Cannabis drinks are coming. This sentiment has been a steady drumbeat over the past decade, growing louder and louder as the pace of recreational cannabis legalization has grown. Beginning with Washington and Colorado in 2012, recreational marijuana offered the possibility of consumer-packaged goods to a product previously constrained by its clandestine status, and early options were in stores by 2016.
The category, however, has remained notably small—under 5% of total cannabis sales—in the few markets where it’s available for a number of reasons. Foremost is that, due to federal cannabis prohibition, it remains illegal to move cannabis products across state lines—even between two adjacent legal-market states like on the West Coast. This constraint largely limits brands to their home market, creating a lack of any true “national” brands across the 11 operational recreational cannabis markets in the U.S. and further limiting the general public’s awareness of the category in the first place.
But rapidly shifting public opinion around cannabis use has created the tantalizing, if yet not fully realized, possibility of an influx of new consumers who may have historically steered clear of the substance. That consumer demographic can be seen in contrast to the stereotypical image of the early-twenties-aged stoner that persists as the face of cannabis use. The new class of cannabis user the industry hopes to win over is a little older—in their 30s or above—and employed steadily and professionally, willing to spend on quality and convenience. It is, in short, the same audience that has powered the premiumization trend in wine and spirits, trading up for products with more character and quality. This group’s strong familiarity with beverages makes drinks an ideal entry point to the world of THC.
Canada's Early Start
While the category has advanced in the U.S. on a state-by-state basis, the drumbeat promising drinkable THC reached high decibels in 2018 when beverage alcohol giant Constellation Brands made its watershed $4 billion investment in Canadian cannabis producer Canopy Growth—just months before Canada legalized cannabis nationwide—assuring a future in which cannabis beverages would be branded and marketed like their alcohol-based counterparts. After nearly two years of intense research and development, Canopy Growth launched its preliminary slate of drinks last March. So far, the rollout has been a success. “We’ve sold just over 2 million beverages into the Canadian boards and provinces,” Andrew Rapsey, Canopy Growth’s then-head of beverages, told Market Watch shortly before he departed the company last December. “For context, the entire THC beverage market in the U.S. was 4 million cans over the same period. Given the fact that Canada’s population is roughly the size of California’s, that’s an incredibly encouraging stat for us.”
Canopy’s first drinks came under its upscale Tweed brand, which skews toward professionals. Tweed Houndstooth & Soda, a sativa-dominant RTD seltzer containing 2-mg. of THC, debuted in March 2020 and was followed a month later by brandmate Tweed Bakerstreet & Ginger, also at 2-mg. of THC but containing an indica-dominant cannabis formulation. Both retail for C$4 ($3) a 355-ml. can on the Ontario Cannabis Store, the province-run online dispensary. This dosage is mild and unlikely to cause significant psychoactive effects in all but the most sensitive consumers. Instead, Canopy is aiming for physical relaxation and sociability as it builds awareness and trust in the category.
In May 2020, Canopy launched drinks under two of its other brands. The first is Houseplant (C$5/$4), the brand Canopy created in partnership with Seth Rogen and his writing partner Evan Goldberg. It debuted with a sativa-dominant grapefruit sparkling water, followed by a lemon version, both containing 2.5-mg. of THC. Also launched last spring, Canopy’s most potent—and popular—release so far is Deep Space, another canned drink that contains 10-mg. of THC per can, the maximum under Canadian law. “Deep Space is consistently at the top of the category,” Rapsey notes. “That’s because a lot of the people shopping at dispensaries right now are more experienced cannabis users. While Houseplant, whose flavors taste a lot like grapefruit and lemon LaCroix, was definitely the drink of the summer, Deep Space seems to be doing well no matter the time of the year.”
Canopy’s strategy for beverages goes farther than using them simply as an entry point to cannabis—rather, the company is angling for a group of consumers for whom drinks will always be the primary or sole form of cannabis they consume. “The majority of our sales are within flower and other inhalables,” Rapsey says. “But we know there’s a whole segment of the population—probably the majority—that has a bias against inhalable formats. There are some people who will never experience cannabis via flower or vapes. Beverages are a way to unlock the potential of cannabis for those consumers, because they’re a less intimidating format. And we’ve figured out how to dose them to a point where we’re making it essentially the equivalent of a typical beverage alcohol serving, and similar in effect to a light beer or a small glass of wine.”
This approach will face its biggest test yet in the coming months when Canopy begins introducing its beverage portfolio in the U.S. through its partnership with New York-based cannabis operator Acreage Holdings. BioSteel, its CBD sports drink, is also launching in the U.S., having signed distribution agreements with Reyes Beer Division and Manhattan Beer, among others. BioSteel’s conventional, non-CBD option also recently became the official drink for the Philadelphia 76ers and the Toronto Raptors in the NBA.
Canopy’s major competition in Canada comes from Truss Beverages. The company, formed in late 2018, is a joint venture between Molson Coors and Canadian cannabis producer Hexo. Truss’s brands include Veryvell, House of Terpenes, Little Victory, Mollo, and XMG. They all launched last August in Ontario and Quebec and are in the process of rolling out to the rest of Canada. The drinks are low-dose and sold individually. Veryvell has the mildest formulations in its two sparkling waters, Strawberry Hibiscus and Sicilian Lemon, which both contain 15-mg. of CBD and 0.5-mg. of THC a 355-ml. bottle. The brand’s Lemon Black iced tea is slightly stronger at 2.5-mg. of each cannabinoid. Little Victory debuted with four bubbly varieties: Dry Grapefruit, Dry Lemon, Sparkling Blood Orange, and Sparkling Dark Cherry, all at 2.5-mg. of CBD and THC.
Slightly more potent, House of Terpenes will launch with two sparkling tonics in Limonene and Myrcene varieties, named for the terpenes they contain. Each is at 5-mg. of CBD and THC and suggested to be served over ice. Mollo, meanwhile, is billed as crisp and hoppy, available in 2.5-mg. and 5-mg. formats; its marketing includes the phrase “Vas-y-mollo,” French for “Take it easy,” in a bid to court Canada’s Francophone population. Finally, XMG is Truss’s high-octane option. With Tropical Fruit and Mango Pineapple flavors, the drinks clock in at 10-mg. of THC a 12-ounce can.
Early signs suggest that consumers are responding positively to Truss’s slate of products. The company’s earnings in the third quarter of 2020 neared C$30 million, more than double its figure from the first quarter of the year. Some of that growth came from its drinks department, which jumped 54% in Q3 to more than C$3 million. It has claimed just over one-third of the cannabis beverage market, according to cannabis retail data tracker HyFyre, putting it in close competition with Canopy, which HyFyre estimates at 33% of the overall category. In December Truss unveiled a new facility called the Centre of Excellence in Belleville, Canada, where its drinks will be made going forward.
U.S. Growth Brewing
In the U.S., drinks options vary by state, with most of the action centered on California. It has led the way due to the size and value of its market coupled with the state’s rich history of wine production and craft brewing. California voted to legalize recreational cannabis in 2016 and sales began in 2018. Shortly thereafter, Petaluma-based Lagunitas Brewing Co. announced Hi-Fi Hops, a line of IPA-inspired hoppy sparkling water infused with cannabis. Launched in the summer of 2018, the brand recently received a refresh that introduced music-themed nicknames to its three options: medium intensity Tuner ($9 a 12-ounce can), with 5-mg. of THC and 5-mg. of CBD; mildest intensity Unplugged ($7), at 18-mg. of CBD and less than 2-mg. of THC; and strongest option Reverb ($9), infused with 10-mg. of THC. While Tuner and Unplugged remain limited to California dispensaries, Reverb expanded to Colorado in September 2019.
In Colorado, Blue Moon creator Keith Villa’s Ceria Brewing launched its first offering, a dealcoholized cannabis-infused ale, in late 2018. That initial release, Grainwave Belgian white ale, was an immediate hit at Colorado dispensaries and sold out its first production in hours. Since then the company has expanded its lineup, augmenting the 5-mg. THC Grainwave with a more potent portfoliomate called Indiewave IPA that ups the THC content to 10-mg. but balances it with 10-mg. of CBD, which is generally believed to have a mitigating effect on THC. In addition to its infused offerings, Ceria saw strong interest in its unadulterated non-alcoholic beer; last year the brewery secured national placement for Grainwave NA in Total Wine locations across the country.
Back in California, a bevy of cannabis-infused wine brands have taken off. House of Saka, a cannabis wine label that launched its first releases in October 2019, was co-founded by Tracey Mason, a veteran of Diageo, Foster’s Wine Estates (now Treasury Wine Estates), and Purple Wine + Spirits, among other drinks companies. Mason touts her industry connections as a competitive edge, as she’s able to source top-quality grapes from Napa Valley for Saka’s portfolio, helping to offset the loss of flavor caused by dealcoholization. The brand first released a Napa Valley Pinot Noir rosé in still ($50 a 750-ml.) and sparkling ($75) varieties that both contain 25-mg. of THC and 5-mg. of CBD a bottle, meaning that a single glass contains around 5-mg. of THC, which has emerged as the standard “approachable” dosage.
Los Angeles-based Rebel Coast embraced terpenes—aroma molecules that cause the distinct cannabis smell—as a way to open up possibilities totally unique to the category. In addition to infusing its wines with THC and CBD after dealcoholization, Rebel Coast adds wine terpenes to compensate for flavor loss. But co-founder and CEO Josh Lizotte says they also inflect the character of the wine’s effects, allowing for a new dimension in winemaking. “Not only do the new terpenes add more flavor and aroma, but they actually have a synergistic effect with our THC,” he says. “People don’t know that these other terpenes interact with the THC to bring on different types of high.”
Both House of Saka and Rebel Coast—which first launched its Sauvignon Blanc in September 2018 and its rosé (both $45 a 750-ml.) in August last year—see their wares as appealing primarily to women, as does Woodland, California-based Viv & Oak, which debuted with a rosé last December. Much of the aesthetic around cannabis culture is oriented toward young men, but statistics from legal states show that the largest growth among consumers has been among women and those older than 35. Cannabis wine has the potential to tap into this burgeoning market, where sophistication and quality are a priority and justify the higher price point.
Outside of these top brands, numerous other players are clamoring to claim a piece of the category. Mirth Provisions distributes its Legal brand fruity cannabis soda, Giant energy shot, and Otto’s CBD cider along the entire West Coast plus Colorado. Cannabiniers is present in California and Nevada with its Two Roots cannabis-infused non-alcoholic beer, Creative Waters sparkling water, and Just Society coffee and tea. And High Style Brewing’s Coastal Haze is another challenger in the cannabis beer category. After years of waiting, the cannabis drinks are here in force. But the long drumroll heralding mass adoption is still ringing.