What could have been a threat to alcohol and the beverage industry, has now turned into one of the beverage’s biggest opportunities since hops met barley.
Both the cannabis and beverage industries saw dollar signs when Constellation Brands added a $4 billion investment to its already ample investment into Canopy Growth. The beverage biggie, that owns Corona, certainly turned heads as cannabis brands, and leading beverage companies began inking deals to ensure their brands showed up in drink coolers across the country.
Headset recently came out with an extensive report examining the rapidly developing cannabis-infused beverages industry, stating that although beverages don’t make up the majority of cannabis product sales, they are “a category within cannabis that’s worth watching.”
The Growth of Infused Beverages
While market share has experienced an incremental increase, the overall market for infused beverages has doubled, moving from $1.5 million to $3 million in 2019.
Infused beverages sales are concentrated in Washington, Colorado, and Nevada. California will be next to enter the beverages race when Lagunita’s HiFi Hops hits the shelves. Most recently, in Q2 2019, Washington led in beverage sales ($4.2 million), followed by Colorado’s $3.9 million.
What Are People Drinking?
Infused sodas are reigning supreme in the beverages category, gaining 3.9% of the overall beverages market share. Surprisingly, warm drinks like teas, coffee, and hot cocoas lost market share, as did Iced Tea, Lemonade and Fruit Drinks. Infused sodas accounted for 70% of Washington’s beverage sales in 2019, while in Colorado and Nevada, 18% and 26% of respective sales were represented by soda.
“Mocktails” also made gains over the last year, but the impact is not yet significant enough to believe that cannabis will become an alcohol replacement drink, although Nevada can attribute 12% of beverage sales to cannabis mocktails, which is aligned with Vegas’ reputation as a party town.
Headset even went as deep to look at the flavors that people were preferring. In Washington, lemon, lime, orange, and apple flavors make up 52% of the infused soda market, with the rest of the flavors being made up of distinct fruit flavors like huckleberry, hibiscus, and honeydew, just to name a few. In Colorado, the majority of the soda consumers prefer a flavorless beverage (this is also because drops, mixes, elixirs, and syrups sell the most in this state); in California, they love the taste of cold tea; and in Nevada, Fruit Punch tickles the most palates.
Headset attempted to compare the prices people are willing to pay for beverages across states, but couldn’t find any correlation. For example, Tea, Coffee, and Hot Cocoa are amongst the highest priced items in Nevada, but of the lowest-priced items in Washington. Headset speculates that there is a different brand landscape in each state that attributes to these nuances in what people are willing to pay.
Getting “Buzzed Over Stoned”
In 2017, 100mg THC infused products made up most of the market share at 90.9%; in 2019, it’s dropped 67.1% and has been replaced by microdosed formats in the 0-5mg range. This leads Headset to conclude that “consumers are more interested in getting buzzed than stoned.” If people are indeed using cannabis-infused beverages for alcohol-replacement, they are likely consuming multiple beverages in one sitting, as they do beer or wine. Despite speculation, Headset projects that there is “a lot of room for low dose beverages”.
The Who and Why of Infused Beverages
Perhaps surprising, the Silent Generation is the largest consumer of infused beverages in Colorado, while in Nevada, enjoyment of these beverages is more evenly distributed across age groups. It makes more sense when you remember that in Colorado, drops, mixes, elixirs and syrups are of the leading product categories, which makes it easy for people of the Silent Generation to easily dose cannabis in a cup of tea.
POS data collected by Headset suggests that cannabis-infused beverages are an impulse buy or an add-on item. People buying beverages are usually purchasing pre-rolls or edibles and throw in beverages as a last thought. Beverages are most commonly bought alongside edibles, suggesting that beverages are more appealing to those who do not prefer to smoke or combust their cannabis.
CBD is Having Its Moment
CBD infused beverages are currently holding at 25% of the infused beverages market share, according to Headset. With the passage of the U.S. Farm Bill of 2018, hemp-derived CBD products could be a threat to THC-infused beverages that can now be sold in coffee shops and retail stores.
Crack Open a Cold One
The cannabis-infused beverages market isn’t yet massive but shows a great opportunity for cannabis and CBD companies to get in on the ground. Headset has concluded through their analysis of 4 states that tracking and predicting data trends across states is not linear, and that piecemeal, state-by-state legalization affects sales. This shows that brands in individual states are shaping the markets of those states. Had cannabis been federally legalized, it would be easier to notice more consistencies across consumer preferences.
Headset predicts that sodas will continue to grow, as will mocktails. People are now getting into lower dose beverages, recognizing that it’s rare that people can consume a 100mg beverage in one sitting.
While Headset was reluctant to name cannabis-infused beverages as an alcohol replacement, several data points such as lower doses and the rise in popularity of sodas show that cannabis-infused beverages are becoming part of social circles and scenes.