From cannabis beer to sparkling water spiked with CBD, companies are betting big on cannabis beverages.
And while there’s little doubt that there’s a lot of buzz for cannabis-infused beverages, there’s also an underlying challenge that is a big one: making them taste good.
It’s hard mixing oil with water. Really hard, particularly on an industrial scale. And not all infused products are created equal.
According to Paul Pedersen, CEO of Nextleaf Solutions Ltd (CSE:OILS), a British Columbia-based cannabis extraction technology company, it takes next-level extraction and purification processes to get tasteless, odourless and standardized THC and CBD distillates.
“Chlorophyll, fats, lipids and other impurities affect taste, smell and colour,” said Pedersen in a recent interview with Proactive.
READ: Nextleaf's cannabis extraction technology takes the spotlight as edibles and beverages prepare to hit Canadian shelves
These days, all eyes are pointed towards the cannabis-infused beverage market, which is set to see significant gains over the next few years.
According to a report by Zenith Global, the US cannabis beverage market could grow to US$1.4 billion by 2024. A report from Deloitte pegs the Canadian cannabis-infused beverage market at around C$529 million by 2020. Globally, Zion Market Research valued the global cannabis beverage market at US$1.6 billion in 2018, with estimates that it will grow to US$4.46 billion by 2025.
The outlook for the UK remains murky at the moment, as CBD has been termed a ‘novel food’ by the Food Standards Agency, meaning the impact of consumption has not been sufficiently monitored, according to the FSA. Government departments continue to work on new guidelines, which are expected in the next 18 months.
Companies bet big on cannabis beverages
When it comes to cannabis beverages, the big (and the small) are jumping in the pool. Beer giant Constellation Brands Inc (NYSE:STZ) invested $5 billion for a 38% stake in Canopy Growth Corporation (TSX:WEED, NYSE:CGC), with an aim to roll out infused beverages and other products. Molson Coors (NYSE:TAP) has partnered with Quebec-based HEXO Corp (TSE:HEXO) to launch multiple pot drinks.
“It’s too early to know how big cannabinoid-based beverages will be but we think it’s a massive opportunity and it’s something we’re interested in investing aggressively in,” Tilray’s CEO Brendan Kennedy told the media when the deal was announced in December.
READ: XPhyto Therapeutics' Germany subsidiary inks R&D agreement with a Munich university and brewery
XPhyto Therapeutics Corp (CSE:XPHY) recently announced that its German subsidiary, Bunker Pflanzenextrakte GmbH has entered into a cannabis research and development deal with the chair of brewing and beverage technology at the Technical University of Munich.
"Given the commercial potential for CBD-infused beverages in Europe, XPhyto is very pleased to have secured such a strong development partner right here in Bavaria," said XPhyto's VP of European Corporate Development and Bunker Managing Director Robert Barth. "We are excited to work together and we are particularly looking forward to the development of cannabis-infused fermented beverages and sports drinks."
A new type of consumer
With cannabis beverages, comes a new type of cannabis consumer. Many companies have positioned themselves in the health/wellness arena, targeting products to people who are looking for something different: an afternoon boost, or something to unwind at night.
BevCanna Enterprises Inc (CSE:BEV) (OTCMKTS:BVNNF) chief commercialization officer Emma Andrews says the shift in the types of the consumer means more opportunity. Cannabis drinks are a way to entice new consumers, who may not be interested in smoking or eating cannabis.
"We're looking at the next generation of cannabis consumers," said Andrews in a recent interview with Proactive.
"It's an approachable product format. It's non-smokable, it's not combustible. It's more analogous with other things we consume, whether that is functional beverages or alcohol," said Andrews.
The Vancouver-headquartered firm creates, manufactures and distributes cannabinoid-infused beverages and consumer products for in-house brands, as well as white-label clients. It has already built a number of global brands, with past successes amongst the team including Mike’s Hard Lemonade, Vega, and Trace Beverages.
BevCanna's existing infrastructure gives the firm a head start – not to mention its prime location in British Columbia's fertile Okanagan Valley known for wine production –which includes a 100-acre outdoor cultivation site and a 40,000 sq/ft manufacturing facility in Osoyoos, as well as a spring water aquifer.
Consumer study shows 70% of Canadian consumers would “definitely” or “probably” purchase CBD-infused beverages
BevCanna recently released a North American-wide consumer study, showing 70% of Canadian consumers would “definitely” or “probably” purchase CBD-infused beverages.
An independent research group, which conducted the survey on behalf of BevCanna, polled over 2,000 adults of legal drinking age in the US and Canada on their interest and preferences in current and potential cannabis products.
The study also found that consumers across all regions see CBD-infused beverages as contributing to a healthy lifestyle. The survey also noted that while Canadian consumers would also consider THC beverages as a means to relax and unwind, they tend to associate THC with consumption occasions such as hanging out with friends or social gatherings.
Hill Street Beverages (CVE:BEER) is another company looking to take a slice of the cannabis-beverage pie. The manufacturer and distributor of non-alcoholic beverages sees significant growth opportunities beyond non-alcoholic wine and beer in the cannabis space.
"We're paying attention to what the trends are," said Chairman and CEO Terry Donnelly. Notably, Hill Street Beverages helped co-found the Cannabis Beverage Producers Alliance (BevCanna is also a member). The group, made up of about a dozen companies, is lobbying the Canadian government for "effective changes."
"Beverages are very different products than gummies or capsules or dried flower," said Donnelly. "They need to be treated as such. They need to have a regulatory framework that allows them as a category to succeed."
For now, as companies look to navigate the waters ahead, it's difficult to predict potential growth, alongside the threats and challenges (if any) posed to the alcohol and wider beverage industry. Who will dominate? How large will the market be? And does the cannabis beverage market have the potential to upstage flower?
Either way, interest is undoubtedly growing. This July, the Cannabis Drinks Expo was held in San Francisco: the first-ever global cannabis drinks-focused expo and conference. Exhibitors included drinks professionals, producers, manufacturers, brand owners, distilleries and brewers. Next year, two summits are planned.
There's little doubt there's a well of opportunity ahead for cannabis beverages but how will it play out? That's unclear – for now.
Contact Katie Lewis at email@example.com