A historic endorsement of pot legalization by a key wine and beer trade group marks the latest foray by alcohol producers into cannabis, with more moves expected, cannabis industry players told Real Money on Monday.
While alcohol makers have been seen as a potential opponent to a rival form of recreational imbibing, some major companies in the beer and wine space have already launched investments into the business prior to last week's pro-pot statement from the Wine & Spirits Wholesalers of America (WSWA).
Spirits giant Constellation Brands ( STZ) for example, late last year invested $186 million for a 9.9% stake in Canopy Growth Corp ( CGC) and Molson Coors ( TAP) has reportedly been eying an investment in the space.
"As cannabis goes more mainstream, people will want to go to bars to consume it, but they're not going to bring an edible and eat it there -- they'll want to buy a drink," said Eric Baum, managing director and co-founder of Solidea Capital, an investor in the legal cannabis space. "Wine and beer companies are starting to see this as a huge opportunity."
Marking the first and only major alcohol trade group to do so, the Wine & Spirits Wholesalers of America (WSWA) said on Thursday, July 12, that it supports state's rights to run legal cannabis markets. It called on the federal government to respect the rights of states to legalize cannabis if they adopt cannabis market regulations that meet a framework similar to beverage alcohol.
"Eight decades ago, Americans acknowledged that the prohibition of alcohol was a failed policy," WSWA acting executive vice president Dawson Hobbs said in a prepared statement. "The state-based system of regulation, adopted after Prohibition, created a U.S. beverage alcohol market that is the safest, most competitive and best regulated in the world."
Legalization should include age restrictions on buyers, as well as efforts to license and regulate growers, distributors, retailers and testing laboratories, the WSWA said.
Morgan Fox, media relations director for the National Cannabis Industry Association, the Washington-based cannabis lobbying group, said the WSWA's statement signals wider acceptance of cannabis.
"This is a big sign that the stigma surrounding cannabis is really starting to dissipate," Fox said. "Even potential market competitors recognize that criminalizing cannabis producers or consumers is simply bad policy for everyone."
A source familiar with the WSWA said it's not known yet if the group will coordinate lobbying efforts with the NCIA, or if their invovlement in the issue will be limited to its public statement. A spokesperson from WSWA did not return a phone call by publication time.
No other alcohol beverage trade groups has yet joined in with the WSWA.
The Beer Institute, for example, has not made any public comment either in favor of or against cannabis legalization, a spokesperson for the group said.
Baum, who also sits on the board of cannabis consumer products company Kush, said beer and wine sales have often been impacted in states where adult use of cannabis has been permitted.
This has been a signal to the industry to ink alliances or make acquisitions with cannabis companies to take up the slack.
"They're starting to accept that the cannabis business is not going away, Baum said. "Some are looking to make a go at it."
Baum said it's likely that the announcement by the WSWA may have been made ahead of potentially major alliances or acquisitions between alcohol and cannabis companies.
As a board member of cannabis packaging and distribution company Kush, Baum said the U.S.-based company is always speaking to customers and monitoring emgerging industry trends to come up with new packaging, branding, and other ancillary services.
"We want to be a dominant provider for the industry as a whole and are looking at...evolving product form factors and formats," he said. "We're considering all options that may include alcohol as an ingredient."
Kush is also studying products to prevent children from opening bottles containing alcohol or cannnabis, he said.
