Consumers are thirsty for CBD beverages.
Research shows the CBD-infused beverage space is expected to reach $2.8 billion by 2025. And by 2029, the global cannabis market could inflate to $130 billion, with CBD beverages making up a significant chunk of business.
Alcoholic beverage companies have already started cutting deals in order to tap that corner of the market in case consumers decide to switch from traditional booze to drinks containing THC.
For example, Pabst Blue Ribbon — the 19th-century beer that is now the largest U.S.-owned brewer — recently debuted its cannabis-infused sparkling water at certain cannabis shops in California. The drink doesn't contain beer or alcohol, but rather a few milligrams of THC.
Before that, spirits giant Constellation Brands STZ, maker of Modelo Especial beer and Svedka vodka, acquired a 39% stake in Canopy Growth CGC with the intention of a beverage rollout.
A certain group of celebrities are also high on the trend. Recall last month when cannabis beverage brand Cann received financial backing from Academy Award-winner Gwyneth Paltrow, "Batwoman" star Ruby Rose, Rebel Wilson, Darren Criss, Baron Davis, Tove Lo, Casey Neistat and Calesha Murray aka Bre-Z. See below.
Expect to see more deals like this in 2021 and beyond, said Bethany Gomez, a vice president at the cannabis data firm Brightfield Group.
"I see more growth trajectory in the non-alcoholic, cannabis infused beer and hard seltzer category, as it is more straightforward from a product development standpoint and aligns more closely with key occasions of consumption for social cannabis users, as the products are effective in targeting," she told Benzinga.
That growth trajectory is expected "to continue year over year," she added.
To illustrate her point, she cited some Brightfield data:
- In a second quarter (Q2) 2020 survey of 3,500 US cannabis consumers, 22% of U.S. cannabis reported using cannabis-infused drink (compared with 57% using flower, 47% using prerolled joints or 41% using gummies). In Q3 2019, only 14% of cannabis consumers were using drinks.
"Given that products are generally sold as a single serve product, the percentage of the overall market is quite low," Gomez said.
"Because of the single serve nature, they are often the lowest priced items in a dispensary which makes it attractive for individual use, but the product formulations are still somewhat underdeveloped and not yet at the caliber to make them competitive with mass market alcoholic beverages."
Companies that make cannabis drinks will likely run into the same regulatory hurdles that edibles makers have.
"In general, cannabis drinks are handled as an edible in nearly all markets," Gomez said. "This means that they will have the same dosage restrctions and packaging guidelines as other edibles, and markets that do not allow for edibles will not allow for drinks either."
And to those cannabis companies that are interested in beverages as part of a 2021 expansion plan, Gomez has some advice:
"Really understand your consumer, how they are using cannabis and how you intend for them to use your product," she says.
If a company decides to pitch cannabis beverages as an alcohol substitute, it needs to be effectively positioned for the same occasions that people are using alcohol.
For example, beverage brand Sweet Reason recently launched its Evening Blend, a collection of high-dose CBD sparkling beverages geared toward consumers looking for an alternative to alcohol to take the edge off at night.
The line contains a powerful combination of calming herbs, adaptogens, and 30 milligrams of broad-spectrum hemp CBD, making it one of the highest-dose CBD beverages on the market.
At the same time, consumers use cannabis and alcohol quite differently, in different parts of the day and during different moments of consumption, Gomez explained.
"Think before a workout or to inspire creativity," she said. "[That] makes it not a straightforward substitute."
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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