BOOZE FIGHTS POT FOR PROFITS
Liquor stores may cash in on cannabis
Legalized marijuana could burn into booze profits, say Alberta liquor retailers.
But the line between the two sectors is set to become increasingly blurred as some of those booze merchants make peace with pot by either switching over to the cannabis side or expanding into it.
Even before the arrival of legal marijuana, many liquor retailers, particularly in Calgary, have seen the economic downturn take a fiveto 10-per-cent bite out of their sales volume over the past three years, said Ivonne Martinez, spokeswoman for the Alberta Liquor Store Association.
“Cannabis is an opportunity to make up that loss,” said Martinez.
“It’s very similar to alcohol — we know how to do this properly and would be well-prepared to do so.”
But given the experience of several years of legalized pot in some U.S. states, that loss could well be extended by cannabis retail here, particularly hitting beer brewed by larger producers, said Martinez and others in the industry.
“All liquor stores are bracing themselves for that,” she said.
“The members are preparing to deal with it, they’ll have to order new brands and do new marketing.”
Research has shown consumption of some alcoholic beverages has gone down by as much as 15 per cent in states such as Colorado since they legalized casual pot sales a few years ago.
It’s thought some tipplers are replacing a portion of their drinking with easily accessible cannabis products.
In its annual report to the U.S. Securities and Exchange Commission at the end of 2017, brewing giant Molson Coors stated legalized pot in the U.S. and Canada could cut into sales.
“Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer,” it states.
That could well be true, said James Burns, CEO of Edmontonbased Alcanna Inc., which plans to operate cannabis stores as well as the liquor outlets it’s operated for years, most notably Liquor Depot.
“It’s certainly happening in some U.S. jurisdictions and in Alaska, I’d say we’ve seen a decrease in sales, mostly beer,” said Burns.
There’s some evidence to suggest marijuana, particularly in its non-smokable forms, has tapped into white wine revenues among middle-aged women in California, he said.
In anticipation of Canadian cannabis legalization on Oct. 17, Alcanna dropped its previous corporate moniker, Liquor Stores N.A., last spring — its new name a marriage of alcohol and cannabis.
It plans to open up to 37 cannabis stores in Alberta, with a few of them converting from liquor to cannabis.
In Calgary, one of the company ’s proposed pot stores would be in what’s now a sports bar at 14th Street and 17th Avenue S.W.
Further reflecting this synthesis of substances was cannabis producer Aurora purchasing 25 per cent of Alcanna’s stock earlier this year.
Some liquor retailers who aren’t exiting that sector are moving sideways, said Alberta Gaming, Liquor and Cannabis spokeswoman Kaleigh Miller.
“There are those who aren’t leaving the liquor industry, but they ’re also going into cannabis,” she said, adding legal pot could take the fizz out of some beer sales.
Burns said he’s not surprised smaller operators in the liquor sector would be switching sides.
“There may be some guys who think liquor’s a pretty low-margin business compared to cannabis,” he said, adding overhead in the pot business might alter that perception.
“Our rents have doubled, just for cannabis.”
Those industries’ cross-pollination can also be seen on the Alberta Liquor Store Association website, which includes a cannabis retail link.
A recent association conference call centred on the marijuana business, with some of its members and licensed producers suggesting the group expand to represent pot merchants, said Martinez.
“We’ll have to see what’s on the horizon, how everything shakes out,” she said.
Those discussions also wandered into the highly specialized world of cannabis strains, talk that might seem familiar to wine aficionados, said Martinez.
“They ’re like sommeliers, it’s become very sophisticated,” she said.
Calgary Co-op and Loblaws, which already operate liquor outlets, are also entering the cannabis market, though Sobeys has opted to stay out of the recreational bud market.
And some brewers, such as the makers of Corona and Modelo beers, are getting into the cannabis beverage market while Molson Coors is exploring the field.
It’s certainly happening in some U.S. jurisdictions and in Alaska, I’d say we’ve seen a decrease in sales, mostly beer.