Betting Big on The Cannabis Drinks Market in 2019

Photo Credit: Brewbudz

As the legalization of marijuana rolls out in more states and Canada soon bringing edibles to the legal market, many businesses are betting big on cannabis-infused beverages this year.

Food and drink consultancy Zenith Global predicts that cannabis beverages market will be worth $1.4 billion in the US by 2023.

Yet the hoped-for cannabis drinks boom is not a sure thing. Talks at the upcoming Cannabis Drinks Expo with names such as “The 3 Barriers to Cannabis Beverage Category Growth” and “Cannabis Regulations Across Boundaries” showcase both the anxiety and anticipation in this space.

Despite the risks and regulatory challenges facing cannabis drinks, entrepreneurs are looking to establish themselves early and quickly.

Regulatory Challenges in the US and Canada

There are many challenges preventing the production and distribution of cannabis drinks.

The state of cannabis legality is still confusing in the United States. The 2018 Farm Bill Act made CBD (cannabidiol) derived from hemp legal at the Federal level. Drinks with CBD are legal across the country, but that CBD must have been derived from hemp for the drink to be sold in a state where marijuana is still illegal.

Eleven US States currently have laws allowing for legal recreational marijuana, though some don’t permit retail sales of Cannabis. Despite cannabis only being legal in one-fifth of the United States, the beverage industry is starting to ramp up. Currently, most of these drinks are non-alcoholic, and rules regarding how much THC can be included vary by State. The fact that marijuana is still illegal at a Federal Level and the different rules in each State makes wide production and distribution of these drinks a challenge.

Meanwhile, Canadian investors in the cannabis industry are calling Health Canada’s recently announced guidelines for cannabis beverages too restrictive.

Cannabis edibles and beverages were originally slated to begin rolling out in the fall. Health Canada has now stated that cannabis retailers must submit a 60-day notice of intent to sell edibles once the rules are live on October 17th.

Health Canada’s rules also state that a cannabis beverage is limited to 10mg of THC per bottle. By contrast, states such as California, Washington, and Colorado allow for 10mg in one serving, with multiple servings allowed.

A major sticking point in the new rules is the packaging and naming requirements; the packaging must be plain, and the name must avoid association with alcoholic beverages, tobacco or vaping products. The Cannabis Beverage Producers Alliance argue that these restrictions will make it harder to compete with the black market, and hobbles Canada’s competitive opportunities in cannabis.

“We make a Cabernet Sauvignon that will be infused with cannabis. But if I can’t use [the name] Cabernet Sauvignon, how can I describe the product?” Said Terrence Donnelly, chairman and CEO of the Hill Street Beverage Company on CBC’s On The Coast. He joked, “I’m going to have to call it a fermented, aged liquid extracted from red-skinned grapes from Niagara.”

While companies in the US and Canada continue to lobby for fewer restrictions on their products, the drinks are already in production.

The Major Players Betting on Cannabis Drinks

Across North America, both small entrepreneurs and the big boys of beverages are vying to make a mark in the cannabis business.

You need only read Cannabis Drinks Expo’s “Top 10 Cannabis Infused Drinks You Must Try in 2019” to see how much investment there currently is in this space. Companies like Rebel Coast Winery and Hill Street Beverage Company both make non-alcoholic THC wines. Cannabiniers is a food service and technology company with THC coffee and tea lines. Cannabis-infused sparkling water is even available from companies like Utopia.

Meanwhile, major beverage companies have paired with cannabis producers to dive headfirst into this market.

Canopy Growth, the world’s largest cannabis company, received a $5 billion investment from Constellation Brands back in April of 2018. Canopy hopes to solve a major hurdle in cannabis beverages – the consistency and taste. Natural cannabis extract doesn’t blend with liquid and tastes, well, like weed! Canopy is heavily invested with Trait Biosciences to help improve the solubility of cannabis and improve flavor.

Molon Coors Brewing Co. headlined cannabis news when they partnered with Hexo Corp. out of Quebec in 2018. Their joint venture named Truss is planning to have a variety of cannabis drinks ready to hit the market for December.

Anheuser-Busch InBev has partnered with BC cannabis producer Tilray to create cannabis drinks.

One major cannabis producer, Auora Cannabis Inc., is staying out the beverage market. They were in talks with Coca-Cola to develop CBD beverages, but both parties backed down. In a recent call with analysts, Aurora’s chief corporate office Cam Battley stated that they anticipate a low market share in Cannabis drinks based on their observation of the current legal US market.

Coca-Cola is staying out of the market for the time being. They reportedly did not want to tarnish their “wholesome” image with products that are still not fully legal.

It remains to be seen if the investments by these major players will be boom or bust.

Cannabis Drinks at The Family Barbeque?

Brands are banking on making enjoying THC or CBD wine or iced tea at the family dinner table the norm. By positioning weed drinks in the wellness category, brands hope to bring in consumers who otherwise might avoid cannabis.

There may be uncertainty that the movement will take off as much as analysts predict. Still, but you can feel the optimism and anticipation in the air.