slow and there is some fear that a liberal market will lead to other problems. There’s still a huge stigma around cannabis, even hemp. It seems bold of Germany to allow consumption, considering that it shares borders with nine other countries. And there’s a lot of uncertainty – even the health minister keeps changing his mind,” Lichtmess said.
She cites the example of Lidl withdrawing hemp products from its shelves because the company was “afraid of backlash”. “It shows that people weren’t ready for it,” she said.
Lichtmess believes the only possible near-term niche available for beverages in European markets such as Germany is the possibility of CBD-infused “sleep well drinks”, which she believes would be popular with younger and more health-conscious groups.
But all hinges on the regulation and she predicts that future German governments will be more conservative, while there is no indication when EU authorities will, if ever, resume novel food assessments for CBD in ingestible products.
“The current German government is struggling and not as popular as it was. Some of the decisions it has been making have been costly and we’re living in uncertain times right now. In times of uncertainty people turn to conservative governments. In the next election there’ll be a shift towards the middle,” Lichtmess predicted.
- Euromonitor will be speaking this month at Vitafoods Europe, in Geneva and online.
– CannIntelligence staff
Photo: Concord 90