The cannabis-infused beverage industry is rapidly growing, posing an interesting question: Are booze and bud friends or foes? A recent panel discussion at the Benzinga Cannabis Capital Conference shed light on the current state and future prospects of this flourishing sector. Moderated by Gerald Pascarelli, CFA senior VP, Equity Research at Wedbush Securities, the panel explored the dynamics of the cannabis-infused beverage market and its potential impact on the traditional alcoholic beverage industry.
The Fast-Growing Segment: Beverages
Beverages are gaining traction in the cannabis market and have become one of the fastest-growing form factors in the industry. Chris Walker, the president and CCO at Hoodie Analytics, highlighted that although cannabis beverages currently account for less than 2% of sales in a typical dispensary, they are increasingly popular among new and affluent consumers, offering significant growth potential in the future.
The Advantages of Cannabis Beverages
Paul Weaver, director and head of cannabis at the Boston Beer Company Inc. (SAM), discussed the company’s entry into the cannabis beverage market. Weaver emphasized the advantages of cannabis beverages over traditional forms, citing their branding and price stability as key factors. With the ability to create a consistent brand experience, cannabis beverages have the potential to outperform their counterparts in the market.
Challenges and Opportunities
Camilo Lyon, CIO at Curaleaf Holdings, Inc. (CURLF), acknowledged the challenges in the cannabis beverage industry, such as the high costs associated with production and distribution across different states. However, Lyon sees potential in the normalization of cannabis beverages, particularly among older demographics and those seeking alcohol alternatives. The production and distribution challenges may be a hindrance to a large-scale rollout, but Lyon remains optimistic about the market’s future.
Tiffany Chin, co-founder at Death Row Records Cannabis, highlighted the social aspect of cannabis consumption and its potential expansion into sports venues through partnerships with cannabis beverage brands. Chin anticipated that partnerships between cannabis beverage brands and sports facilities would materialize in the near future.
The Potential of On-Premise Consumption
The panel also discussed the possibility of on-premise cannabis consumption, similar to traditional alcohol sales in bars and restaurants. As the stigma around cannabis diminishes and consumers become more curious, on-premise cannabis consumption could gain traction. Weaver raised intriguing questions about the business model for bars and restaurants regarding the sale of cannabis beverages, hinting at the potential of cannabis beverages to generate significant revenue for businesses beyond branding and sponsorship.
The Power of Brands in the Cannabis Beverage Industry
The discussion emphasized the significance of branding in the cannabis beverage industry. Strong branding creates a unique value proposition that consumers are willing to pay extra for. As cannabis gains legal status in more states and countries, the challenge lies in providing a consistent brand experience and expanding into international markets.
The Role of THC Content
Regarding THC content in cannabis-infused beverages, the panel highlighted the importance of safety and proper testing in the industry. Brands offering beverages with lower THC concentrations have seen success in appealing to new consumers who desire an elevated experience without the intensity of higher THC doses. Standardization and safety are critical factors in a market that currently lacks regulation.
The cannabis beverage industry faces various challenges, including oversupply, which impacts pricing and potential down-trading. However, the industry is evolving rapidly, with a broad portfolio of products catering to diverse consumer demographics.
The Illicit Market Dilemma
The panel discussion acknowledged concerns surrounding the proliferation of the illicit cannabis market, particularly in certain regions. Enforcing regulations and cracking down on illegal operators are essential steps to create a safer and more regulated environment.
The panel discussion provided a comprehensive overview of the challenges and opportunities in the cannabis-infused beverage industry. Key factors for success include branding, product safety, and regulatory enforcement. As cannabis consumption continues to surge and alcohol sales decline, the cannabis-infused beverage market represents a significant $100 billion opportunity.
Image by Benzinga