The global cannabis beverage market, according to Zion Market Research, was worth US$1.61 billion in 2018 — and it is expected to reach more than US$4.46 billion by 2025.
The American and Canadian markets are expected to dominate this newly emerging industry. The consumer demographics driving this market are those new to cannabis as well as seasoned consumers and those leaning toward more wellness-focused products for a smoke-free cannabis experience. Research shows today’s cannabis consumer is looking for novel products such as CBD and THC-infused beverages and carbonated drinks with premium flavor profiles. Cannabis beverages may even have the potential to displace market share from the alcohol industry. An October 2018 survey by New Frontier Data found that 46 percent of cannabis consumers prefer cannabis to alcohol while 74 percent believe cannabis is a safer alternative to alcohol.
Given the patchwork of state and local regulations in the US cannabis industry as well as Canada’s strict limitations on branding and cannabinoid concentrations in cannabis products, the challenge for cannabis beverage companies will be differentiating their brands in a competitive landscape.
This INNspired Article is brought to you by:BevCanna Enterprise. (CSE:BEV) is an early leader in the emergingÂ cannabisÂ beverages marketÂ developing and launching premium, innovative cannabinoid-infused beverages that cater to the next generation of cannabis consumer.Send me an Investor Kit
The cannabis beverage landscape
In the US, the legal status of cannabis beverages remains murky given the federal ban on the plant. The ban also makes it a federal crime to transport THC or cannabis-derived CBD products across state lines. However, products manufactured with hemp-derived CBD are legal at the federal level under the US Farm Bill and regulated by the US Federal Drug Administration (FDA). At the state level, regulations are even murkier as the rules can vary from one state to the next. “Some states have allowed the sale of CBD infused edibles through licensed dispensaries, even though such sales are a violation of FDA regulations,” reported Forbes.
When it comes to THC-infused beverages in the US, the amount of THC and CBD allowed in each product differs depending on state law. Medical cannabis is legal in 33 states and adult-use cannabis is legal in 10 states. Illinois is expected to become the 11th state to legalize adult-use cannabis in January 2020. There are a handful of companies producing THC-infused beverages for sale in legal adult-use states.
Only hemp-derived CBD infused beverages can be sold across state lines; however, hemp-derived CBD still hasn’t been approved by the FDA as a food additive. The country’s largest cannabis market, California, only allows edibles and beverages to contain 10 milligrams (mg) of THC per serving size or 100 mg per package.
“(The patchwork of regulations) makes it hard for companies to grow, since they’re at the mercy of each state’s individual rules and restrictions on THC and CBD,” according to Forbes. “Labeling, bottling and even concentration regulations can differ from state to state, making it difficult to build brand identity.”
In Canada, the second stage of full cannabis legalization began on October 17, 2019, which greenlit edibles and beverages for sale nationwide beginning in December 2019. The fact that cannabis products are federally legal for both medical and adult-use makes it easier to build interprovincial distribution channels and greater brand recognition. However, tight restrictions on cannabinoid concentrations and packaging are also challenging companies to look for other ways to differentiate their brands.
Health Canada’s regulations for cannabis edibles and beverages will limit package size to 10 mg of THC and such products will need to be sold in translucent plain packaging, including restrictions on logo size, placement, and product descriptions. The government may have good intentions in their efforts to limit cannabis’ appeal to youth, but those in the industry feel the restrictions present unreasonable implications for manufacturing that greatly add to the overall cost, making it more difficult to compete with illicit product.
Cannabis beverage marketing regulations
“There’s no real brand marketing in Canada,” said Ted Zittell, head of product and brand development for Tinley Beverage Co (CSE:TNY,OTCQX:TNYBF). In California, the company sells cannabis elixirs and tonics in flavors such as Stone Daisy, a sativa-infused margarita blend of blue agave, lime and pineapple — except the company can’t use the word “margarita” in its packaging due to restrictions in Canada and California. Both markets do not allow branding that associates products with alcoholic beverages. Tinley plans to expand its brand to Canada once the market opens up later in 2019. However, the company will have to drastically trim down the artistic flair in its packaging to align with Canada’s strict branding regulations.
Weighing in on the branding issue, Tinley Beverage Co CEO Jeff Maser said, “The problem with that is packaging is more critical to drinks than it is to other product categories. Drinks have to look good because you are carrying them around at parties and putting them on your table at dinner. Beverages are brand and image-driven. Having nice packaging is really critical.”
Terry Donnelly, chairman and CEO of Hill Street Beverage Company (TSXV:BEER), agrees with Maser. “If I was to come to your home and bring you a bottle of cannabis-infused wine as a gift, do you want me to show up with that bottle of wine looking like toilet bowl cleanser or do you want it to look like a beautiful bottle of wine,” he said in an interview with CBC. Hill Street has an agreement with Lexaria Bioscience (CSE:LXX,OTCQX:LXRP) to create a cannabis-infused beverage brand formulated with a tasteless, odorless powder that does still contains terpenes and cannabinoids.
Taste and consumer experience key to brand differentiation
Cannabis beverage brands in the North American market are facing restrictive rules on packaging, THC content and distribution. However, there are a few strategies these companies can employ to differentiate their brand from the competition. One of the most important strategies centers on quality product formulations that deliver a superior consumer experience.
“I think at launch, brand will be important but I don’t think it’ll be as important as taste and experience,” said former Molson Coors (NYSE:TAP,TSX:TAP) executive Brett Vye, speaking about Canada’s upcoming open to the cannabis edibles and beverage market. Vye is now CEO of Truss Beverages, a cannabis beverage partnership between Molson Coors and Quebec licensed producer HEXO (TSX:HEXO,NYSE:HEXO).
Taste and consumer experience are directly related to how a product is made and the ingredients that go into that product. “I think consumers are going to pay a lot more attention to how a product is made if they can’t distinguish brands based on marketing features,” Emma Andrews, chief commercialization officer at BevCanna Enterprises (CSE:BEV), told Investing News Network (INN). “What is the onset time? What outcome can I expect from the cannabinoid potency? What are the ingredients in this product? Those are the questions consumers will be asking, which represents an opportunity for brands and retailers alike to help consumers navigate the category and guide product selection.”
Bevcanna recently completed a study of North American consumer preferences across 25 different product concepts and found that edibles and beverages had the highest purchase interest. “One of the key trends we’re seeing is the choice of cannabis-infused products as part of a healthy lifestyle. Consumers view this as a ‘better for you’ option when they want to relax and unwind,” said Andrews, who previously led product innovation, consumer and retail education programs at Vega, the category leader in plant-based nutrition, prior to its US$700 million acquisition by WhiteWave Foods (NYSE:WWAV). “As consumers become more familiar with the benefits of both CBD and THC products, we expect to see further evolution in consumer tastes. Consumers are just testing the waters right now, but there is unlimited room for growth.”
Cannabis beverage companies looking for an edge in this market are expected to appeal to both the “cannabis-curious” and the “cannabis-confident” consumer with a wide range of products. “They’re looking for options such as infused spring waters, carbonated drinks and innovative flavor combinations,” added Andrews. “The category will grow as the product selection and assortment expands, including value-priced, craft, and premium products based around attributes such as taste, volume, potency, and form factor (packaging type). Each will resonate with different segments of the market.” The trend toward micro-dosing among social drinkers and lower-tolerance consumers has the potential to fit alongside Health Canada’s dosing limitations per serving.
In both the US and Canada, Bevcanna plans to bring to market a wide variety of CBD- and THC-infused beverage options, including powdered drink mixes, shots, and ready-to-drink products. In August 2019, the company debuted Grüv, a product line of iced tea flavored ready-to-drink beverages with 5mg of THC and 5mg of CBD infused in alkaline spring water from British Columbia. “Iced tea was among the top five performing concepts, among 25 product concepts tested,” said Andrews. “We are also choosing to launch this brand with a balanced THC and CBD profile (1:1 ratio), in order to provide consumers with a mild, yet effective cannabis experience.”
Strict restrictions aside, there are ample opportunities for growth and value creation in the North American cannabis beverage market. Companies with a focus on taste and consumer experience are expected to gain an advantage in building brand recognition in the US, Canada and beyond.
This INNSpired article is sponsored by BevCanna Enterprises (CSE:BEV). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by BevCanna Enterprises in order to help investors learn more about the company. BevCanna Enterprises is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information in this article should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with BevCanna Enterprises and seek advice from a qualified investment advisor.
CanBud Distribution Corporation Closes 2M Second and Final Tranche of its Oversubscribed Private Placement Offering
CanBud Distribution Corporation (CSE: CBDX) (FSE: CD0) (“CanBud” or the “Corporation”) is pleased to announce that it has closed the final tranche of its oversubscribed non-brokered private placement for aggregate gross proceeds of approximately $4,730,000 (the “Offering”).
The Corporation issued a combined total of 39,409,346 units (each a “Unit“) at price of $0.12 per Unit, with each Unit comprised of one common share in the capital of the Corporation (each a “Common Share“) and one common share purchase warrant (each a “Warrant“). Each Warrant entitles the holder to purchase one additional Common Share at an exercise price of $0.22 within 24 months of the closing of the Offering (the “Warrant Term“), provided, however that if the closing price of the Common Shares on the Canadian Securities Exchange (the “CSE“) (or any such other stock exchange in Canada as the Common Shares may trade at the applicable time) is $0.25 or greater per Common Share for a period of five (5) consecutive trading days at any time after the closing date of the Offering, the Corporation may accelerate the Warrant Term such that the Warrants shall expire on the date which is 30 days following the date a press release is issued by the Corporation announcing the reduced warrant terms.
Thoughtful Brands Inc. (CSE:TBI)(FSE:1WZ1)(OTCQB:PEMTF) (the “Company” or “Thoughtful Brands) announces that the letter of intent with Franchise Cannabis Corp. (“FCC”), previously announced in January, has been terminated. The previously announced European joint venture with FCC will continue and allow the Company to launch and tailor its products to European consumer demands
In connection with termination of the merger transaction with FCC, the Company has agreed to pay FCC $100,000 in cash and to issue FCC 5,000,000 common shares of the Company at a deemed value of $0.05 per share. The common shares will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
Mergers and acquisitions (M&A) in cannabis space have helped boost the industry to new levels.
Strategic sale of non-core assets by Lobe adds non-dilutive capital and shareholder value
Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce, further to its press release dated February 23, 2021, that it has completed the sale to Ionic Brands Corp. (“Ionic Brands”) of Lobe’s non-core cannabis assets relating to Washington-based Cowlitz County Cannabis Cultivation Inc. (“Cowlitz”) held by Lobe’s subsidiary vendor, Green Star Biosciences Inc. (the “Transaction”).
Seattle Area Grocery Chain Metropolitan Market to Begin Carrying KOIOS and Fit Soda on March 22, 2021
Adding to its existing presence on the west coast of the United States, all five KOIOS™ flavours and all four Fit Soda™ flavours will be carried in Metropolitan Market stores beginning on Monday, March 22, 2021. Serving the Seattle-Tacoma area (population 3.87 million), Metropolitan Market is one of five chains under its parent firm Good Food Holdings, which has a total of 51 stores in California, Oregon, and Washington State.
Koios Beverage Corp. (CSE: KBEV; OTC: KBEVF) (the “Company” or “Koios”) is pleased to announce that beginning on Monday, March 22, 2021, Koios’ entire line of canned beverage products will be sold at all locations of Metropolitan Market, an urban format supermarket chain in the Seattle-Tacoma area of Washington State. In Q1 2021, the Company announced multiple placements of its beverage products with regional grocers in markets on the west coast of the United States including Market of Choice in Oregon Jensen’s in Southern California and major natural grocery chain Sprouts Farmers Market which has a substantial west coast presence with over one third of its locations (360+ stores across 23 states) in California as well as Washington State 1 . The Company has also recently announced other developments relating to its expansion efforts being undertaken in 2021 such as an in-house beverage canning facility and distribution agreements with regional and national wholesale partners.