Pubdate: Thu, 11 May 2017
Source: Toronto Star (CN ON)
Copyright: 2017 The Toronto Star
Author: Ross Marowits
Page: B1


MONTREAL- The recreational marijuana industry is expected to take a
sip of less than 1 per cent initially out of annual Canadian alcohol
sales once it becomes legal, a new analysis says.

The Anderson Economic Group, a business consulting firm in New York,
says legalization of marijuana would sap $160 million out of the
country's $22.1 billion booze sector, rising as use of the drug expands.

While there are numerous unknowns governing the sale of marijuana, the
Anderson Economic Group based its projections on alcohol sales in U.S.
states that have legalized the drug. It also took into account a host
of factors in Canada, including spending patterns, income and

The beer market, which is worth about $9.2 billion, is anticipated to
take a $70-million hit from in the first year of marijuana
legalization, the Anderson Economic Group said.

"It won't affect spending patterns necessarily the first year to the
degree where individuals' buying habits will change overnight," said
Peter Schwartz, an Anderson consultant and editor of its biannual
Cannabis Market Report that will include the analysis in its summer

A Deloitte report estimated that the market for marijuana could be
worth up to around $22.6 billion a year, including about $4.9 billion
to $8.7 billion from the sale of the substance, with the rest coming
from the ancillary market including growers, testing labs and security.

Analyst Vivien Azer of U.S.-based research firm Cowen and Company is
anticipating the alcohol industry could be under substantial pressure
over the next decade if young people continue to take a pass on drinking.

In a report released last month, Azer said just under 82 per cent
of18- to 29-year-olds in Ontario consumed alcohol in 2015, down 5.5
percentage points since 2008.

Meanwhile, marijuana use has remained steady at around 34 per cent to
36 per cent.

"Our focus on these younger consumers reflects our belief that the
experimenter of today is the leading consumer of tomorrow," said the
report by Azer, who also covers Canopy Growth.

The head of Molson Coors Canada, the country's second-largest brewer,
said there is conflicting data about what marijuana legalization will
do to alcohol sales, but he is watching the issue closely.

"I don't think we can say we're worried," Frederic Landtmeters said in
an interview.

"We are conscious that this is something that will come up that may
have an impact."

Luke Harford, president of Beer Canada, said he believes the country's
aging population and relatively high taxation are bigger threats to
the industry than marijuana.

"We really see beer as being a product that has a long history in
Canada and is part of social occasions and celebrations that just
aren't tied to what marijuana is tied to," he continued.

As for taxes, Harford said he doesn't want the government to give
marijuana "a free ride."

"We want to make sure that we're not in the market with one hand tied
behind our back."

Spirits Canada president Jan Westcott said forecasts on the impact
marijuana will have on the alcohol business are highly speculative at
this point.

"As you get down to such small numbers in the overall market you have
to start wondering about the accuracy of any projections," he said.

"We're all anxious to know the answer to that. The fact is, nobody
really knows."

The federal government is aiming to make the recreational use of
marijuana legal on July 1, 2018.
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