“Share of Buzz” may be one of the biggest challenges facing brands looking to enter the cannabis beverage space, according to a panel discussion hosted by Duane Morris LLP and the American Trade Association for Cannabis and Hemp’s (ATACH) Cannabis Beverage Council on Wednesday.
The webinar, titled The Cannabis Beverage Revolution: Is Beverage Cannabis’ Next Big Wave? featured brands and industry experts including Cann co-founder and CEO Jake Bullock, Boston Beer Company head of cannabis Paul Weaver, Wine and Spirits Association EVP of government affairs Dawson Hobbs, and ATACH president Michael Bronstein. The panel was moderated by Duane Morris LLP partner Seth Goldberg.
While beverages comprise just a fraction of the U.S. legal cannabis market, many in the space – from startups to industry leaders – have seen opportunity in the category as a potentially significant driver of future cannabis sales. But, according to the panelists, as THC-infused drinks begin seeing mainstream adoption, they will have to compete more with alcoholic beverages and other “mild intoxicants.”
“Sober curiosity is really driving people to look for alternatives,” Bullock said during the discussion. “Interestingly, though, we don’t believe that they’re going to land in a place of actual sobriety or [at a] product that doesn’t actually deliver on that social buzz. And so what the opportunity that we can meet with cannabis beverages is delivering on that buzz, and having folks think about their overall consumption of mild intoxicants and that sort of ‘share of buzz’ as being the more relevant metric.”
Last year, Boston Beer Company announced it would begin producing cannabis-infused beverages in Canada, where marijuana has been legal since 2018, through its subsidiary, BBCCC Inc. During the discussion, Weaver offered insight into the company’s approach to the cannabis space, noting that no THC-infused products will launch in the U.S. until federal legalization occurs but that the beer giant sees the category as vital to maintaining long term future growth.
For Boston Beer, two key motivating factors driving its push into cannabis drinks are the incremental growth opportunity to bring in new consumers via expanded use occasions, and as a way of mitigating potential lost sales from consumers turning away from beverage alcohol.
“For us, having a firm understanding of cannabis isn’t just about incremental growth, which is pretty attractive in and of itself,” Weaver said. “But we’ve got to protect the mothership, and understanding how consumer choice is evolving is really paramount.”
Bullock noted that Cann’s low dose (2 mg of THC) social tonics have appealed to a large cross section of demographics, but one of the most common traits among new consumers is that they are people who are “frustrated with alcohol.” As THC beverage producers eye mainstream breakouts, he said creating products with doses “at the right level for an alcohol drinker” will be vital for sustaining growth and driving repeat purchases.
Asked whether adding a cannabis division could be disruptive to workplace cultures in established companies looking to enter the space, given that some employees may have differing opinions about whether marijuana should be legal, Weaver highlighted shifting attitudes with an overwhelming majority of Americans now favoring recreational legalization and more than 90% favoring medical legalization. While the situation could vary from company to company, Weaver said for Boston Beer the integration of cannabis has been welcome.
“In hindsight, perhaps our reticence of getting [into cannabis] seems maybe overly conservative,” he said. “Because I would say internally, we’ve really been embraced as just another division of the company. Beer and cannabis are very much close cousins plant-wise.”
On the regulatory level, Bronstein said ATACH is focused on ensuring that federal legalization bills proposed in Congress factor in the legal framework for beverages.
He noted, for example, that some state regulations require motor vehicle operators to keep cannabis products in a locked container, which leads to murky interpretations when it comes to packaged THC-infused drinks.
“Beverage should be at the forefront, it should not be an afterthought, of any advocacy,” Bronstein said. “Which is one of the reasons why we created our [Beverage Council] to begin with, so that cannabis beverage [makers] could be speaking with a voice on these issues. We found that too often, beverage has been an afterthought in some of these discussions at the federal level, and when we’re talking about regulating cannabis, we have a lot of areas that do overlap with the traditional beverage industry.”
Looking forward, Bullock said regulation will be necessary for the long term growth of cannabis beverages as overhead costs associated with manufacturing products state by state are prohibitively expensive for most companies. In particular, the business model of producing drinks in multiple states forces the end product to be more expensive (Cann retails for about $24 per 6-pack, for example) and that hurts trial and consumer adoption, particularly when beer and other alcoholic drinks are significantly cheaper.
“Until you have either the ability to send these products across state lines, or you see the volumes materialized from a consumer demand standpoint – which I think has a lot to do with more dispensaries and more places that are optimized for sale of beverage – [it’s hard] to justify spending an order of magnitude more on equipment that you may just run a week a month,” Bullock said. “And so it’s kind of a chicken and egg problem. But that creates all sorts of operational costs and hurdles for us to really get the consumer adoption where we need it to be.”