Cannabis Vs. Alcohol: Wall Street Analyst-Led Research Shows $29B Cannabis Surge, 18M New Users

A new report by TD Cowen analyst Vivien Azer unveils a shift in consumer behavior, spotlighting the clash between legal cannabis and alcohol sales.

“Alcohol sales in legal cannabis states underperformed by 100-150 bps over the past five years,” revealed Azer.

See Also: As Cannabis Consumption Surges While Alcohol Falls, This Expert Sees A $100B Market Opportunity For Weed

Turning to growth projections, Azer’s research — first reported by the Green Market Report (GMR) — forecasted U.S. cannabis sales surging to $29 billion by 2023, with a robust 7% Compound Annual Growth Rate (CAGR) over the next five years.

Azer, the first senior Wall Street analyst to cover this emerging industry in 2014, anticipates a paradigm shift, projecting the cannabis sector to attract 18 million new users while potentially witnessing a decline of 2 million alcohol users. 

Shifting Preferences: Colorado Leading the Way

According to the report, Colorado stands as a symbolic vanguard of evolving consumer preferences, securing an 11% market share for cannabis — a remarkable ascent from a mere 4% five years ago.

Moreover, Azer emphasized a significant trend as two-thirds of cannabis consumers confessed to curbing alcohol consumption. Among 18 to 25-year-olds, cannabis retention soared to 68%, while alcohol experienced a dip to 74% in 2022.

See Also: Colin Hanks Says ‘Cannabis Serves A Million Better Uses Than Alcohol,’ Does Not Make You Less Productive

State Performance: Legal Cannabis States Navigating Challenges

States with legal cannabis access found themselves underperforming by over 100 bps, according to the U.S. Bureau of Economic Analysis (BEA) data.

The report noted, “While select Nielsen states showed a roughly 140 bps delta. Meanwhile, the 5-year alcohol volume CAGR for adult-use cannabis states had underperformed non-cannabis states by 150 bps in IWSR (data).”

Market opportunities and stock implications mirror this transformative trend. Azer suggested short-term resilience for alcohol stocks but warned of potential impacts on beer, which witnessed a notable drop in preference among recent cannabis users — falling by six points. On a positive note, spirits like tequila and bourbon are expected to thrive in this evolving market, she said.

The analysis cited data from the National Survey on Drug Use…