Brewbound Podcast: Paul Weaver on Boston Beer’s Cannabis Plans

[00:00:00] Jessen Fonte: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with the Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch the Brewbound team at booth 956 during CBC. Next on the Brewbound podcast, we discuss Boston Beer's cannabis plans. Hello and welcome to the Brewbound podcast. My name is Justin Kendall and I'm the editor of Brewbound and I'm joined by Jessen Fonte, the managing editor of Brewbound. What's up, Jess?

[00:00:53] Zoe Licata: Not much, Justin. How are you?

[00:00:55] Jessen Fonte: doing well. And we're also joined by Zoe Licata, Rebound reporter extraordinaire, Generation Z consultant, all the above. What's up?

[00:01:06] Modern Times: Hello, I feel like I need to update my business card with all these titles.

[00:01:10] Jessen Fonte: It would be a long business card. There's not enough ink. This week we've got a featured interview with Paul Weaver, the head of Boston Beer's cannabis program in Canada. We'll talk all about teapot and what makes that go and how those products are doing now that they hit the market in July. But first, we're going to hop into the news this week and just looking at thebrewbound.com. homepage, it is not a bunch of cheery stuff. I see layoffs, a closure, a bunch of closures, and a lawsuit. So I guess we should just dive in here with Modern Times. They've filed a notice, a war notice, which you do if you employ more than 100 employees and you're planning a mass layoff. And the caveat here is due to the Maui brewing acquisition of Modern Times, Modern Times drinks, which filed this warrant notice in California, will no longer exist. And so they're saying, yes, we've got to file this, but Maui plans to rehire most of these employees is my understanding.

[00:02:27] Modern Times: Yes, it seems like more of a formality than anything, but I mean, nothing is guaranteed, so who knows what might actually happen, but from what has been told to us, it seems... Like there shouldn't be too many alarm bells going off at this moment.

[00:02:47] Jessen Fonte: No. And that was one of the tricky things with this story was writing it in a way that it wasn't alarmist. The San Diego Union Tribune reported that CEO Jennifer Briggs said that they held a Zoom meeting with employees ahead of time to sort of give them the heads up of, hey, this is a thing that's happening and why it's happening. So it sounds like they tried to, you know, do their best to get ahead of this.

[00:03:12] Zoe Licata: I mean, you guys kind of said it all, but looking at the story, it's, you know, 16 employees at their warehouse in San Diego, 15 at the Encinitas taproom, 57 at the San Diego taproom, three at another San Diego taproom, and 33 at an Anaheim taproom. And assuming that Maui intends to keep all these locations open, you have to think they'll want to bring these people back, especially given the state of hiring right now in the hospitality industry seems pretty dire. I feel like every day you log on to various social media platforms that I'm seeing, you know, bars and restaurants near me saying they have to close for a certain amount of time due to staffing. So if you've got the employees and they know what to do, they're trained, they know how the ship runs, you'd probably want to keep most of them. We'll see, but this is a formality.

[00:04:03] Jessen Fonte: Yeah. And this is a 60 day notice. So these would take hold in October. Maui is expected to close on its deal for Modern Times in October. So until then, I guess this is the latest in that move as they inch closer to uniting those two companies.

[00:04:23] Zoe Licata: Yeah. So basically nobody freak out too bad. Yeah, that seems to be the gist. Yeah.

[00:04:30] Jessen Fonte: Easy for us to say, you know, when we're not a Modern Times employee. It's true.

[00:04:34] Zoe Licata: Much easier said that. I remember that when I used to work at a newspaper that was owned by a very large newspaper company that would make layoffs all the time. And they actually just had another round last week. But I remember those days and they were really scary. And you would hear rumors like we were and I was in a bureau. So you'd hear rumors that like the main newsroom, what had happened, how many people and just waiting for, you know, HR to make their way down the Garden State Parkway to all the other bureaus. So scary, you know, thinking about all those people, but it sounds like this is standard issue formality.

[00:05:06] Jessen Fonte: Yeah. So you covered a lot of closings, and I don't want this to be the doom and gloom podcast here.

[00:05:13] Zoe Licata: Let's get through the doom and the gloom and we'll move on to some knock-knock jokes or something.

[00:05:18] Jessen Fonte: Yeah, very quickly, take us through some of these closings.

[00:05:22] Zoe Licata: Yeah, so we did a roundup of closings last week. One of them, Smut Labs, which is the on-premise offshoot location of Smutty Nose Brewings, their R&D line, Smut Labs. They had given it a home in late 2019 in Dover, New Hampshire. It was a hermit crab situation when they moved into the Seventh Settlement Brewery, their former spot. Unfortunately, they are going to have to let the space go, but all of the employees on site at Smut Labs are being offered jobs at Smutty Nose's main location, which is about 20 miles away. Smutty Nose is a New England mainstay. They've been in business a long time in our neck of the woods. Last year, production increased 5% to 22,000 barrels. So sounds like Smutty Nose itself doing all right, but this one location, you know, between COVID, labor shortages, rising costs, they've said, quote, we've been unable to regain the momentum we saw previously. So not surprising there's a lot of that going on. Three breweries shutting down completely and a brew pub. Those breweries that did shut their doors over the weekend include Harrisburg, Pennsylvania based Newfangled Brew Works. Their last day was Sunday, August 14th. They were open about four years similarly-ish. North Carolina District 8 Beer Company, which started as a taproom and a bottle shop and then opened its own nano brewery on site, which was called the South Fork Brew Project. They're in Belmont, North Carolina. The shop and the brewery are both shutting down. Last day was this past Saturday. Same kind of timeline, opened in 2017, so about five-ish years old. They are decided now is the time to go out, so they are. And then last but not least, at the end of this month, West Coast Grocery Brewing in Portland, Oregon, will be shutting down. This was a company that opened in 2018. Last year, brewed 585 barrels of beer, according to the BA. This story had a little bit of some color to it because at one point in 2018, there was a sexual harassment issue between a brewer and a server. And this is obviously before the craft beer industry's reckoning with sexual harassment last summer, like three years before. And similar situation, the incident spilled over onto social media and the owner, founder, you know, really points to the handling of that situation as a reason that the, you know, West Coast grocery was unable to gain support in the community. Lots of backstory there on the new school. If you're interested in reading more of it, we link to all of those in our story. So you could check that out.

[00:08:02] Jessen Fonte: And then a very trippy one, though. You have another trippy one in Colorado. El Rancho Brewing.

[00:08:09] Zoe Licata: Yeah, well, I was just going to get to the fact that West Coast Grocery Brewing is going to have another hermit crab situation where there are two incoming business owners that are about to open Grand Fur Brewing. That is Whitney Burnside, who is a well-known, much awarded brewer in the Portland area, and her husband, Chef Doug Adams, are opening Grand Fur in that southeast Portland location. So more to come on that. We're going to temporary all of this closing news with some opening news, hopefully at some point this week. But yeah, it's just a great point. So this other story, it's quite a time. Highly recommend you visit the Business Den story and get on this roller coaster where Evergreen Colorado El Rancho Brewing Company is this big, beautiful log cabin-looking facility. It's been a restaurant for decades upon decades, centrally located between Denver and the mountains. A family had acquired what had been this long-established restaurant and opened a brew pub on the premises in 2015. This brewery is now distressed and they're kind of in a race against time to get the brewery sold before they get foreclosed upon. But really much more of a brewpub than a brewery. So I'm sorry that I keep calling it a brewery, but that doesn't really ever have seemed to have been the number one reason for being that this business exists. But a group of siblings and their spouses, bought the property in 2015, took out a million and a half, yeah, like a million, a loan for a million and a half dollars. Sorry, I'm wonky with words today. Took out a loan from their bank, which filed a motion to foreclose in the middle of July. The owners have been named in several lawsuits since 2017, so basically two years after they opened. They've got an investor suing them, a food vendor saying that vendor has not been paid, a former employee suing for back wages, and a social media agency all claiming to be owed money. Quite the thing. So if you're interested in a really pretty building, 31 minutes from downtown Denver, it is up for sale. Hillco Real Estate. No price listed, but you know, 21,000 square foot building on 4.4 acres. No mention of the brewing equipment. Last year it produced 420 barrels of beer according to the BA.

[00:10:20] Jessen Fonte: Just trying to beat that buzzer.

[00:10:22] Zoe Licata: Yeah, man, that's the deal with El Rancho. Yeah. But a great quote from the owner in this Business Den story. Co-owner Paul Vincent told Business Den, as my attorney puts it, we're in deep doo-doo here. So we can't be terribly picky if we want to survive at all financially because the worst outcome of this is that the place would sell for pennies on the dollar. So if you got dimes on the dollar, hit up Hillco Real Estate.

[00:10:49] Jessen Fonte: Well, another story that we received a press release on from the person who is suing Cape May Brewing and Wawa. Zoe, you are on this story. Why don't you tell us a little bit about the Shore Tea controversy?

[00:11:06] Modern Times: Yeah, so you guys might remember Kate May and Wawa announced last month that they were coming out with this shorty hard tea first with this peach flavor based on Wawa's non-alcoholic tea. And yeah, last week we got a press release from Jeff Plate, who is an attorney and also co-founded a brewery in Ashbury Park, New Jersey called Ashbury Park Brewery. He has alleged that he came up with Shore T several years ago, first as something that could come out of Asbury Park and then as its own entity, and he allegedly approached Cape May about this idea earlier this year. Cape May declined to go forward and then Plate said he was shocked when they announced this collaboration with the same name. Cape May has denied Play it's alleged timeline of these events. They said they've been planning this for six months long before play ever approached them with his shorty idea and had. Packaging our materials and branding already in place before he talks to them. On Palate's side, he already has a trademark for sure. He first put that out in 2018. Yeah, August 2018. That was abandoned in 2019 and then filed again in May of this year. So he technically has the trademark on his side, but Kate May has denied any wrongdoing, any stealing of his ideas. A spokesperson contacted us and said this quote in particular stood out. We provided documentary proof to Mr. Plait's attorney prior to the lawsuit showing that the labels were ordered in March 2020, yet Mr. Plait insists on pursuing baseless litigation, which we intend to defend vigorously. TBD on what happens there, but both sides seem to be pretty confident in their idea of events.

[00:13:12] Zoe Licata: Yeah, this has been a funny one. Cause we saw this start to bubble up a couple of weeks ago and we kind of were like, all right, well, we'll see what happens. But it turns out that Jeff plate resolved to make it, make it happen and, you know, file the lawsuit, sent the press release.

[00:13:28] Modern Times: Yeah. He's been wanting to get this out there and yeah. Sent us this press release seemed to have sent a lot of various news publications, not just trade publications, this release to, to make sure people know.

[00:13:41] Zoe Licata: Yeah, I was at the Jersey Shore when the whole product was first announced and everybody was was really in a tizzy about it. So I'm sure for him to see how much media attention and social media buzz this product was getting was probably a little alarming. But I mean, these timelines are pretty, pretty tough to argue against.

[00:14:01] Modern Times: Yeah, KMay has lined out their whole timeline of everything that seems to go against plates favor. But the one snag is that trademark. Right, right.

[00:14:11] Zoe Licata: Was he approaching Cape May as a distribution partner or was he offering them the product for them to assume it?

[00:14:19] Modern Times: He described it just as a collaboration. Interesting. Yes, and he no longer has ownership of Ashbury Park, so he could not release this product out of that anymore. So he needed some outlet. So I assume he wanted this on more of a production collaboration project.

[00:14:38] Zoe Licata: Yeah, I've been to Asbury Park, the city many times, and the brewery once a few years ago, ostensibly while he was still the owner of it. I love Asbury. If I moved back to New Jersey, that's where I'd wanna go. But yeah, I guess we'll see what happens.

[00:14:54] Jessen Fonte: So in less maybe contentious news, you just wrote about the future. I think you told me, I've seen the future and it is this.

[00:15:05] Zoe Licata: Yeah, look at this with this other little... So what Justin's referring to is our story that we published last week about Craft Standard. And what I said to Justin was, if you're a big nerd like me, you will know that when Bruce Springsteen played a show that his now manager John Landau was in attendance at, and John Landau was He was writing at the time, he was like a music writer. And his takeaway from this show was, I've seen the future of rock and roll and its name is Bruce Springsteen. And after I conducted this interview with these entrepreneurs, my takeaway was, I have seen the death of craft beer and its name might be craft standard. So craft, sorry, sorry. Wow, this is a real downer of a podcast episode, sorry.

[00:15:51] Modern Times: I don't know, we preface this as like hopeful and future and now it's just back in the depressive hole we started in. Sorry.

[00:15:59] Zoe Licata: So Craft Standard is a company that makes cocktail mix kegs. It is founded by twin brothers and business partners, John and William Ray. They are business owners. They've been in the hospitality business for a long, long time based in Fayetteville, Arkansas. They've run a few different college bars and they would update these businesses to keep with the trends and what their customers are looking for. And these were massive, massive bars. I'm sure you've been to a bar in college, a big cavernous room and a really huge bar. And a few years ago, they started focusing on handcrafted cocktails. Because that's what people were into. So, you know, it was when Moscow mules were really, really big. And they started offering this service, but they realized that it was really hard to make this many handcrafted cocktails for the amount of people that their bars were accommodating every night. So they have friends who are homebrewers and they knew that these homebrewers would keg their own products. So they started looking into Cornelius kegs, which are popular with the homebrew set. They're large vessels that you can fill yourself. Standard kegs that craft breweries use and make. Really, you can't and you shouldn't be filling those on your own at home unless you're a trained expert. So they start messing around. They come up with these great recipes. They put their own cocktails in these kegs. They do it on site. Eventually, they get to a point where these kegs are so successful that they've taken all of their beers off tap and all 18 draft lines are dedicated to these cocktails because they're just selling so well. So then they realize, all right, we've got something, what can we do? They start talking to a co-packer and they realize that the TTB standards, they feel the way that they are. You cannot sell a keg with a spirits base in it. It's just too large for distilled spirits, according to the TTB. So what the brothers at Craft Standard have done is they have these kegs that are underfill. So they're 30 liter vessels with about nine liters missing. You buy the mix from them and William Ray created, he has a patent on what's called the spiker. It's a funnel shaped piece of equipment that retailers receive kegs and they fill them with their own spirits. So you can add six to nine liters of spirits, which is about a case of spirits. You can add whatever you want though. If you get the margarita mix, you add your own tequila. But if you want to add extra flavors, you can do that too. And everything is really customizable. So they're in over 40 states. They should be nationwide, as nationwide as they can get. There are a few states where a product like this is not allowed, like Utah. They probably will never go to Alaska, but they're in the Anheuser-Busch distribution network. They're in a lot of AB1 wholesalers. The kegs, once they're filled, they don't look like regular kegs, but they do use U.S. Sankey decouplers, so they fit on any draft system. They're a really great option for really big venues. They're in about 13 MLB stadiums. They're in some football stadiums, some hockey arenas. I think this would be a great option for, let's say, a brewery in a state that has a liquor license that allows them to sell spirits. You could very easily get some of this, customize the beverage, and then now you've got a cocktail offering to sell. The huge perk here, obviously, is that you don't need to have like artisanally trained bartenders. You can be serving these really well-made cocktails with premium ingredients and customizable liquor and extra flavorings, and you don't need to be able to train people. Anybody that can pour off a tap can serve a cocktail. I just, I think this is super interesting and I think they're gonna be really popular. The kegs retail for, they sell to retailers for $150. They contain enough liquid for 164 cocktails. Depending on how much liquor the retailer wants to add using the spiker, each drink can be between eight and 13% ABV. But yeah, I was super, super impressed with this really innovative product and also slightly concerned.

[00:19:59] Modern Times: Especially when bars and restaurants are still having labor issues right now, anything that can provide a solution and possibly make it so you can have less staff or overwhelm your existing staff less is ideal right now. This is the perfect environment for that.

[00:20:18] Zoe Licata: Right. And everybody that provides us data from, you know, the on-premise side of the world is finding that bars and restaurants are not using all the tap lines they have. They're not putting that much beer back on. So beer was already losing draft lines just to nothingness. And now here comes a product that's ready to compete with those draft lines that are out there. Draft service and convenience store cold boxes have long been beer's domain over wine and spirits. And now that you've got things like High Noon and Waterbird, those ready-to-drink spirits-based canned cocktails coming after the cold box, here's another version of that that's coming after the draft lines. The brothers told me originally they were with Glazers. That was their wholesaler. They knew them from their business. Southern Glazers was really interested. And it had a stutter start pre-pandemic times, and they realized these guys just don't get draft service. So they were really happy to sign on with the AB network because AB is itself really interested in Beyond Beer offerings, like their own, you know, cut water, spirits-based canned cocktails. So here's an offering in that similar vein that can dominate the on-premise.

[00:21:32] Jessen Fonte: Well, that is both exciting and terrifying.

[00:21:36] Zoe Licata: Yeah, man, the future is now.

[00:21:38] Jessen Fonte: Yeah, well, and then you look at these Nielsen IQ numbers for how Kraft has performed this summer, and not that we didn't already know that. And yeah, not great. Anyway, we've got a bunch of content up, a bunch of stories, a bunch of profiles up at Brewbound.com. You can go and read if you're an insider. Zoe, you covered Blake's hard cider expanding to New York. I covered Great Lakes and their seasonal program. We'll have more stuff up there. But I think that's probably all we can do for this week on the news. So let's get to our featured interview with Paul Weaver from Boston Beer Company's cannabis subsidiary. In May 2021, Boston Beer established a Canadian subsidiary to research and create non-alcoholic cannabis drinks. 14 months later, the company launched Teapot, a THC-infused line of iced teas in select Canadian provinces. Joining us today to discuss the business is Paul Weaver, Boston Beer's head of cannabis. Thanks for being here, Paul. Nelson, thanks for having me. I love the podcast and I can't wait to talk about Teapot with you guys. We'll cut that out and put that on Instagram or something. So let's dive in here. You're the guy running the show here over at the subsidiary for Boston Beer. Teapot just hit the market in July. How has it performed so far?

[00:23:08] Justin Kendall: Well, the reaction from just the branding and just putting the brand in the universe has been fantastic. I think we've got a lot of organic love for Teapot. It's in a really small base right now. We just started launching in Saskatchewan a few weeks ago. We'll be expanding into a few more provinces by the end of the year. So, you know, from a sales perspective, it's still very much being seeded. But in terms of the consumer response to Teapot, it's been fantastic. We think we have something special in our hands.

[00:23:39] Zoe Licata: Awesome. What have you learned since releasing it in the market? Any important findings that have changed your thinking about anything?

[00:23:46] Justin Kendall: You know, I'm only just reaffirming kind of some of the instincts, Jessica. We've been working on a cannabis beverage for quite a while now. And Teapot is a labor of love across the product development team at Boston Beer. And to see some early enthusiasm and support and some of the passion for Teapot early is really fantastic. So yeah, I think I think it's just reaffirming that we're on the right track, and we're in this to learn. We're not a Canadian company by nature. We're American-based, so we're using Canada as a test market. We're using Canada to get the feedback from drinkers and tell us what they love and what we can improve upon with teapot. But so far, so good. I think we're on the right track.

[00:24:30] Modern Times: So whenever we talk about THC, people are always like, okay, what's the dosage of this? So what is Teapot's THC dosage and how did you come to the conclusion this was the right fit for it?

[00:24:41] Justin Kendall: You know, it's a, it's a long journey because I think if you try to appeal to everybody, then sometimes you can kind of alienate everybody as well. So first, Teapot is a five milligram THC beverage across the board. So every flavor of Teapot, every style of tea or flavor that we choose to introduce will always be five milligrams of THC. And that's an important number for us. We think that five milligrams of THC is the real sweet spot for a sessionable cannabis beverage. When you're in the kind of real low dose territory of two, two and a half milligrams of THC, you start to lose kind of sales momentum. And when you go to kind of the full strength edible of a 10 milligram THC dose, that starts to become a little bit polarizing for the new drinker that we're trying to attract. Five milligrams of THC, we've learned through trial and error in terms of introducing products in our past lives, is that real sweet spot. It's easy to understand. It's easy to throttle 5, 10, 15. You can start to do the building blocks without pulling out a calculator. And it's enough for you to maintain confidence in your control of the experience. So teapot is a five milligram THC beverage across all styles. And we think that's the right balance between the new consumer and the experienced consumer.

[00:26:01] Jessen Fonte: Why was ice tea the right vehicle for teapot?

[00:26:06] Justin Kendall: For a couple of reasons. First, there's this kind of old adage that experienced cannabis consumers probably would agree to, which is that there are different strains of weed that can correspond to different times of day or different usages. And that holds true in tea as well. You know, there's kind of evening teas, daytime teas, you have black teas during the day, you have chamomile or whatever for the evening relaxing period. So we really like the parallel between certain strains of cannabis and certain times of day and how we can apply that to tea. So kind of at its core, tea and weed have this kind of certain parallels of time of day. And then making amazing tasting Sessionable iced teas is a strength of Boston Beer, something we do better than anybody. So it's kind of a good alignment of our core strengths in terms of how to make just a really awesome tasting drink. And this idea of communicating times of day and usages of cannabis with a familiar vehicle in tea. So it's kind of both a strategic consumer idea and kind of a smart business idea based on Boston Beer strengths.

[00:27:17] Zoe Licata: So Paul, how many flavor varieties are there in the family?

[00:27:20] Justin Kendall: Yeah, we've got one for now. So we've got a Good Day Iced Tea. It's a lemon black tea, a very familiar flavor if you're familiar with Twisted Tea. But that's obviously far from the end of our product pipeline. We're working on a really great tasting mango green tea that I'm really excited to get into market. That's another Good Day Iced Tea, so a daytime product. And it'll be really interesting when we start getting into the good evening iced teas and something more for an evening wind down occasion where we have no caffeine in the product, a little bit more of a modest sugar profile and really easing into the evening. We're looking at different times of day. Our first is a lemon black tea with a good day focus, and we've got another mango good day green tea that we'll be releasing. We'll be introducing some evening drinks as well in the future.

[00:28:10] Jessen Fonte: When do you expect that to hit?

[00:28:12] Justin Kendall: This is a testing year for us. We just got one tea in market. We're going to get a few more over the next few months. Our goal is to have a nice, well-rounded flavor portfolio by next spring or summer so that we can really communicate those different times of day and different flavor profiles. So good days, good evenings, and a few different flavors. So if we can have two, three, four flavors in market by spring of next year, I think we'll be really happy with that.

[00:28:39] Modern Times: you're talking about different strains or flavors having different occasions, do you see teapot as being more of like an occasion-based product or are you talking a specific consumer right now?

[00:28:50] Justin Kendall: Occasion-based 100% Zoe. I think cannabis has such appeal beyond kind of any specific consumer type. We're really focused on a specific occasion. That occasion is groups. You know, cannabis has this stigma of being for the lonely stoner. You know, you step outside and you smoke a joint and you come back in to join the party. And that's the antithesis of teapot. We want teapot to be a social cannabis brand, something that you can stay engaged with your friends. You don't have to break the rhythm. And whether that's in the evening as a wind down still with your friends and your family in a group setting or the daytime, picnic, barbecue, whatever that is, where you're still with your friends in a group setting. So we think that the real sweet spot for teapot is group occasions, groups of five or more, which are typically not your standard cannabis occasions, but it's a bread and butter occasion for beer and alcohol. And I think that's where we really have an interesting opportunity to be disruptive, is the group setting where drinks are present, but maybe a bit of a different vehicle.

[00:29:54] Jessen Fonte: From a consumer perspective, is there a lot of overlap that you guys have found in your research among dive out drinkers and these cannabis beverage seekers? Or is this a truly like incremental drinker?

[00:30:09] Justin Kendall: I do think there is some macro overlap between cannabis and alcohol, but I would say that what we've seen so far is that cannabis drinks ironically has not been dilutive to the alcohol category. It really is complementary. I think it's just about having a new product in the rotation and has an incremental role in those traditional drinking occasions. But yeah, no, we have not seen any substantial or meaningful cannibalization or anything like that from cannabis drinks to alcohol. We view this as complementary to our product portfolio for sure.

[00:30:41] Jessen Fonte: I would go to conferences all the time and there would be always sort of a talk, you know, what, three, five years ago that, you know, it was like a reefer madness. Like you're afraid that, you know, cannabis is going to steal these occasions from beer and this and that really, it feels like that narrative has changed or has even proven to be not so true. Is that what you've really found or, you know, how, how do you view that? I would say that,

[00:31:09] Justin Kendall: You're right. Think of it like reefer madness. I do think maybe the hysteria of doomsday coming with the pending legalization of cannabis has been proven to be not as scary as we thought. I do think there is impact to how alcohol drinkers are thinking about consumption and also think about just leasing Canada over the last couple of years and how COVID has impacted our approach to alcohol. I think just generally, there are two macro trends here that we're right in the middle of. The first, as we're coming out of lockdown, I think consumers' relationship with alcohol is changing and I think we have to acknowledge that. We're seeing the growth of the fourth category, really reinforcing this new narrative of how alcohol works in our daily lives. At the same time, access to usage of acceptance of cannabis increases every day around the world. So there's these two Venn diagrams of macro consumer trends that you can't really deny. Whether or not those two are like in direct conflict with one another, I think we're showing that that's not as dire as we may be feared. But these are still two consumer trends that we have to acknowledge. And that's a big impetus behind Boston Beer Strategy and why we're into cannabis just generally is those two things, the relationship with alcohol, evolving and the growth of cannabis usage worldwide.

[00:32:32] Modern Times: Well, I guess while we're on the topic of like general industry impressions of it, how have you seen within Canada consumer knowledge about THC infused beverages changing? How has that evolved?

[00:32:45] Justin Kendall: We all kind of work in the bubble of drinks, right? And so we think of cannabis drinks as part of kind of this macro trend of heart seltzers or malt-based or spirit-based coolers. But I think when you step outside for a second, you realize just how insulated and how much of an echo chamber sometimes the drink industry can be. Because I'm always surprised when I bring up the fact that I work in cannabis drinks, that people don't even know these exist. People are really still finding out about them. I think it just goes to speak to the fact that when you are relegated into a dispensary, most consumers are not walking into dispensaries, most beverage alcohol consumers. And that idea of cannabis drinks still being something to discover and still being something that they had no idea even existed. And when they find out about them, they're intrigued and they think, okay, maybe this is a form factor that I could get used to because most people don't want to smoke anything anymore. And edibles can be a bit intimidating. Gummies, brownies, these are all, everyone has a kind of impression of some sort of bad trip. but a low dose cannabis beverage. When you have an opportunity to have a direct conversation with a new cannabis consumer that these products even exist, they're intrigued and they want to have access to them and they want to try them. But when they're relegated to a dispensary, that's a leap of faith that some people find very challenging. I think that's a bigger part of our brand building goals is to make a product that's not intimidating, make a product that actually makes you want to take that leap of faith and enter a dispensary and buy cannabis for yourself. Because most people don't know cannabis drinks exist. And Teapot is designed to kind of break through that message and actually reach that new consumer. So they not only learn about the category, but learn about the brand at the same time.

[00:34:28] Zoe Licata: So how are you guys sparking those conversations? What's making that happen?

[00:34:32] Justin Kendall: It's trying to be a part of the bigger beverage alcohol conversation. You know, this type of conversation that we're having, Jessica, you know, if we can reach a new consumer that would otherwise not be listening to cannabis podcasts or cannabis advertising or seeing, you know, cannabis branding, that's a, that's a consumer that we're happy to talk to. So I think it's, it's this type of engagement, these types of conversations that can slowly bleed into the other kind of consumer cultures that they're a part of. So we're very restricted. in terms of how we do advertising, how we do brand development. And we have to go grassroots. It's the only way. No pun intended. We've got to get boots on the ground. We've got to get liquid on lips. But that really is individual conversations. And it's about making sure that every touchpoint we have with Teapot and our consumers is a positive one. It helps to have like a really cool logo, really cool name, really cool branding, you know, I think I think the product looks really cool. And I think that helps when they try it, it tastes even better. But you know, you got to get through that and have that introductory conversation, which is hard enough.

[00:35:37] Zoe Licata: How big is the team with you up in Toronto?

[00:35:40] Justin Kendall: Yeah, I mean, we're a pretty slim group, but we've got a lot of good partners here as well. So we're an R&D team at its core. We've got a few people in sales, a few people in liquid development, and we've got a lawyer. That was our first hire, aside from myself, was our lawyer. Seems important. Got to have your lawyers in place, 100% of cannabis. And then, so we have a small handful of people dedicated to it here in Canada. And then we have two excellent partners to help facilitate that. We've got a co-manufacturer based in Windsor, Ontario, which is just across the river from Detroit. So that helps us kind of lend us some R&D space and licensed manufacturing space. And then we have a distributor, sales distributor called Entourage Health Corp that has a sales force nationwide. So they can help us push that into the dispensary network in Canada. So a handful of people, maybe five or six here in Canada, and then a very broad partnership network that allows us to make and sell the drinks.

[00:36:34] Modern Times: You mentioned the name, I feel like we have to touch on it. Even on Boston Beer's earnings calls, everyone's very excited about the name, that it's a little on the nose there. Was that part of that strategic? Was it just like being very clear that this is a THC product or what was that strategy?

[00:36:50] Justin Kendall: Just when you thought the weed puns had been exhausted, we found one more. No, teapot, when you know, you know, in brand development. And we had been making that drink for quite a while. And we had had the drink done, the recipe done, and in the can before we even knew what to call it. Because we knew iced tea and cannabis was the right play. We knew lemon black tea was the right first flavor for us, but what to call it. We had a list of a lot of different names. Someone just said it and someone said the words teapot and it just went, let's find it, let's track it down, let's lock it, and let's make a logo for it. So it's pretty serendipitous how these things can come about Zoe, but we had the drink first. We started with an amazing tasting beverage and cheeky name, great logo, bright packaging, all that was wrapped around what started with an amazing tasting drink. So I think we're really proud of the core of the product. to wrap it with something even more fun and appealing and unintimidating, I think it's just gravy.

[00:37:52] Jessen Fonte: Do you see it going that direction, looking beyond tea, or is it just that there are so many other possibilities within tea that your focus as a small team is pretty centered around that now?

[00:38:03] Justin Kendall: Yeah, I mean, we're an innovative company at Boston Beer, and our aspiration, you may have heard this before, is to be the most innovative beverage company on the planet. This idea of being the most innovative beverage company does mean that we have to continue to challenge ourselves and try new things. So we've got a few other ideas in the pipeline beyond team. But our focus is T-Pod. I think we really like what we have with T-Pod. We think T-Pod as a platform for continuous innovation is a lot of fun even when you kind of think outside of time of day. You know I know that Jessica might be familiar with Robert Bale, who is one of the innovation leads at Boston Beer. And he's always been focused on good gaming, a gaming iced tea. So you can even open up different really hyper-focused occasions with that. But yeah, the flavor profile of tea is perhaps the only limiting factor in what we could do with the brand. But tea is a great vehicle.

[00:39:01] Modern Times: So the kind of elephant in the room here is that Boston Beer is a U.S. company. Teapot is currently only in Canada. I know you've said in the past that when it is an opportunity in the U.S. that it will come here. How optimistic is the Teapot team about U.S. legalization and that opportunity coming?

[00:39:22] Justin Kendall: Well, I don't think it's an elephant in the room at all. So I think it's just honest facts, right? Like we are a U.S.-based company. We have a Canadian R&D division focused on developing out an amazing portfolio of products to one day launch when the American market opens up. I think what's really interesting is how political cannabis has become in a really funny way. Like I think cannabis, the American population, I think I saw something that was like 91% of Americans support legalizing medical cannabis and over two thirds of Americans support legalizing recreational cannabis. So despite it being this political football and really linked to Washington politics, it's a pretty universally accepted idea across the American population. So that gives us tremendous confidence that there is an unstoppable gravity moving towards the kind of federal regulations of cannabis products. What'll be really interesting to see is how it's managed between state level versus federal, how it's managed between full quote federal legalization versus some kind of throttled piece of legislation that might start with banking or might start with medical or might start with some sort of kind of permission to execute at the state level. We're a publicly traded company and we have shareholders that we answer to. Every time there's a moment to consider how we enter the U.S. market, we're going to pause and take a look and we'll act what's in our shareholders best interests. But we do view that American legalization has this unstoppable momentum just based on sheer population support. And we'll be ready when the situation is right, when the market is open, we can legally enter and it's in the best interest of our shareholders. So that's a bit of a kind of a long winded answer to say we're very optimistic. So I think it's just a question of time.

[00:41:14] Modern Times: Have you considered entering the market with something like a CBD drink, or is it really focused on when we can do THC? That's what we're going to do.

[00:41:23] Justin Kendall: You know, it's a great question. And I think that, you know, we don't want to close the door on any opportunity. Personally, you know, this is Paul Weaver's opinion on this. This isn't some sort of loaded kind of vetted answer to that question, but you know, our core competency is in regulated adult products, alcohol currently, and now cannabis. And so THC is really the secret sauce for that type of stuff in the drink space. So I do think it's important for us to have expertise in how to market and sell products that have an intoxicant like alcohol or THC. CBD beverages goes into the wellness space, goes into the natural health product space. And those are areas that there are a lot of other really competent companies that know how to execute natural health products. So if the situation's right and we have a lot of value to add in that space, then maybe we'll go down that path. But I think right now our focus is THC. Let's not confuse ourselves. Let's focus on making products for adults that have to be responsibly consumed and sold in regulated channels.

[00:42:27] Zoe Licata: This has certainly been in the works for a while and you've got a lot of really smart people on the case. What lessons have you learned throughout all of this that have really helped inform the journey along the way?

[00:42:35] Justin Kendall: If I step back and acknowledge that small but really effective team we have here in Canada. We've been doing this for a few years now. You know, I think cannabis beverages are, you know, I think maybe at this point, four or five years old, five or six years old in terms of their invention. And the idea of, you know, if you and I were having this conversation, let's say two years ago, Jessica, a lot of the conversations would be about stability. A lot of conversations would be about can liners, talking about THC degradation, talking about just, can you create this type of product at its existential level? And I think that it's just really cool to see how we've evolved and matured as a category. Two, three years ago, it was like, can we make a liquid that is cannabis infused? Now it's, Well, can we make it taste incredible? Can we make it, you know, communicate a certain effect or a time of day? Can we really round that out with a consumer story that's appealing? So I think the real lessons learned is just how we're standing on each other's shoulders and taking the next step, moving beyond just existential questions of stability and formulation and going into a broader conversation about how we reach these consumers and how we talk about our products and how we make something taste incredible. So it's really just the evolution. and the sophistication of the category and just how far we've come.

[00:43:55] Jessen Fonte: Well, this has been awesome, Paul. Thanks for all the time today. Oh, my pleasure. Yeah, the bolo ties are in the mail. Teapot branded. I can only dream.

[00:44:05] Justin Kendall: Oh, yeah. Of course, a little turquoise, a little turquoise on there, a little, like, little sterling silver teapot with a nice bolo tie straw. We'll get it on. It's in the mail. Zoe, Justin and I will wear them proudly.

[00:44:19] Jessen Fonte: So excited. Well, thanks again. And t this week. Thanks to all