Tuesday, January 29, 2019

People who make good wine have nothing to fear from cannabis competition

Graphics courtesy Silicon Valley Bank
The wine industry has been warily eyeing cannabis since before the first state legalized it. Now that a wave of legalization is spreading across the U.S., owners of small wineries are gettting nervous.

Wine sales are actually dropping for the first time in 25 years
Rob McMillan, executive vice president of Silicon Valley Bank's wine division, was especially gloomy about the future of wine in his influential annual report earlier this month. McMillan said millennials aren't buying as much wine as he expected, and they especially aren't buying expensive wine. (Here's a full story on McMillan's report.)

McMillan cited cannabis as one reason younger consumers aren't drinking as much wine. There is probably some truth to that, at the volume sales level.

Paradoxically, sales are dropping for the cheapest wines, even though supposedly-broke millennials can't afford wine. Sales for wines over $12 are continuing to climb.

Put these numbers together and here is the conclusion: Cannabis is not hurting all wine sales. It's hurting cheap wine sales. And not just with millennials. If you spend any time in cannabis shops in Northern California, you'll notice there are plenty of boomers buying weed. And as you can see from the next chart, it's not stopping them from buying wine.

Cannabis isn't displacing single-vineyard cool-climate Syrah. Cannabis IS displacing bottom-shelf jug wine.

For people just seeking a buzz, cannabis > booze.

Wine offers sensory treats that cannabis cannot duplicate. Take my word for this, as I am a regular consumer of both. I like the cannabis buzz, but no amount of marketing bullshit makes cannabis taste good. It can taste "not bad," but that's hardly what you look for in a nice bottle of wine.

As you read this, I'm off to Sacramento to hear another State of the Industry speech tomorrow, which I will report on for Wine-Searcher. I don't know what their position on cannabis will be. I do know that, from past experience, some worried vineyard owners or winemakers from the audience will wonder about the impact of cannabis on their industry.

Make good wine, folks. You'll have a myriad of other issues to worry about -- the economy, distributor consolidation, etc. -- but cannabis won't be one of them. Make good wine and charge a fair price for it. That's how wine will remain competitive with millennials, and everyone else.

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Jet Fuel said...

Amen! I continue to be dumbfounded by the myriad of articles, conferences and studies talking about cannabis and wine in the same sentence. I don't see how the two are related in any way. And I've also insisted that any self-respecting winemaker or producer that is proud of their exceptional wine would not want it in any way associated with cannabis.

Good wine is multi-dimensional and transcends age, culture, cuisine and origin. It is respected and sophisticated. Cannabis on the other hand, with the exception of perhaps some very narrow medicinal application, is good for one purpose only. The article hits the nail on the head in saying that the only segment of the industry that it may adversely affect is cheap wine. Now if respectable wine publications could please stop comparing the two.....

Unknown said...

If you aren't seeing cannabis as a competitive product (at least in an ancillary way) you are making a mistake. And if you aren't thinking that the cannabis industry is brainstorming how to make cannabis taste good you are really making a mistake. Cannabis is a nascent industry with the big players only now beginning to get involved. You can bet Altria has ideas about positioning cannabis as a premium product to compete in every segment. And with the recent stake in Juul they are looking towards vaping the THC and skipping the bad taste altogether associated with combustion as another avenue to position against those who won't smoke.

My question for you is how do you think the edibles market for cannabis will affect the wine industry? As this develops will it become a serious competitor for the wine industry?

Unknown said...

I think the other worry would be from the consumer of wine in that cannabis grows well where wine grapes grow well and cannabis farming is much more profitable per acre. Will demand grow for "fine pot" as it becomes legal in more states and countries? Will my children or grandchildren be smoking sticky To Kalon green? And will such fine pot be more affordable than the cabernet?

ned said...

I entered the CA cannabis trade in 1978. I began seriously collecting fine wines around 1990. After all these years I know both products extremely well and each far far more then most who are involved primarily with either one. There are numerous parallels.

Both like similar climate conditions, both are harmed by the same molds and diseases. The best cannabis flower is appreciated in ways very similar to wine, and similar to say, cigars. So what's this talk of "bad taste"? Good cannabis does taste good. Fine flower can and does deliver a very sensual taste experience. All sorts of shades of complexity. Just as in fine wine or fine cigars.

The sales process is also very much like that of wine. Consumers want to know about quality, can they taste test it, what can they expect, is the value there for price paid and so on.

A big issue cannabis has is that most people think it must or should be grown indoors under lights. That's absolutely wrong. It should absolutely not be grown that way. While terroir is a bit less of a thing with cannabis because it grows a full lifespan in as single season, it still is a far superior product if grown in nature. Does anybody grow wine grapes indoors? Not that I'm aware of.

W. Blake Gray said...

Hey Ned, thanks for that. I have always wondered about indoor vs. outdoor. It's odd to me that indoor gets higher prices when outdoor is more natural.

One aspect of the cannabis trade now that's very different from wine is that the chemical compounds of cannabis are being extracted out to form drug-like products: something one consumes purely for the effect, rather than something agricultural. This seems to be accelerating and appears to be the future of the industry. For wine, you can buy industrial alcohol, and people do, but when most people buy wine they believe they're buying an agricultural product.

Tommaso said...

Blake, I have a question. What do you think being high on cannabis does to your ability to evaluate a given wine? Just curious.