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The state of Nevada allowed medical marijuana dispensaries to sell their existing medical marijuana inventory as “recreational marijuana” on a one-time only basis. This objective was to provide the state with an initial marijuana supply for recreational use.
The main complication in having an adequate supply of marijuana for sale is the result of an interesting court order. The courts denied marijuana distribution licenses to anyone other than those already holding existing liquor distribution licenses. When the initial supply runs out, which could occur in a few weeks, it is probable that there will be a significant disruption to the legal supply of marijuana in Nevada.
I've been following the research being done by Vivien Azer and her research team at the New York-based investment banking firm Cowen and Company. Azer's team specializes in covering the beverages, tobacco and cannabis industries. Recent research provided by Cowen leads me to believe that Nevada’s new industry could be very disruptive not only to the state’s alcohol industry but to the casino and hotel business as well.
In an April 20th report, Cowen indicated, “We believe alcohol could be under pressure for the next decade, based on our data analysis covering 80 years of alcohol and 35 years of cannabis incidence in the U.S.” In addition to this April report, Azer and her colleagues stated in May, “Over the next 14 months we expect to see four more states transition to legal cannabis, accounting for 14.5 percent of overall beer volumes (and 16.2 percent of total alcohol volumes.) Recent survey data confirms that a majority of consumers reduce their alcohol consumption with cannabis, while younger adult consumers are most likely to avoid dual-us altogether.”
A Cowen consumer survey in the United States and Canada concluded that over 60 percent of those individuals using marijuana reported a reduction in alcohol consumption when both were consumed together. The report concluded by stating “ The consistent trend of consumers either moderating their alcohol consumption or avoiding dual-use altogether is clearly problematic.”
The impact of the recreational marijuana industry could pose a devastating blow to Nevada’s cash-cow, its casino and hotel industry.