Research Suggests Marijuana Is Competition For Alcohol, Not Tobacco

Forbes wrote:

Research Suggests Marijuana Is Competition For Alcohol, Not Tobacco - The Reports

Toomaj Bungs

If you were asked to predict which industry would suffer more from the legalization of recreational marijuana, the alcohol industry or the tobacco industry, which would you choose? This was the question explored in a new article appearing in the journal Marketing Science.

The answer, researchers found, was the alcohol industry. But how they got there is perhaps as interesting as the finding itself.

A team of scientists led by Pengyuan Wang of the Terry College of Business at the University of Georgia designed a study to test whether internet browsing habits changed in response to marijuana legalization legislation. Specifically, they wanted to know if pro-marijuana legislation produced any spikes, or reductions, in alcohol and tobacco-related web traffic. This, they thought, might provide useful insight into consumers’ consumption patterns in a “marijuana-ized” marketplace.

To accomplish this, the researchers partnered with a leading U.S.-based web portal to obtain large-scale data of online searches, advertising click-through rates, and advertising revenues from early 2014 to mid-2017. The data amounted to no less than 28 million searches and 120 million ad impressions pertaining to the cannabis, tobacco, and alcohol industries.

Importantly, Wang and her team focused their analysis on states that had legalized recreational marijuana between 2014 and 2017. Six states (Alaska, California, Maine, Massachusetts, Nevada, and Oregon) met this criteria. This made it possible for the researchers to test whether marijuana legalization altered web browsing habits in the categories of interest (namely, alcohol and tobacco).

What did they find? Not surprisingly, the researchers reported that search volumes for marijuana and marijuana-related terms increased after legalization went into effect. Interestingly, they also found that search volumes for alcohol-related terms decreased significantly. To quantify the size of the effect, the researchers write, “We can infer a reduction of 10.9% in alcohol searches after recreational cannabis legalization relative to the average of the pre-treatment period.”

The same pattern of results was observed for advertising click-through rates and advertising revenues, leading the researchers to surmise that cannabis and alcohol are, to some extent, substitutes for each other.

Conversely, the researchers found that marijuana legalization significantly increased tobacco-related search volumes, advertising impressions, and advertising revenues. In other words, while marijuana may be poised to steal market share from the alcohol industry, its legalization may also serve to catalyze the tobacco market.

The authors conclude, “Historically, both alcohol and tobacco companies have been actively sponsoring/supporting campaigns against recreational cannabis legalization because they are strongly concerned that legal marijuana may pose threats to them. However, our results suggest that tobacco companies may need to re-examine their presumption and that anti-cannabis legalization is not in their best interest.”

For alcohol companies, the future appears less rosy. Perhaps following the lead of Constellation brands – who recently acquired the Canadian cannabis company, Canopy – is the smart hedge.

Leave a comment

Your email address will not be published. Required fields are marked *