David Wood, Ph.D., is co-chair of the Borden Ladner Gervais LLP cannabis industry focus group
As edible cannabis products hit store shelves in late December, Canadians will have regulated access to a relatively new class of products – beverages infused with or otherwise containing cannabis. Cannabis beverages, a specific implementation of the edible cannabis class of cannabis, play an important role in responsible execution and otherwise contribute to the success of the Cannabis Act.
Accessible, appealing, safe and consistently-dosed beverages fit well in most social situations where burning or vaporizing dried cannabis or concentrates may be inconvenient, particularly for people not using cannabis. The social advantages of beverages speak to how product diversity increases the competitiveness of the regulated industry with its illicit counterpart. Practical challenges to producing a palatable cannabis beverage at scale emphasize strengths of the regulated industry – infrastructure, quality and dose control, and collaborations with established industry, including access to experienced formulation talent.
We can expect market share for cannabis beverages to be gained more quickly by the regulated industry than we have so far seen with dried cannabis, and with cannabis oil compared with illicit edible cannabis. The incumbent illicit market for beverages is smaller and the practical challenges favour the regulated market. The need for lower-dose and reliably-dosed products is greater with all edible cannabis products than with dried cannabis.
The advantages to including cannabis beverages in the offerings of the regulated cannabis industry are readily apparent. That is, for those who figure out how to define and market the cannabis beverage.
What is a cannabis infused beverage to you?
Approaching the market will be challenging but the rewards for dominating a new social fixture are significant.
Most of us can relate to a cold beer or a smooth-burning pre-roll, either directly or second hand. Few of us have cracked open an ice-cold THC-infused mineral water during cocktails before dinner, drank a shelf-stable kombucha with 50 mg of CBD after a workout, or brewed up a warm pot of 1:1 THC:CBD chamomile tea to relax before a bath. The examples illustrate the matrix of category-defining work that the industry has ahead of it.
Dried cannabis was an easy sell on the adult use market – after all, people willing to risk criminal liability are likely to participate in a compelling regulated market. The product was familiar but newly regulated for adult use purchase.
In contrast with dried cannabis, the novelty of cannabis infused beverages requires the industry to make the market. An upside relative to dried cannabis is that we are bringing this new payload – cannabis – to a recognizable and socially acceptable form factor that works indoors without bothering others – a beverage.
Socially, cannabis-infused beverages feel a lot like beverage alcohol, albeit with broader variety, for example including hot beverages such as tea or decaffeinated coffee, and not being tied to the particular flavour that comes with alcohol. Edibles and extracts intended for eating are only used for a moment – a beverage is easier to nurse during a conversation than a cookie, a soft gel capsule or liquid extract in a dropper. Beverages are conducive to “nursing” – drinking slowly during conversation or while watching entertainment. This manner of using beverage alcohol underpins its social role.
Most Canadians know enough about cannabis to have their guard up on anything that is eaten or drank rather than smoked or vaporized. This responsible caution, to be particularly encouraged with people who have little firsthand experience with cannabis, dovetails well with the limit of 10 mg THC per container that applies to cannabis products in the edible cannabis class.
A true double-edged sword in terms of market making on cannabis beverages is the plethora of options available. For any given product, matching a beverage with a payload results in immediate and significant commitment into some markets and departure from others. Consider the carriers – flat water, mineral water, juice, coffee, tea, de-alcoholized beverage alcohol, soda, soft drinks, fermented beverages and many others. In a huge departure from the beverage alcohol mindset, we have a great variety of payloads – THC, CBD, both, other phytocannabinoids, single-strain, curated blends of only flower, cost-effective blends of trimmings or shake, hemp extracted, full spectrum extraction, distillate, indoor, outdoor, yeast-produced – the list goes on. However, these payloads are not tied to any particular flavour, form factor or standard serving size, as is the case with different types of beverage alcohol.
Multiplying the carriers by the payloads creates a matrix of options. Choices of single strain full-spectrum live resin matter at one extreme, and yeast-produced single phytocannabinoids on the other, may or may not change the product’s psychological effects, its taste, or its appeal to various demographics. However, these choices will absolutely be part of the product story and part of the brand.
Choices about whether to mask the flavour of cannabis (perhaps with sweet flavours or proprietary chemistry) or roll with it (a discussion about terpenoids comes to mind – something any wine connoisseur can relate to) present a crossroad in branding strategy. Products in the extracts class of cannabis present creative options adjacent to beverages – an extract using coconut oil as a carrier oil might become the new road to infused butter coffee – and shelf-stable coconut oil will be easier to ship than bottles of mixed coffee, with the added freedom of up to 1,000 mg THC per package.
Product choices aside, this market-making will of course be completed under heavy promotional restrictions. A minefield of prohibitions and requirements on labeling, branding, promotional activity and formulation present themselves to industry. Options for promoting cannabis beverages are as varied and complex as for the products themselves.