Consumer demand for cannabis-infused beverages and its impact on the economic sustainability of local farms and craft beverage producers

View the project report

Commodities

• Agronomic: barley, hemp, hops

Practices

• Education and Training: decision support system
• Farm Business Management: business planning, market study
• Sustainable Communities: local and regional food systems

The emergence of niche crop markets and local food and drink value chains have offered small farmers an opportunity to diversify crop selection and increase profitability, but burgeoning markets are subject to boom-and-bust cycles that can leave farmers without an end-buyer. The craft alcohol movement has become one of these budding markets, with the number of local breweries, cideries, distilleries, and wineries growing steadily over the past decade. With this, the North Central region has seen a boost in specialty crop production to supply locally-sourced inputs to these craft producers.

The 2018 Farm Bill also legalized the production of industrialized hemp, offering yet another specialty crop for local farmers to consider. Industrialized hemp has several end-uses including fiber and feed, but the use of particular relevance here is the commodity’s cannabidiol (CBD) content. While countless CBD products have entered commerce—from CBD-infused muscle rubs to lotions to edible food and beverage—little is known about the long-run potential for cannabis-infused products, leaving farmers wondering about the economic longevity of producing for the industry.

The proposal outlined here, titled “Consumer preference for alcohol and cannabis products and its impact on the economic sustainability of local farms and craft beverage producers,” considers analyzing consumer preference for alcohol and cannabis products to uncover the preferences for the two goods and identity the demand for cannabis-infused, non-alcoholic beverages. In achieving these objectives, we will evaluate how cannabis reform is likely to affect the alcohol supply chain, and we will offer market insight to farmers and craft beverage producers on how to adapt to these evolving markets to mitigate risk and uncertainty.   

We will use data from three online surveys distributed to a representative panel of U.S. households to understand consumer preferences and attitudes towards alcohol and cannabis products. Each study will examine cannabis preferences and consumption habits as well as one of three alcohol sectors: (i) beer, cider, and seltzer; (ii) distilled spirits and mixed drinks; and (iii) wine. By partitioning the alcohol industry this way, we will identify which market segment could experience the most significant innovation given cannabis reform.

Expected output includes academic publications, extension articles, and policy briefs. Information will be disseminated to our target audience of farmers and craft beverage producers predominantly through conference presentations. Project findings will also be shared to a more general audience through podcast episodes, popular press articles, and social media campaigns.

We identify three primary learning outcomes associated with this grant proposal. First is a more thorough understanding of the alcohol and cannabis laws regulating production, distribution, and commerce, with an emphasis on the North Central region. This understanding will be obtained through a review of the academic literature and state policies. Knowledge will be disseminated to our target audience, including craft beverage producers and farmers, through various outreach and extension outlets, increasing awareness on the laws regulating farmer, producer, and consumer behavior.

Second, by identifying consumer preference for alcohol and cannabis products, we will calculate substitution patterns, or elasticities, within the industry. Generating this knowledge and sharing it with our target audience will leave members of the alcohol supply chain better equipped to manage these evolving markets.

The final learning outcome is understanding demand for alternative beverages, as this demand affects farmers and beverage producers alike. Uncovering consumer demand for cannabis-infused beverages will equip farmers and beverage producers with the knowledge they need to make production decisions.

The proposal also has three intended action outcomes. Primarily, for small scale farmers with specialty crops, the expected output will better inform decision making on niche crop selection, mitigating uncertainty about the longevity of these markets, which in turn increases expected profits. Next, the output will influence local craft beverage producers' production decisions as they continue to innovate. Finally, the proposal seeks to heighten industry collaboration amongst stakeholders across the alcohol and cannabis supply chains, increasing market coordination, participation, and lobbying efforts.