Why Alcohol Companies Oppose Legal Pot in Arizona, but Support it in Nevada?
Are alcohol distributors just waiting to get a cut?
Source: US News and World Report
By Steven Nelson
May 23, 2016
An alcohol industry group is funding a campaign against Arizona legalizing and regulating recreational marijuana sales. But across Lake Mead, alcohol companies in Nevada are among the largest financial supporters of an effort to legalize pot there.
The reason for the divergence and whether the donations are motivated by greed, high-minded altruism or good business sense depends on whom you ask.
The difference between the Arizona and Nevada initiatives may offer an explanation. In Nevada, the initiative would require that licensed distributors act as middlemen between cultivators and retailers, with licenses going for the first 18 months to alcohol distributors. There’s no such requirement in the Arizona initiative likely to qualify for the ballot.
But getting that answer directly from parties involved isn’t easy, and while shared financial interest presumably guides trade groups, they’re not inclined to say so in the context of a hot social policy debate.
The Arizona Wine and Spirits Wholesale Association provided comical excuses as to why they could not comment on a large contribution in a timely manner amid jeers of hypocrisy from backers of marijuana legalization.
Association president David Bart of wine and liquor-distributing Young’s Market Company told U.S. News the group’s $10,000 donation to the anti-legalization campaign was approved by “all the principals” but referred questions to Executive Director Karie Dozer.
Dozer spoke briefly with U.S. News on Wednesday, after the donation was first reported by the Phoenix New Times, and promised “a quick call back” as soon as a meeting was over.
Two days and several attempts to re-establish contact later, Dozer called on Friday, saying her phone had gone down a waterslide and that she would supply a statement as soon as the three association principals signed off on a draft.
On Monday, Dozer did not respond to a voicemail regarding the three-company group’s motivation.
Arizona’s most prominent pro-legalization campaign sees something sinister: an effort to prevent a rival intoxicant from being made legal for adults 21 and older, and the explanation lends itself to an easy line of attack from legalization supporters.
“It is simply inappropriate and objectionable for those who profit from the sale of alcohol to use those profits to prohibit adults from using a less harmful substance,” said the chairman of the Arizona pro-legalization campaign, J.P. Holyoak, in a press release last week urging the money be returned.
Holyoak leads Arizona’s Campaign to Regulate Marijuana Like Alcohol, which appears more likely to put the matter before voters in November than a less well-financed effort.
But there are other potential explanations. Though some research suggests users may simply choose one substance over the other – threatening the alcohol industry – other research suggests pot legalization may have no effect on alcohol use, and tax data from Colorado appears to indicate alcohol sales increased along with the opening of state-legal pot stores.
Citing the apparent increase in Colorado alcohol sales, a spokeswoman for the anti-legalization Arizonans for Responsible Drug Policy, Melissa DeLaney, casts the association’s donation as purely benevolent and self-sacrificial, guided by concern about societal ills and the state chamber of commerce’s stance.
“It should come as no surprise that a member of the Arizona Chamber of Commerce and Industry – which supports ARDP’s position on legalizing recreational marijuana – has contributed to our cause,” she says in an emailed statement. “And given how much the alcohol industry potentially stands to gain, as seen in Colorado, their support speaks volumes about how poorly written this initiative is for hardworking Arizonans, as well as potential societal costs.”
Business interests aside, legalization generally is backed by a group that includes libertarians, anti-racism advocates, opponents of gang violence and the large number of Americans who consume the drug or support unpunished use by those who do, while opponents generally discuss concern about mental health, various public safety issues and the potential effect on young people.
University of California scientists appear to have figured out how to quantify THC on the breath of recent smokers.
Barrett Marson, spokesman for the pro-legalization Arizona campaign, says it appears no alcohol companies have donated to them. But in neighboring Nevada, alcohol businesses are among the largest financial donors to the pro-legalization campaign.
The Nevada pro-legalization campaign collected $12,500 from Morrey Distributing Co., $12,500 from the Nevada Beverage Co., $12,500 from Crown Beverages, $12,500 from Bonanza Beverage Co. and $12,500 from Capitol Beverages Inc.
None of the company leaders were available to discuss their stance with U.S. News, but all five are members of the Nevada Beer Wholesalers Association, which does not itself have a stance but whose representative, Alfredo Alonso, said the companies approved of the draft regulations.
“Those that have supported the petition process have done so as individual companies and only in an effort to ensure a regulatory system that is similar to the three-tier system in the liquor industry, as their goal is to safeguard regulatory integrity,” he says.
In addition to the Nevada measure, mandatory distributor licensing is included in the leading California initiative this year after a 2010 measure there lacked mandatory middlemen, eliciting alcohol industry opposition.
The California Beer and Beverage Distributors in 2010 donated $10,000 to help defeat the pot legalization Proposition 19. Spokeswoman Rhonda Stevenson said at the time the group did not oppose legalization per se, but objected to “a poorly written initiative” and said when alcohol prohibition ended “there was already a regulatory system in place to deal with the distribution or sale of alcohol.”
Stevenson did not respond to a request for comment, and it’s unclear if the group will back this year’s prominent California initiative, bankrolled by the Napster-founding billionaire Sean Parker, now that the newer proposal has a distributor requirement.
Derek Peterson, president and CEO of Terra Tech Corp., which grows non-intoxicating crops on the East Coast and is building out eight medical marijuana cultivation, processing and retail locations in Nevada while operating a successful cultivation-dispensary location in California, says Nevada’s experience with effectively and tightly regulating gambling may play some role in the local alcohol industry’s support, but says distributors are acting according to obvious self-interest.
“With 50 million people coming into a few square miles on an annual basis, they get the numbers involved, because they see the alcohol consumption numbers,” he says. “It’s a rocket ship from a business perspective to have recreational pass in Nevada with the transitory population that comes through.”
Advocates and experts say it’s only a matter of time after the Liberal Party’s election romp.
Peterson says the mandated distribution in this year’s proposed California initiative is very controversial among fellow growers, as established medical marijuana growers are used to selling their own product or selling directly to dispensaries. But in Nevada, he says, cannabis entrepreneurs are willing to accept it as a trade-off that he concedes allows for easier auditing and testing by state officials.
“The distribution model is usually a 20 to 30 percent haircut,” he says. “Nobody loves that profit being eroded out of their business, but recreational may not pass in the state without that lobbying support from a big industry like the alcohol industry.”
Kevin Sabet, leader of the national anti-legalization group Smart Approaches to Marijuana, which is struggling to stem the tide of states going green this November after cannabis breakthroughs in Colorado and Washington in 2012 followed by Oregon and Alaska in 2014, says he believes the alcohol industry is “much more interested in legalizing than not, but there will always be some exceptions, of which this case seems to be.”
Sabet points to research that shows marijuana users are more likely to have alcohol problems as reason for them to do so and says his group does not accept money from alcohol companies.
Mason Tvert, a spokesman for the Marijuana Policy Project, a national group that backs state legalization campaigns, says alcohol industry contributions are rarely seen in the legalization ballot fights to date. He helped lead Colorado’s successful Amendment 64 in 2012 and says he can’t recall alcohol industry donations flying in that campaign or the successful state efforts in Washington, Alaska and Oregon.
Although the Arizona association’s donation lends itself to a simple narrative, the alcohol industry does not speak with one voice, even in Arizona.
David Delos, president of the Arizona Licensed Beverage Association that represents retailers and bars, says the prospect of legal pot hasn’t been a big issue among members. The 11-company Beer and Wine Distributors of Arizona also has not taken a side, executive director Steven Barclay says. The Arizona Craft Brewers Guild did not respond to a request for comment.
Still, Tvert says he believes the Arizona association’s donation is a valid target for criticism.
“I think it’s a big deal for the opposition campaign that is galavanting around Arizona claiming they are concerned about public health, yet they are taking money from purveyors of a more dangerous substance,” he says. “We aren’t opposed to alcohol but we are opposed to hypocrisy.”