CBA — and Other Brewers — Eye CBD, Non-Alcoholic Beverages For Opportunity

Craft Brew Alliance (CBA) is making good on its promise to innovate in products other than beer, namely low- or no-alcohol drinks.

The publicly traded Portland, Oregon-based craft beer company — which makes and markets the Kona Brewing, Widmer Brothers, Redhook, Omission and Square Mile Cider brands, and has partnerships with Appalachian Mountain Brewery, Wynwood Brewing, and Cisco Brewers – has launched what it has dubbed the “pH Experiment.”

The initiative will give 50 focus group participants a new experimental beverage each month in exchange for answering questions about the types of alcohol they purchase, their favorite producers, and the places where they like to consume beer, wine, and spirits.

Consumers will also be asked to share feedback on CBA’s experimental products, and answer questions about the possible use occasions for low or no-alcohol offerings like kombucha, according to Karmen Olson, CBA’s director of innovation.

“We are doing a lot of exploring, learning and testing, and we are willing to fail,” she told Brewbound during a recent interview.

Olson’s current job reflects what she said. She was named to the position in February after CBA eliminated an emerging business division focused on potential acquisitions in order to focus on internal innovation. She caught up with Brewbound during last month’s BevNET Live business conference for non-alcoholic entrepreneurs.

Her reason for attending an event that attracts hundreds of non-alcoholic beverage brands?

“Our interest is to understand more about that space, who that consumer is, what their motivations are, and what the occasion is,” she said.

In doing so, CBA has ramped up its innovation efforts and has begun looking beyond beer for possible future growth opportunities.

“We are willing to take risks, but calculated ones,” Olson said. “Some of those risks might be brewing kombucha, pouring it at our pub and getting some feedback about how that works. And some of those risks might be doing beers with CBD terpenes.”

Thomas Bleigh, CBA’s innovation brewmaster, is also looking into the possibility of creating protein-infused beer, and homebrewing experimental batches of saké.

“If you came into our office, you would see a wall of windows that we have taken over, and on those windows we have notes up about all of the different things we are looking at,” she said, noting that CBA recently placed an order for “medicinal mushrooms” as an experimental ingredient.

“It is really just a sandbox for us right now to test whatever we can get our hands on,” she added.

CBA isn’t the only beer company looking for non-traditional growth opportunities. The country’s two largest beer makers – Anheuser-Busch and MillerCoors – have already made forays into the non-alcoholic segment.

Molson Coors, via its TAP Ventures growth unit, purchased California’s Clearly Kombucha last month for an undisclosed sum. The company also has a minority stake in Colorado-based Bhakti Inc., a maker of ready-to-drink chai tea, and is said to be in talks with “several” Canadian marijuana companies as it considers introducing a line of cannabis-infused beverages.

A-B, meanwhile, has made a number of non-beer moves in recent years.

Last summer, the world’s largest beer company acquired natural energy drink and soda maker Hiball Inc., and in 2016 it forged a partnership with Starbucks to manufacture and distribute ready-to-drink bottled tea under the Teavana brand.

A-B, via its ZX Ventures “global disruptive growth group,” also has investments in Kombrewcha, a slightly alcoholic organic tea; Canvas, a non-alcoholic drink made from spent grain; and Owl’s Brew, which makes tea-based cocktail mixers and a tea-and-beer Radler line.

For its part, Constellation Brands, which owns a variety of wine and spirits labels in addition to the Corona, Modelo, and Pacifico import brands, is also looking to develop a line of cannabis-infused beverages. It owns a 9.9 percent stake in Canada’s Canopy Growth Corporation (WEED), the world’s largest publicly traded cannabis company.

And Heineken-owned Lagunitas Brewing Company recently announced the launch of Hi-Fi Hops, a non-alcoholic sparkling water product that is infused with THC, CBD and hop oils.

The moves outside of the beer category are in part driven by declining U.S. beer production — shipments were down 3.5 percent through May, according to the Beer Institute — and are aimed at offering a diversified portfolio to consumers that have shifted away from beer and toward other products like hard seltzer, low-alcohol kombucha, and recreational cannabis.

“Consumers are changing their definition of what beer means, and the occasion that it serves,” Olson said. “ So if the definition of beer is changing, naturally beer companies will need to have different portfolios.”

The big question for all of those beer companies, however, is how competitive they’ll be in a non-alcoholic segment that is already teeming with innovation.

“I don’t know,” Olson said when asked how successful beer companies could be in the non-alcoholic sector. “I think that is why I have such an interest in learning more about the consumer behavior and motivation behind those beverages, and less about capturing share from that category. I want to understand why the consumer is choosing that product instead of beer.”

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