U.S. alcohol industry faces split as THC drinks gain market share

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U.S. legislation effective December will cap THC in drinks at 0.4mg, forcing most current products off shelves and dividing alcohol industry interests.
THC drinks, leveraged by the 2018 hemp legalization, now generate over $1 billion annually, with store sales up 74 percent to $289 million year-over-year.
Trade groups push for stricter THC regulations while some wholesalers warn caps could cut up to a fifth of retailer revenue and drive black-market activity.

December THC cap sharpens industry divide

As reported by the Financial Times, brewers and distillers are pressing for tougher curbs on hemp-derived THC drinks, while wholesalers and retailers are fighting to keep the products in mainstream sales channels.

Legislation due to take effect in the U.S. in December will cap the amount of THC allowed in drinks at 0.4mg, a threshold that manufacturers say would force most current products off shelves. The change is also set to open the way for a new regulatory framework for the category.

The dispute reflects diverging commercial interests within the drinks business. Trade groups including the Distilled Spirits Council of the United States and the Beer Institute have lobbied for stricter rules, arguing the market needs tighter control, while the Wine and Spirits Wholesalers of America warns the restrictions could erase as much as a fifth of revenue for some retailers.

Wholesalers instead want THC beverages folded into the long-established three-tier system used for alcohol distribution, under which products move from producer or importer to distributor and then retailer. Dawson Hobbs, head of government affairs at The Wine & Spirits Wholesalers of America, says the sector fears an outright ban would push responsible producers out and encourage black-market activity.

Consumer shift adds pressure on alcohol sales

The rise of THC drinks traces back to the 2018 legalization of hemp production in the U.S., which created a loophole for hemp-derived THC products. That opening has helped brands such as Wynk, Crescent and Nowadays expand into grocery, convenience and liquor stores across much of the country, although some states have already imposed their own restrictions.

Consultancy Whitney Economics estimates THC drinks now generate more than $1 billion in annual revenue. NielsenIQ says more than a quarter of U.S. adults have tried THC-infused beverages, and sales at tracked stores rise 74 percent in the past 12 months to $289 million.

The category's growth contrasts with a broader downturn in alcohol, as healthier lifestyles and pressure on disposable incomes weigh on demand for beer, wine and spirits. Hemp-derived THC seltzers are marketed as fruit-flavored, hangover-free alternatives, intensifying competition for shelf space and consumer spending.

Not all alcohol producers support closing the loophole. Tilray Brands, which earlier this year bought British brewer BrewDog, sells spirits, craft beer and THC drinks including Fizzy Jane's and Happy Flower, and chief executive Irwin Simon says he expects THC products to cannibalize alcohol sales because consumers view them as calming and free of hangovers.

Our earlier report on Moody’s upgraded global growth outlook highlighted stronger consumer spending and a steadier labor market as key drivers of the recovery, supported by higher vaccination rates and easing lockdowns. It also noted that persistent inflation and ongoing supply-chain disruptions remained major risks that could slow momentum across regions and sectors.

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