Legal cannabis provides a valuable opportunity to reshape the consumer beverage industry, according to Cannabiz Consumer Group (C2G). Today, beverages generate nearly $1.5 trillion annually for the US economy. Manufacturers profiting from increasing demand for beverages that are healthier alternatives to traditional sodas and sugary drinks, while delivering unique flavors and experiences. Coupled with ample consumer confidence to spend on beverages that fit a specific mood or occasion, these trends bode well for the beverage industry’s entry into the cannabis space.
“Although most believe that the alcoholic beverage industry will lead the charge into the cannabis beverage space, our opinion is that the ultimate winners will be the non-alcoholic beverage manufacturers” said Rick Maturo, Chief Product Officer at C2G. Maturo cites three reasons why these companies will likely become the dominant players in the space.
First, by entering the THC-infused beverage marketplace, today’s non-alcoholic beverage manufacturers can begin to offer products to compete against the untapped $200B alcoholic beverage industry. Currently, their products don’t satisfy the needs for which consumers turn to beer, wine, and spirits.
Second, many of non-alcoholic beverage manufacturers have already been broadening their portfolios to take advantage of the consumer trend toward alternative drinks, like energy drinks or shots, kombucha, and other enhanced juice drinks; offering a cannabis-infused beverage is an extension of this strategy. “For most of the country, adults looking for a healthier afternoon ‘pick-me-up’ might turn to a Kombucha or 5-Hour-Energy™, but in places like Denver or San Francisco, they can pick up a THC and CBD-infused cannabis shot with a citrus sativa strain that purportedly promotes energy and mental stimulation,” Maturo adds.
Third, higher margins mean higher profits. Cannabis-infused beverages are offered at a premium when compared to other alcoholic and non-alcoholic segments. This higher price point per serving translates to significant profits. Even better, while alcoholic beverages will directly compete with their cannabis-infused counterparts, for non-alcoholic beverage manufacturers sales will come without any significant impact on their core product lines.
Although cannabis-infused drinks make up less than 20% of cannabis products sold in adult-use cannabis markets and account for an even smaller percentage of total sales dollars, the format is predicted to grow. Major growth catalysts for the rise of cannabis-infused drinks, especially among older-adults and cannabis novices, are the absence of inhaling smoke or vapor, and if desired, even the “high” itself. Cannabiz Consumer Group projects that in a full-national recreational cannabis marketplace, infused-beverages could produce annual revenues of nearly $15B dollars, comparable to retail coffee sales and double the size of the energy drinks market.
Today, CBD-only infused beverages are legal to sell to any adult residing in a state with medicinal cannabis access, regardless of the individual’s status as a qualified medicinal patient. The CBD-only market alone is predicted to be more than a $300M. As the cannabis industry aggressively evolves to cater to changing laws and consumer demands, the opportunities from infused flavored beverages that match consumers’ current taste preferences and needs, in addition to existence of cannabis drinks that already mirror major non-cannabis brands’ products, will accelerate traditional beverage manufacturers entry into the cannabis market. For now, cannabis drink manufacturers face little competition outside of the cannabis ecosystem, though this will certainly change following national legalization or a sizable investment from a major non-cannabis beverage manufacturer.
Despite the upside for entering the cannabis-infused beverage marketplace, Maturo states that there are many issues that need to be considered, aside from the obvious legal challenges of entering the industry. Potential issues surrounding negative consumer sentiment and damage to corporate equity from entering the cannabis marketplace need to be addressed. Despite these uncertainties, cannabis drinks are poised to become the newest battleground for beverage manufacturers to champion. As such, we fully expect to continue to see more announcements from major players in 2018.
About Cannabiz Consumer Group™
Cannabiz Consumer Group investigates cannabis legalization and its impact on consumer spending throughout the economy. Bringing together a diverse information set and a team with expertise in the tracking of emerging markets, data modeling, and analytics, Cannabiz Consumer Group provides insights and solutions for industries that must adapt to cannabis legalization. This includes over-the-counter medications, beer, wine, spirits, tobacco, other foods and beverages, retail, pharmaceuticals, healthcare, and travel/tourism. Each will be impacted by consumer spending on cannabis as existing legal use markets continue to evolve and new markets launch.
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