Marijuana and Labor Shortages Are Giving the California Wine Industry a Headache

Article by John Kell, Fortune

Marijuana and Labor Shortages Are Giving the Wine Industry a Headache

The U.S. wine industry is poised for another banner year in 2017. Sales are projected to rise by as much as 6% and the total harvest in California—by far the largest wine-producing state—should climb 7% to nearly 4 million tons crushed. The coveted millennial generation is increasingly paying more attention to wines.

Marijuana’s threat

Beyond the pressure on the work force, some wine producers expressed worries about the threat of competition from drugs that are a substitute to wine. Specifically, they are worried about the movement by several states to legalize cannabis. As of today, eight states—including California—and D.C. have legalized marijuana for recreational use. More than a dozen additional states have approved the drug for medical use. Americans and Canadians have spent an estimated $53.3 billion on marijuana annually, with legal purchases on the rise.

That’s led some observers to fret that sales could decrease for alcoholic beverages. Cowen & Co. analyst Vivien Azer issued a widely cited report late last year that said there were signs cannabis sales were hurting demand for beer across several states where marijuana was legal. Domestic big beer brands like Bud Light and Coors Light appeared to face the greatest competitive threat to cannabis, while imported beers looked the most immune.

Wine producers are worried their industry could see a slowdown as well. If the trend were to mirror what some are claiming is happening in the beer world, lower priced wines could see the greatest dent to sales. Fine wines, which are often consumed for special occasions and often at expensive restaurants, will likely be less hurt by the rise of marijuana.

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