Canada: Beer volumes down by 3% through November 2019

Smoke more, drink less.

That appeared to be the trend among Canadians in the first full year of legal cannabis, when beer volumes fell by 3 per cent through November, according to data from Beer Canada, the Financial Post reported on January 7.

“This is far worse than the trends seen between 2014-2018, where beer industry volumes fell an average 0.3 per cent,” and appears to be related to Canada’s legalization of pot in late 2018, said Cowen analyst Vivien Azer.

Domestic beer volumes slid 3.9 per cent through November, while imported beer volumes grew 1.4 per cent. Cannabis consumers appear to prefer mainstream beer “as they pursue better ‘buzz for your buck,”‘ Azer said in a note published on January 7.

There’s some debate about how much impact marijuana legalization has on alcohol consumption, although surveys of pot users indicate that they tend to drink less when they’re high. Declining sales have led to several alcohol-cannabis partnerships, including Constellation Brands Inc.’s investment in Canopy Growth Corp., Anheuser-Busch InBev NV’s joint venture with Tilray Inc. and Molson Coors Brewing Co.’s partnership with Hexo Corp.

To be sure, the Canadian cannabis market is still tiny. Annual sales based on the most recent monthly data would be C$1.5 billion versus C$9.2 billion for beer and C$23 billion for alcohol.

However, Azer said she expects Canada’s launch of newly legal pot products like vapes, edibles and cannabis beverages to “perpetuate this trend” of declining beer volumes, and said she favours cannabis over mainstream beer as an investment.

Cannabis stocks have been on a steady downward trend since last spring. The sector retreated again on January 7, with the Horizons Marijuana Life Sciences Index ETF falling as much as 2.2 per cent. If it closes at that level, it would be a record low.

06 January, 2020