Come one, come all to see the showdown of the century! In one corner, we have wine - an elite incumbent. In the other corner we have a newcomer that's only recently gained recreational legitimacy across 10 U.S. states and medical legalization across 33 - marijuana. Theoretically, these two drugs could act as complements in the market (e.g. buy a bottle of wine, and smoke the next day to cure the hangover), but this phenomena doesn't seem to manifest in sales. Instead, wine and weed appear to be in a head-to-head, substitute-based relationship.
The idea that weed is substituting rather than amplifying wine sales is supported across a variety of metrics. According to the Economist, marijuana legalization is likely to "encourage more women, baby boomers and high earners—all stalwarts of the wine business—to smoke weed instead". In various states, for example, legalization of medical marijuana is associated with a 15% fall in overall alcohol consumption. In California, winemakers complain that they can no longer afford seasonal labor to harvest their grapes because workers have better-paid, year-round jobs on cannabis farms. Wine Spectator is suing Weed Spectator, published in northern California, for trademark infringement.
Why are we seeing a substituent rather than complementary relationship between weed and wine? Perhaps for many of the same reasons we are seeing weak sales in the wine industry among Millennials. In a post-Great Recession America, getting "bang for your buck" is the golden rule of consumption among youth. On a per glass vs. per blunt basis, marijuana is both cheaper and more effective. Marijuana also lacks some of the education barriers that may scare many Millennials away from wine - with marijuana, there's no need to pronounce French names or understand optimal drink pairings. Additionally, marijuana is the new kid on the block. Having only been recently legalized (and, in the process, receiving commiserate media coverage), marijuana may excite and entice Millennial customers in a way that wine does not (at least, not anymore). The reasons for wine's decline in the face of marijuana are likely varied and complex, but I believe a large part of the answer lies in taking a close look at Millennial drug consumption.
I definitely agree in seeing how weed is playing a substitute role instead of complement role. To me this is occurring because of the key role that millennial customers play in both of these industries. A lot of the wineries that we have spoken with in class have highlighted the important portion of the pocketbook that millennial consumers hold. However, at the same time millennial consumers made up over 50% of cannabis sales in 2017. However, while many wished that the amount of "buzz" this generation consumed would significantly increase, that has not been the case. Although it has slightly increased, there has still been a large impact on the wine industry.
ReplyDeleteMany argue that is baby boomers and Generation X were playing as large of a role in the wine industry as they previously had, the the impact would be smaller. This is because compared to millennial consumers, baby boomers share of wallet is significantly skewed higher towards wine sales than weed sales. While the difference is not as large with generation X, this generation falls somewhere between the two.
It will be interesting to see how things continue to trend as the generation after millennial begins to have more money to spend!