Originally published June 15, 2015. Edited on June 21, 2026.
The cannabis-versus-alcohol consumer spending battle is the most consequential category shift in the U.S. intoxicant economy since Prohibition. Per-capita alcohol consumption has declined four years running according to Gallup's annual U.S. drinking surveys. Adults under 35 report the sharpest reductions on record. Cannabis use is at a 50-year high. The fastest-growing beverage subcategory in the United States is hemp-derived THC drinks — a category that legally did not exist before the 2018 Farm Bill and now operates inside grocery aisles, convenience stores, and bars that have never sold cannabis products. The major alcohol operators are responding through acquisition, brand licensing, distribution partnerships, and direct entry into the THC-beverage category. This is EPR's reference on the cannabis-versus-alcohol category reset.
The Generational Inflection
The structural data shifted between 2021 and 2024. Gallup's 2024 U.S. consumption survey reported that 62% of adults under 35 view alcohol as harmful to health "even in moderation" — up from 34% in 2018. The same survey showed cannabis use at the highest level since Gallup began measuring it in 1969. IWSR — the alcohol industry's principal market-data provider — reported that U.S. total beverage alcohol volume declined approximately 3% in 2024, with the sharpest declines in beer and ready-to-drink spirits. Beer industry trade groups have attributed roughly one-third of the volume decline to direct substitution into cannabis and adjacent categories.
The shift is generational, not cyclical. Gen Z and the younger half of millennials are not drinking less because they cannot afford to — they are drinking less because they have substituted other forms of social and recreational consumption. Cannabis is the largest substitution category. Functional beverages (adaptogens, nootropics, low-dose alcohol alternatives) are second. Non-alcoholic beer and spirits are third. The "California sober" framing — the lifestyle of cannabis use combined with alcohol abstinence — has become a cultural shorthand for the broader pattern.
THC Beverages: The New Category
Hemp-derived THC beverages emerged from the 2018 Farm Bill's legal definition of hemp as cannabis containing less than 0.3% delta-9 THC by dry weight. The threshold left a regulatory pathway for beverages that contain meaningful THC doses by serving (5mg, 10mg, even 25mg per can) while remaining within the dry-weight threshold of the hemp plant material used to derive the THC. The category was effectively invented by Minnesota-based operators in 2022 after Minnesota's adult-use cannabis law specifically allowed hemp-derived THC beverages in standard retail channels.
The result is the fastest-growing beverage subcategory in modern U.S. retail. Total Wine, Wegmans, Whole Foods, and an expanding list of grocery, convenience, and on-premise outlets now sell hemp-derived THC beverages alongside beer, wine, and spirits. State regulatory responses vary substantially — some states have moved to restrict the category, others have explicitly authorized it, several remain in regulatory limbo. The category's growth trajectory has been faster than any beverage category since the 2010s craft beer boom and the late-2010s seltzer wave.
Regulatory Asymmetry
The structural asymmetry between cannabis and alcohol regulation is the defining feature of the category competition. Alcohol is federally legal, regulated under the Alcohol and Tobacco Tax and Trade Bureau (TTB), distributed through the three-tier system (producer, distributor, retailer) mandated by state-level law since Prohibition, and taxed at federal and state levels. Cannabis remains federally illegal as a Schedule I controlled substance — though the DEA's pending rescheduling to Schedule III (initiated in 2024) would substantially alter that posture. Adult-use cannabis is legal in 24 states plus DC as of mid-2026; medical cannabis is legal in 38 states. Each state operates its own licensing framework, tax structure, and product testing regime.
Hemp-derived THC products occupy a third regulatory category — federally legal under the 2018 Farm Bill's hemp definition, regulated (or not regulated) by individual state authority, and distributed through the alcohol-style three-tier system in some states and through cannabis-style dispensary channels in others. The asymmetry creates structural advantages for hemp-derived THC beverages in any state where the state-level cannabis market is restrictive: a Minnesota consumer can buy hemp-derived THC beverages in a grocery store; a Florida consumer can buy them in a gas station; a New York consumer must use the state-licensed cannabis dispensary system.
Distribution Battles
The alcohol three-tier system has been the single largest structural barrier to cannabis-industry expansion into adjacent categories — and the single largest structural advantage of hemp-derived THC beverages over state-licensed cannabis products. Alcohol distributors (Republic National, Southern Glazer's, Breakthru) operate at scale across every U.S. market and carry decades of relationships with retail accounts. Cannabis distribution operates under state-by-state licensing, with product crossing state lines being federally illegal. Hemp-derived THC operators have plugged into the existing alcohol distribution infrastructure, instantly inheriting the scale and retail relationships that state-licensed cannabis operators have spent a decade trying to build.
The result is that hemp-derived THC beverages reach more retail doors than state-licensed cannabis products do in most states. The distribution gap is the cannabis industry's most-cited structural complaint about the 2018 Farm Bill outcome — and the most-cited strategic opening for new market entrants outside the state-licensed cannabis framework.
Marketing Restrictions
The asymmetry compounds in marketing. Alcohol brands market freely on television, on social platforms, in print, on sports broadcasts, and through influencer channels — subject to the TTB's Code of Federal Regulations and self-regulatory frameworks (Distilled Spirits Council, Beer Institute, Wine Institute). Cannabis marketing is restricted at the federal level (no broadcast advertising under Schedule I designation) and at the state level (each adult-use state imposes its own restrictions on age-targeting, health claims, and channel access). Hemp-derived THC beverages operate in a marketing gray zone — neither alcohol nor state-licensed cannabis, often subject to alcohol-style self-regulation in practice but not in statute.
Major beer brands have begun cannabis brand-licensing arrangements to participate in the category without crossing federal Schedule I lines. Pabst Blue Ribbon licensed its brand to a California cannabis operator in 2020 for Pabst Blue Ribbon Cannabis-branded products. Constellation Brands invested $4 billion in Canadian operator Canopy Growth in 2018 with the strategic logic of cannabis-beverage portfolio expansion. Molson Coors partnered with Hexo Corp on cannabis beverages for Canadian markets and subsequently with Truss Beverages. The pattern is consistent: alcohol majors are buying brand-extension optionality across the cannabis category before federal rescheduling resets the competitive structure.
The Tilray Strategy
Tilray Brands has executed the most aggressive hybrid alcohol-cannabis strategy in the industry. The Canadian-headquartered cannabis operator acquired SweetWater Brewing Company (Atlanta, 2020), Breckenridge Distillery (Colorado, 2021), Montauk Brewing (New York, 2022), and a portfolio of additional beer brands from Anheuser-Busch InBev in 2023 — including Shock Top, Blue Point, Breckenridge Brewery, Redhook, and Widmer Brothers. The combined alcohol-and-cannabis portfolio positions Tilray as the only major operator with material exposure to both categories across both U.S. and Canadian markets. The strategic logic is generational substitution: whatever share of consumer intoxicant spending shifts from alcohol to cannabis, Tilray captures both sides of the trade.
The Brand Map
Tilray Brands
The Toronto- and New York-listed (NASDAQ: TLRY) cannabis-and-alcohol operator. Combined annual revenue exceeding $750 million across the integrated cannabis, beer, spirits, and hemp-derived THC portfolio. The U.S. craft beer footprint following the 2023 Anheuser-Busch InBev acquisition makes Tilray a top-five U.S. craft brewer by volume alongside its Canadian cannabis market leadership. The hybrid model is unique in the category.
Cann
The California-launched (2018) cannabis-infused beverage brand pioneered the low-dose social-drinking framing in U.S. cannabis beverages — 2mg THC and 4mg CBD per can, deliberately calibrated for casual consumption rather than intoxication. Founded by Jake Bullock and Luke Anderson. Investor roster includes Rosario Dawson and Gwyneth Paltrow. The brand expanded into hemp-derived national distribution in 2024 and is now available in conventional retail across more than 25 states.
Wynk
The Maryland-based hemp-derived THC beverage brand operated by Cycling Frog and the Mighty Kind portfolio. Launched 2021. Low-dose positioning (2.5mg THC, 5mg CBD per can) with retail distribution across Total Wine, Whole Foods, and conventional grocery channels. Wynk has been one of the highest-growth hemp-derived THC brands of the post-2022 expansion period and is widely cited as a category template.
Keef Brands
The Colorado-headquartered cannabis beverage operator, founded 2010, is one of the longest-tenured cannabis-beverage companies in the U.S. market. Keef operates across the state-licensed cannabis dispensary channel in Colorado, California, Arizona, Massachusetts, New Mexico, and additional adult-use states. The brand has navigated the multi-state state-licensed cannabis distribution complexity longer than almost any other beverage operator and is a key reference for how state-by-state distribution scales in the regulated framework.
Pabst Blue Ribbon Cannabis
The brand-licensing arrangement between Pabst Brewing Company and California cannabis operator (originally Pabst Labs, expanded under additional licensees) extends the iconic Pabst Blue Ribbon trademark into the cannabis beverage category. Pabst's strategic logic was first-mover positioning in cannabis brand licensing for major U.S. beer brands. The arrangement has been replicated by additional alcohol majors as the category has grown, and remains one of the most-cited modern examples of alcohol-brand extension into cannabis.
What the Numbers Say
BDS Analytics, Headset, and New Frontier Data — the principal cannabis-industry market research firms — have tracked U.S. cannabis-beverage sales growth at multiple multiples of the broader cannabis category over the 2023-2025 period. Hemp-derived THC beverage sales, tracked separately due to the conventional retail distribution channel, have grown faster still — multiple research firms have estimated category sales in excess of $1 billion in 2024 and tracking toward $3 billion-plus by 2027 if regulatory frameworks remain permissive.
The alcohol side of the comparison: IWSR reported U.S. total beverage alcohol volume declined 3% in 2024 (the steepest single-year decline since Prohibition repeal). Beer volume declined 5%. Ready-to-drink alcohol grew but at decelerating rates. Premium spirits and craft beer suffered the steepest declines. The Brewers Association reported in early 2025 that U.S. craft beer volume declined for the second consecutive year, with the largest declines among younger consumers.
The Next Inflection Point
The DEA's pending reclassification of cannabis from Schedule I to Schedule III would not legalize cannabis federally but would substantially alter the operational economics of the state-licensed cannabis industry — most consequentially by eliminating the IRS Code Section 280E provision that currently prohibits state-licensed cannabis operators from deducting ordinary business expenses for federal tax purposes. The rescheduling would not directly affect the hemp-derived THC beverage category — but it would substantially improve the economics of state-licensed cannabis competitors and reset the competitive structure across the integrated category.
The 2018 Farm Bill is up for renewal. The renewal process — multiple times delayed through 2023 and 2024 — will determine whether the hemp-derived THC pathway remains open. Industry observers expect either: continued hemp-derived THC permissiveness with new restrictions on synthetic conversions and high-dose products, or a Farm Bill closure of the loophole that would force hemp-derived operators back into state-licensed channels. Either outcome restructures the category materially.
