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Showdown: Cannabis vs Alcohol

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Showdown: Cannabis vs Alcohol

Who will win? Cannabis vs Alcohol

This is the question haunting those at the top of Alcoholic Beverage companies around the world, and making investors increasingly interested in the new green crop.

As the total size of the market increases in Cannabis we can see why, our consumer base is growing while one could argue the alcohol industry's is shrinking.  

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The interesting trend is not simply the total growth but also where that growth comes from. 

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What do these images tell us? That as users of cannabis increases, alcohol consumption decreases. 

In fact (~60%) of monthly cannabis users surveyed all said cannabis has reduced their alcohol consumption, regardless of alcohol preference. While New Frontier Data found that nearly half (45%) of cannabis consumers who also drank expected to eventually replace at least some of their alcohol use with cannabis. For those who enjoyed the taste and traditions yet worried about the health effects of alcohol, a new profusion of non-alcoholic, cannabis-infused beer and wines are (where legally available) offering some intriguing potential replacements. Now this is interesting in and of itself as a tailwind that is going to fuel cannabis companies growth however as it becomes easier to access cannabis we see something interesting happening.

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More users who had previously used cannabis before are now re-engaging. So we have two trends, first is that current cannabis users consume less alcohol (that affect seems to continue) and secondly as more cannabis users come online this trend may accelerate. 

What does this mean for us as cannabis investors?

  1. Large acquisitions of cannabis companies by Alcohol companies as we've already seen with Constellation brands amongst others.

  2. Alcohol companies creating their own cannabis and CBD beverages as Molson Coors is here.

  3. Increase in market share from Alcohol to Cannabis, which simply means more sales and thus more profits to us, theoretically.

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That may be why 2018 looks to have been the worst year for beer sales in nearly a decade. 

As we look ahead with more medical and adult use cannabis markets coming online, cannabis is looking up and alcohol, well, alcohol needs to get creative to compete.

Ahead: Look for more acquisitions in alcohol and cannabis, more partnerships and more sales swaying away from wheat and into another plant. 

TOTD: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
— Warren Buffett

This quote really sticks with me, it's what I remind myself when so many are concerned about this space. When there is no more concern about cannabis, when greed runs rampant, that is when we must be cautious.

I believe whole heartedly in what we are doing as a generational wealth creation event if we do this right.

That's why some of our biggest investors at CCP are former alcohol, CPG and beverage execs. Not all companies will be winners, far from it, but those who do this strategically just may be. 

Codie Sanchez

Cresco Capital Partners

Disclaimer: This report reflects the current opinion of the authors, aka me. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security. The fund is open only to accredited and qualified investors. And in investing you should always question everything.

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