Why wine is dangerously exposed to the cannabis tidal wave - Comment

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just-drinks' regular wine commentator Chris Losh has been away this summer. While away, has he been smoking something? If he has, it's given him something to warn the global wine category about.

While cannabis is thought to be a threat to the beer category, wine companies should also pay heed to the changing legal landscape

While cannabis is thought to be a threat to the beer category, wine companies should also pay heed to the changing legal landscape

Talk to most of the world's winemakers about the issue of weed and they'll probably launch into a discussion on the merits or otherwise of using pesticides in between the vine rows. Ask the same question in North America, however, and the answer is likely to take the conversation in an entirely different direction.

Washington became the first state to legalise recreational use of cannabis in 2012, but others have followed at a steady rate. Today, the substance is legal in nine states, including, as of January this year, California.

The appearance of the latter in the game was, to put it mildly, a big deal. Not only did the potential population of legal pot consumers in the US jump from under 30m to nearly 70m but, since California is both immensely wealthy and home to many of the world's most entrepreneurial brains, the state's decision shifted the cannabis industry up through several gears.

California is also, of course, the beating heart of America's wine industry - and the wine industry is nervous.

Grape growers have known that legalisation was coming for a while. The public vote to legalise adult consumption of cannabis was passed in 2016, which is when George Christie, a self-described 'wine guy', put on a one-hour seminar looking at the subject. "The idea that we were going to have another competitor - and a fairly formidable one - was of some concern to the wineries," says Christie. "It was quickly obvious that one hour was just not enough - we needed a full-day dive into the topic."

The result was the birth of an annual Wine & Weed Symposium, the first since legalisation kicked in in the Golden State. The inaugural session took place last month in Santa Rosa.

Those initial fears about the size of the competitor seem to be realised.

At the event, Jessica Lukas, VP of consumer insights at BDS Analytics, pointed out that in 2014, when the use was mostly (officially at least) medical, the cannabis industry in North America was expected to be worth US$3.4bn. By 2017 (pre-Californian legalisation), it was $9bn and, by 2021 it's predicted to be worth over $20bn. The underlying growth rate is over 40% a year.

That's a lot of money that's either not being spent on wine or, worse, being taken from it.

Of course, while cannabis has only been legal for a few years in a handful of US states, its use has often been tolerated for a lot longer. This is not a product that is coming from a standing start.

What has been noticeable, however, is how its use has diversified in a relatively-short time. The majority of it might still be smoked, but much of the growth in consumption since legalisation has been in alternative products: inhalers, vapes, concentrates, and any number of edible variants from tea to pretzels. The edibles, in particular, have been very effective at pulling in consumers who don't smoke, and baulk at lighting up.

Meanwhile, the smoking business has become sophisticated enough to offer brands - Leafs by Snoop, Marley Natural, to name but two - different strengths and even variants that claim to have different effects, from stimulating to relaxing.

For a crop with relatively-low overheads that can yield ten times as much as wine per acre, there's a giddy 'Gold Rush' feel to the whole thing. It's a powerful, exciting new industry and the possibilities, clearly, are huge. Constellation Brands certainly thinks so: Last year, the group paid $190m for a 10% stake in Canada's leading cannabis business Canopy Growth Corp. Then, in August, it upped its holding to nearly 40% with a whopping $4bn investment. Not coincidentally, cannabis is due to be legalised in Canada next month.

Constellation's initial plan seems to be to make cannabis-infused non-alcoholic wine and beer (it's still illegal to mix alcohol and drugs), though presumably there's nothing to stop the company setting up a dedicated weed division either.

Diageo is strongly rumoured to be looking at a similar investment, and it would seem logical to expect that cannabis is on the radars of other large players like Accolade Wines, E&J Gallo and, of course, the brewers. Meanwhile, Heineken-owned Lagunitas already produces Hi-Fi Hops cannabis-infused sparkling water, while Molson Coors recently signed a JV with a Canadian company to produce similar non-alcoholic, cannabis-infused drinks.

As George Christie put it: "Constellation is a company that has the resources to play both black and red. If people do switch, they're going to switch to something that they also own. It's a great opportunity for the beverage alcohol industry to leverage the experience they already have."

Weed, then, is booming. The category has growth rates that established drinks categories can only dream of, and it's attracting the investments of the big companies.

So, is weed an opportunity for or a threat to wine? Let's start on a product level. There isn't, currently, a vast wine-infused cannabis category. With the almost-certain involvement of the drinks giants, however, this is likely to change. The example of Rebel Coast, which launched a zero-alcohol, marijuana-infused Sauvignon Blanc earlier this year, could be illustrative. The wine is being positioned as a fun, non-traditional, disruptive and, crucially, healthy option: Something that you can drink without fanfare, and that will give you a buzz but not a hangover.

This pitch might not be attractive to your average claret drinker, most of whom would struggle with paying $60 for a Sauvignon Blanc of any description, but it ticks an awful lot of boxes for health-conscious Millennials. It could also prove a useful first step into wine for a consumer group that has proved obstinately hard to attract.

Of course, it's too soon to know whether consumers who enter the category this way will expand into 'normal' (ie, alcoholic) wine. But, perhaps more significant is the issue of whether wine is already losing sales to weed. Cannabis consumers cover the full demographic spectrum, but their average age is 40, which puts them smack in wine's sweet spot.

According to Jessica Lukas at BDS Analytics, not many consumers use cannabis and alcohol on the same occasion, so the fact that people tend to drink rather less when imbibing cannabis isn't a big issue. What could be a big issue, however, is if cannabis starts to take over situations that were previously 'wine occasions'. While the Saturday night 'wine with the meal' is unlikely to be under threat, the cheaper Monday or Tuesday night 'wine on the sofa' might well be. 'Relaxation' is a key driver for cannabis consumers.

"If there is going to be an impact," says Christie, "it will be at the lower prices, in the $8-to-$12 range."

While alcoholic drinks come under increasing pressure from health lobbies, the movement to cannabis is very much in the other direction; from pariah to new kid at the party.

De-stigmatised, chic and available in multiple formats, cannabis is a major disruptor for the wine world in one of its most lucrative markets. The volume end of the wine category, consumed in non-food-related occasions - think blush Zin, Pinot Grigio, Prosecco et al - could be under serious threat.

Moreover, where the likes of California are now, the rest of the world might well be in a few years' time. A growing number of countries, from Australia to Argentina to Germany, have either decriminalised or sanctioned cannabis use for medical reasons. Full-on legalisation may well not be far behind

The wine trade had better wake up and smell the reefer.

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