Legalized Marijuana Could Boost Chipotle, Yum Brands, Threaten Beer, Bernstein Says

Bernstein’s Trevor Stirling and team released a very serious report on a very serious topic today–whether the continued legalization of marijuana will pose a threat to beer. Their conclusion–and more on this in a bit–is that the outcome is far from certain.

REUTERS

But buried at the end of the report is a list of companies Stirling thinks will benefit from the continued legalization of marijuana–namely those that can cater to a case of the munchies. Stirling names four: Chipotle Mexican Grill (CMG), Domino’s Pizza (DPZ), PepsiCo’s (PEP) Frito Lay and Yum Brands’ (YUM) Pizza Hut and Taco Bell.

As for beer, well the open question is whether marihuana will complement or replace beer. Personally, I’ve always assumed drinkers drink and tokers toke, but Stirling recommends watching Colorado and California for clues as to how it all plays out:

Op-ed views and academics have very differing points of view on the interactions between beer and weed. Our analysis of the legalization of medical marijuana in the 10 most populous states found that that: in the 3 years before legalization of medical marijuana, beer consumption was falling 1% pt faster than the national average; but in the three years after, per capita
consumption trends were broadly in-line with the national average. So, if anything, this indicates that the legalization of medical marijuana had a positive impact on beer volume trends.

All the empirical studies conducted so far are based on the legalization of medical marijuana, with recreational use only recently being made legal in just two states. It will be crucial to watch consumption patterns in these two states over the next few years to see if there is any effect on alcohol sales in general and beer in particular, and whether there is a marked difference from the impact of the legalization of medical marijuana.

Shares of Chipotle Mexican Grill have gained 0.3% to $662.26, while Yum Brands has advanced 0.9% to $69.62, Domino’s Pizza has risen 0.3% to $76.95 and PepsiCo has jumped 2% to $95.43.