CBD and THC beverage brands are taking a consumer-centric approach to product creation, offering credible alternatives to alcohol, reports Amy Hopkins
For some time now, the drinks industry has faced a potent disruptor: cannabis. CBD and THC-infused beverages are becoming big business as cannabis suppliers focus more on edibles, and as drinks makers move into cannabis.
The category is rapidly accelerating, with market researcher BDSA Analytics estimating that in the US the total cannabinoid beverage market will develop into a “$1bn opportunity” by 2022.
A significant trend driving the segment is health and wellness, which has seen drinkers increasingly seek out alcohol alternatives. In tandem with this movement, consumers are becoming more curious about cannabis, but are looking for ways to enjoy it without inhalation. “We know from research that beverages offer a familiar format for those new and
curious consumers who may be intimidated by the cannabis category,” says Tara Rozalowsky, vice-president of beverages and edibles at Canadian cannabis producer Canopy Growth Corporation. “Beverages are a familiar and convenient format that fit into daily routines. They also play to different occasions and fulfil different consumer need states, depending on the cannabinoid and desired effect.”
In this respect, THC and CBD take on very different roles. In simplistic terms, both THC and CBD are cannabinoids (cannabis compounds), but THC possesses psychoactive properties, while CBD is non-intoxicating. Research has, however, shown that CBD possesses functional attributes, such as the ability to relieve physical pain and mental stress. As such, the beverages that each compound is incorporated into are often designed with different consumer motivations in mind.
Rozalowsky explains that at Canopy Growth “THC cannabis beverages are designed to disrupt the alcohol industry and attract new-to-cannabis users to the sector. Our lower dose options (2.5-5mg of THC) are sessionable, social and can be felt quickly without the drawbacks of alcohol (such as calories and hangovers)”.
Meanwhile, CBD beverages offer a “clean, balanced and sessionable alternative” to the “stimulants, sugar and artificial ingredients found in most sodas, coffees and energy drinks”, claims Rozalowsky. Though as the no/low trend continues to grow, CBD products can also act as alcohol replacements, especially when their taste and format mirror that of a traditional alcohol category.
While Canopy Growth initially focused its beverage operation on THC, the group recently expanded its offering to include CBD drinks. After building the brand in Canada, Canopy Growth introduced its Quatreau line of ready-to-drink sparkling CBD beverages to the US market earlier this year. The brand was created using insights from US drinks firm Constellation Brands, which has built a multi-billion dollar take in Canopy Growth since 2017.
Each Quatreau beverage is sugar-free and combines 20mg of hemp-based CBD with carbonated water and natural flavours. During the development of the range, Rozalowsky says that Canopy Growth and Constellation determined three key differentiators Quatreau could own: the highest CBD potency at a lower price point, zero sugar and low calories, and pure hemp CBD isolate for a consistent THC-free experience.
“Beverages are fuelling CBD category growth, particularly as consumers turn to this powerful cannabinoid to cope with both everyday stressors and the ongoing pandemic,” she adds. “In the US in particular, the market potential for CBD infused beverages is extremely promising and has the potential to disrupt other traditional beverage formats, from sparkling water and soda to beer, wine and spirits.”
To capitalise on the opportunity, players are investing heavily in new production capabilities and facilities, and are striking up partnerships to expand their businesses. For instance, BevCanna recently gained access to a “coast-to-coast” distribution network in Canada through its new partnership with cannabis cultivation and extraction company Stigma Grow. The move will support the growth of BevCanna’s in-house white-label and partner brands.
In 2019, BevCanna made its cannabis drinks debut with Anarchist Mountain Beverages, incorporating THC, alkaline spring water and botanical flavourings. “Anarchist Mountain Beverages is a brand that speaks to the values held by the craft beer and cocktail consumer,
a consumer who is now interested in exploring cannabis-infused products,”
BevCanna head of brand and innovation Don Chisholm said at the time. BevCanna is also the exclusive Canadian licensee, manufacturing and distribution partner of the No.1 US cannabis beverage brand Keef Brands; in turn, Keef Brands provides BevCanna’s house brands access to its extensive manufacturing and distribution network in the US. BevCanna also recently entered into two white-label agreements with State B Beverage and Chapeau Noir owner Enthusiasmus.
Rapid product range growth
The range of cannabis-based drinks on the market is growing rapidly, particularly as the ways of infusing cannabinoids into liquid improves. An increasing number of next-generation cannabis beverage makers use nano emulsification, which breaks down cannabis into water-soluble drops, allowing the body to absorb the cannabis more efficiently.
BevCanna uses Nextleaf Solutions’ ‘Rapid Emulsion Technology by Oils’ process. “Made with Nextleaf’s high purity cannabis distillate, Rapid’s unique structure and composition allows the final ingredient to be fundamentally tasteless, odourless and achieve optical transparency through uniform and complete dispersion in water,” says BevCanna CEO Marcello Leone. “Ten years of R&D has resulted in a patent-pending emulsion technology adapted to cannabinoids, to deliver rapid onset of THC, CBD and other cannabinoids.”
Product innovation is also being ramped up by a swathe of new players hitting the market. Newcomer CannaBev is aiming to create “the world’s best-tasting social and functional cannabis-infused beverages,” says COO and head of innovation Stephen Dillon. Eventually, the group will create a wide-ranging portfolio of beverages but will start by launching its THC and CBD beer brand Turtle Roll.
“The size of the prize and beer is absolutely huge, and the alcohol-free beer market is in double-digit growth, so that’s why we’ve decided to channel our energy into the beer, launching in the UK and one state in North America,” says Dillon. He adds that while the coronavirus pandemic has “put everything on hold”, CannaBev has used the time to “work on the packaging, refine the recipes and work on our investments”.
In addition to Corona-maker Constellation Brands, other big beer businesses — which arguably face the greatest challenge from cannabis beverages — are also getting in on the action. In 2018, Molson Coors Canada and Hexo Corp, a consumer packaged goods cannabis company, formed the Truss Beverage Co. joint venture to develop non-alcoholic cannabis-infused drinks. “Eight months ago we launched the largest and most diverse portfolio of cannabis beverages in the industry, and feedback from consumers and industry alike has been overwhelmingly positive,” says Truss Beverage Co. head of marketing
Lori Hatcher-Hiller.
She adds that the five-strong range has been built around five key consumption occasions, enabling Truss to “develop a full portfolio to fit the needs of various legal-age consumers”.
One of the key findings from the group’s consumer research was that drinkers “generally didn’t want to be able to taste cannabis in a beverage”, says Hatcher-Hiller. As such, Truss sought to disguise the smell and taste of cannabis in its drinks, with the exception of its House of Terpenes brand, which elevates the flavours of cannabis using botanicals.
“We believe both innovation and product education are vital for the continued growth of the category,” says Hatcher-Hiller. “The tastes and preferences of consumers are evolving as they learn more about cannabis beverages, and it’s vital that as an industry we continue to listen and innovate to meet their needs. Our focus over the next six months is twofold: to continue innovating within our current portfolio, as well as looking at the potential for additional brands and beverage types that bring an entirely new offering to the category.”
In January this year, Truss CBD USA, a separate entity to Truss Beverage Co., launched the Veryvell line of sparkling CBD beverages in the US state of Colorado.
Meanwhile, US-based Parallel is planning to move into cannabis beverages in the first half of this year, starting with a single-use tincture before expanding to a “much broader line of SKUs over time,” says chief strategy and innovation officer Jay Holmes.
Large-scale cannabis innovation has been relatively limited in the US while marijuana use remains illegal under federal law (in contrast with Canada, where recreational cannabis use was legalised in 2018). However, 16 US states and Washington DC have legalised recreational and medicinal cannabis use, and the industry is confident the time is nearing for nationwide legalisation.
“As legislation evolves and points of distribution increase, we are extremely bullish in the cannabis beverage market,” says BevCanna’s Leone. “Consider this to be the end of Prohibition 2.0.”
