Why Infused Beverages are Creating New Opportunities for Cannabis Companies

Cannabis beverage and tincture options are creating new means for safe and discreet cannabis consumption.

Few industries are more driven by consumer trends than the beverage space. Recent years have seen several huge beverage trends including the energy drink craze of the mid-2000s, the explosion of craft beers and countless new caffeinated drinks. The vast range of formulation possibilities makes beverages a blank slate to create new and innovative formulations that appeal to consumers’ taste buds while tapping into the latest beverage trends. With the cannabis industry spreading into new markets, these two spaces are coming together to present opportunities for the next big potential beverage industry disruption.

Cannabis is being introduced into a variety of beverage categories to serve a range of different purposes, from high-inducing alcohol alternatives meant for social occasions, to non-psychoactive CBD-based health and wellness drinks. The versatility of cannabinoids along with the variety of beverage options creates a huge range of opportunities for companies to develop unique cannabis beverage products that could allow them to carve out their own niches in an emerging space.

The cannabis industry as a whole is growing rapidly as new jurisdictions open the door to legal cannabis. As the industry has developed, cannabis consumers have been gravitating away from traditionally smoked cannabis flower towards other methods of consumption. Cannabis companies and beverage companies alike are betting that beverages could make up a significant chunk of tomorrow’s cannabis industry. An August 2019 report by Zion Market Research projects the global cannabis beverage market to grow at a 15.6 percent compound annual growth rate from US$1.613 billion in 2018 to US$4.46 billion by 2025.

Why beverages?

For cannabis consumers who prefer not to inhale their cannabis, edibles and beverages provide an appealing alternative to inhaling cannabis. Smoking rates have declined dramatically over the past couple of decades, largely in response to a growing understanding of the damaging effect of smoking on lung health. While cannabis is not thought to be as harmful to lung health as tobacco products, many consumers would simply prefer not to smoke at all. Vaporizing is a less harmful alternative to smoking, however, it is not truly harmless. Ingesting cannabis orally takes lung health out of the equation altogether.

In Canada, heavy restrictions have been placed on cannabis packaging and branding. Unlike in the United States, where cannabis producers are relatively free to use unique and eye-catching branding, Canadian packaging is limited to uniform colors with no graphics beyond a brand logo. This makes product attributes like taste, efficacy, and formulation using clean ingredients (i.e. without the use of additives, or excess sugar) that much more important. If Canadian cannabis beverage brands can’t appeal to consumer’s eyes, then they need to make sure that they appeal to their sense of taste and deliver on expected outcomes, such as fast onset time. Canada is set to begin selling edible products and cannabis drinks in late 2019, giving companies in the country a significant opportunity to grab the first-mover advantage in the space into early 2020.

Tincture and beverage options

THC or CBD infused drinks could bring a staggering amount of variety to the cannabis space with the potential to cater to the tastes of just about every type of cannabis consumer. Cannabis-infused lemonades, iced teas, sports drinks, sparkling water and much more could soon be represented in the cannabis beverage market. Cannabis coffees are a high-potential category as well, although it’s important to note that cannabis-infused products in Canada cannot contain more than 40mg of caffeine – and must be naturally occurring.

In pursuit of the infused beverages opportunity, major beverage companies are beginning to enter the space. Arizona Iced Tea, already a favorite among many cannabis consumers, announced in August 2019 that the brand would be leveraging its established brand loyalty by partnering with US cannabis company Dixie Brands (CSE:DIXI.U,OTCQX:DXBRF). The two companies are expected to produce cannabis-infused versions of Arizona’s popular drinks along with other Arizona-branded cannabis products.

Cannabis company BevCanna Enterprises (CSE:BEV) is focusing exclusively on the cannabis drinks market, with a wide selection of beverages for both the Canadian and US markets. For the craft beer or cocktail consumer looking to venture into cannabis-infused beverages, the company has developed Anarchist Mountain, a THC-dominant drink with a variety of botanical flavors infused in sparkling spring water. For consumers looking to relax and unwind at the end of the day, the company has announced Grüv, a balanced CBD/THC-infused iced tea line. BevCanna’s products are bottled with pristine alkaline spring water from an aquifer in BC and are also expected to be available in a powdered formula that can be easily mixed by the consumer.

In addition to launching a range of consumer-facing infused beverage formats and brands, BevCanna also boasts a 40,000 square foot fully-built world-class bottling facility that gives the company a bottling capacity of 72 million bottles per annum. BevCanna offers white label manufacturing services to licensed cannabis companies that aim to utilize BevCanna’s established manufacturing expertise and infrastructure.

“Backed by our proprietary consumer research, we know both the current and new cannabis consumer is looking to beverages as a more approachable and discreet method of consumption, with predictable outcomes. The advantage within the infused beverage category comes from water-soluble cannabinoids, offering fast onset time and precise dosing” said Emma Andrews, Chief Commercialization Officer at BevCanna.

“It’s up to each brand to ensure this technology is showcased in market-validated formulations and executes on a creative and compliant brand-building strategy. BevCanna has decades of experience creating beverage products in regulated categories such as alcohol and nutraceuticals that have resonated with consumers on a global scale,” said Andrews.

Some companies are working to bring to market cannabis beverages that more closely resemble traditional alcoholic drinks. Province Brands has developed a non-alcoholic beer that is actually brewed from cannabis in place of barley. Hill Street Beverage Company Inc. (TSXV:BEER) is developing a line of cannabis-infused non-alcoholic beers and wines using proprietary technology from Lexaria Bioscience Corp. (CSE:LXX,OTCQB:LXRP) that allows the products to be infused without affecting the taste, smell or quality. Major brewers like Constellation Brands (NYSE:STZ), InBev (NYSE:BUD), Molson Coors (NYSE:TAP) and Heineken (OTCMKTS:HEINY) have also partnered with cannabis producers with plans to release their own cannabis beer products.

Non-psychoactive CBD has become the fastest-growing segment of the cannabis industry, partly because CBD products can be sold in some markets where THC-rich cannabis is not yet legal. Due to this relatively low barrier to entry, CBD beverages are becoming a major subcategory of their own. In order to target this market, companies like Phivida Holdings (CSE:VIDA) have developed CBD-infused sports drinks and protein shakes designed to treat post-workout aches and soreness. Koios Beverage (CSE:KBEV,OTC:SNOVF) has developed a line of CBD nootropic drinks designed to improve focus, concentration, mental capacity, memory retention, cognitive function and alertness. Similarly, BevCanna is entering the space with its CBD-dominant beverage line Lev, which comes in a variety of fruit flavors, and is expected to target the wellness-oriented consumer looking to improve their quality of life, rather than seeking intoxication.

Takeaway

As consumer tastes shift in the era of legal cannabis, the future of the industry could be far more refreshing than its smoky past. Cannabis beverages offer more variety than nearly any other consumption method and create a world of possibilities for beverage producers looking to carve out their place in the market.

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