Cann Ventures Into CBD Beverages, But Looking Beyond CBD

Cann plans to create a non-CBD format of Sweet Reason after seeing demand for its THC-less drink.

Low-dose cannabis beverage maker Cann has acquired Canadian CBD-infused drink brand Sweet Reason, but the company isn’t exactly buzzing about the CBD.

In fact, the co-founder sees a “dwindling” market for the category.

“I think CBD beverages are largely buoyed by misplaced curiosity about cannabinoids and a lack of access to microdose THC products due to the (U.S.) federal government’s slowness to legalize cannabis,” Cann co-founder Luke Anderson told The Green Market Report.

He also believes that consumers who were originally attracted to CBD-only drinks were frustrated with the lack of buzz in those products.

Cann plans to create a non-CBD format of Sweet Reason after seeing increased demand for its THC-less drink and the desire to avoid regulatory fences.

The company has seen sales for its noncannabis-infused drink rise due to its “emerging partnership” with distributing giant Southern Glazers, Anderson said.

He cited “extraordinary” untapped potential in the category, should the company continue to introduce new lines of the Cann brand “and its broad portfolio of formulations (many of which are still unreleased) to mainstream consumers via the retail outlets they are already buying alcohol from today.”

Unsurprisingly, he blames the lack of federal guidance for the lack of market expansion. “SAFE banking should have passed, like, yesterday.”

Cann also wants to target a more narrow “micro-microdose” crowd with offerings that contain even less THC than the least potent options currently on the market, such as a drink with 0.5 to 1 milligrams THC and 20 milligrams CBD.

The company sees the category as a huge” untapped market within the cannabis space, and plans to build it out through this acquisition.

The company tapped Sweet Reason’s founder and CEO, Hilary McCain, to become Cann’s senior vice president of emerging products to drive sales and distribution, as well as product development for all portfolio brands.

“Hilary is aligned in the idea of small amounts of THC unlocking so much of the effect that consumers missed in the plethora of pure CBD offerings and thinks the cannabis industry would attract and retain newcomers better if a greater variety of beverages existed at these dosage ratios,” Anderson said.

Anderson expects to see sales growth of up to three times year-over-year, “driven by strong outperformance (nearly 10x) in nondispensary channels where Hilary’s work will be focused.”

“We are lucky to have plenty of cash on the balance sheet, and our margin evolution story continues to strengthen – even in the toughest of market,” he added.

Still, Anderson said that the market for cannabis-infused drinks continues to be an uphill battle without more legalized on-premise consumption.

“But we continue to win in each of the channels we play,” he said. “The strongest markets are the ones that are recently legal because there’s a massive inflow of consumers who are curious and don’t know where to start.”

He added that all eyes are on New York City.

“80% of adults are trying to drink less booze, very few of these folks are willing to commit to sobriety,” he said. “This acquisition positions Cann as the one-stop shop for a platform of alcohol alternatives, and very few large and growing companies are solely focused on addressing these consumers with such breadth and depth.”

Adam Jackson

Adam Jackson covers the cannabis industry for The Green Market Report. He previously covered the Missouri statehouse for The Columbia Missourian and freelanced for The Missouri Independent. He most recently covered retail, restaurants, and other consumer companies for Bloomberg Business News. You can find him on Twitter @adam_sjackson and email him at adam.jackson@crain.com.


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