Like coffee, beer and other drinks, cannabis has been enjoyed in social situations for eons. It only makes sense, then, to combine them.
Jason Reposa, founder and CEO of Good Feels, described beverages and cannabis as a “natural fit.”
“It's the easiest way to be part of the party,” he said. “They are sessionable like a beer and you fit right in. When you walk into a friend's house they don't say ‘would you like a gummy?’ They say ‘what do you want to drink?’”
“As I got older and my hangovers started getting worse, I quickly realized that alcohol was not serving me well,” Bullock said. “Yet, my entire social life seemed to be structured around alcohol consumption, and giving it up may mean missing out. I thought there should be a beverage designed for socializing that gives a mild buzz similar to alcohol but without the hangover and calories.”
Driven by format familiarity, consumers’ desire to avoid alcohol, and new cannabis markets becoming operational, beverage is one of the fastest-growing segments, outpacing the growth of the overall edibles category. Manufacturers are developing options that drive flavor as much as function.
In the first three quarters of 2022, sales of cannabis beverages surpassed $135 million, which represented 6.9% of the nearly $2 billion total edible sales BDSA tracked during that same period. That’s up 0.3 percentage points — or 4.2% — from the first three quarters of 2021.
In some markets, beverages occupied an even greater share. California’s beverage category represented 9.5% of the state’s edibles sales in the first three quarters of 2022, while beverages represented 7.3% of Colorado’s adult-use edibles sales. In Illinois’ medical and Nevada’s adult-use markets, beverages occupied an 8% share, while in Oregon’s medical market, beverages represented 8.5% of edibles sales.
The share of beverage sales surpassed double-digits in four markets. Beverages occupied 10% of edibles sales in Massachusetts’ adult-use market and 12% in its medical market. In Missouri’s medical market, beverages represented 11% of edibles sales, while they occupied 12% of Nevada’s medical edibles sales.
Beverage captured a larger slice of edibles sales in three markets, with Arizona’s medical market posting a gain of 1.7 percentage points from the first three quarters of 2021, and Massachusetts’ adult-use and medical markets seeing increases of 3.3 and 2.4 percentage points, respectively.
Beverage sales in the first three quarters of 2022 were up 8.5%, compared to the first three quarters of 2021. The category doubled the growth of overall edibles sales, which saw an increase of approximately 4% over the same period. BDSA attributed this growth to new markets opening to consumers in 2022.
However, in looking in markets that tracked beverage sales in the first three quarters of 2021 and the first three quarters of 2022, beverage sales are down 1.8% over the same period.
Looking at individual markets, beverage sales in Arizona’s medical market were up 18%, while they were up 75% in Massachusetts’ adult-use market and 41% in the state’s medical market. Beverage sales in Michigan’s adult-use market were up 124%.
Beverage sales dropped in other markets. BDSA reported:
- California’s licensed market -1%
- Colorado’s adult use market -28%
- Colorado’s medical market -38%
- Illinois’ medical market -12%
- Maryland’s medical market -24%
- Michigan's medical market -65%
- Nevada’s adult use market -33%
- Nevada’s medical market -23%
- Oregon’s medical market -31%
While overall beverage sales are growing as new markets become accessible, Bullock noted THC-infused beverages can face challenges in the dispensary retail channel.
“Beverage is the smallest (yet fastest growing) category in cannabis, so does not receive significant floor space or visual merchandising, and for Cann specifically as a microdosed beverage, we do not fit the ‘bang for your buck’ mentality frequently touted by budtenders,” he said. “We are grateful to all of our retail partners for believing in us and for creating welcoming environments where canna-curious customers can learn about microdosed beverages.”
Product development and new launches
Reposa, who launched Good Feels in Massachusetts in 2022 after using cannabis to recover from a medical issue, said his company relies on the survey process to hone in flavors for its products.
“We work tirelessly to determine which flavors to launch through surveying and focus groups,” he said. “Our initial launch flavors were tested with over 150 individuals. In total, we've probably tested with over 400 people.”
In addition to flavored beverage enhancers, Good Feels offers fast-acting seltzers with zero calories and zero sugar. Each seltzer contains a total of 5 mg THC and CBD. They’re available in four core flavors: Black Cherry, Blood Orange, Grapefruit and Raspberry Apple.
Good Feels also introduced the limited-edition flavors of Pineapple Mango for summer and Autumn Harvest — with notes of apple and cinnamon — for fall.
“We are a brewery in a sense,” Reposa said. “Our seasonal beverages are limited releases that encapsulate the best flavors for the season. We sold out of our summer seasonal, and our Autumn Harvest just entered its second production run. People seem to really like the variety and the flavors we're putting out.”
Bullock said Cann set out to create a beverage with flavor top of mind. Cann sources ingredients for its microdosed seltzers from all over the world, including grapefruits from Florida and lemons from Sicily.
“We aimed to keep Cann’s products simple by only using five ingredients, three of which never change: sparkling water, cannabis extract, and sustainably sourced agave from Mexico,” he said. “The other two are fresh fruit juice and natural herb flavor, which will vary based on the Cann.”
In addition to its core flavors of Blood Orange Cardamom, Grapefruit Rosemary and Lemon Lavender, Cann has also introduced seasonal options in Ginger Lemongrass, Pineapple Jalapeno, Yuzu Elderflower and Cranberry Sage flavors.
Already available in a half dozen U.S. markets, Bullock said Cann aims to expand into New York this year and extend its reach in the surrounding states.
“We are also committed to keeping the brand fresh and culturally relevant throughout the year with Canns popping up in some thoughtful and nontraditional places,” he said.
At least two other players in the seltzer category launched new flavors over the last year. Happi, a Michigan THC seltzer brand, debuted Hibiscus Pomegranate in April 2022. The brand followed it up with its Glow seltzer, featuring a Blood Orange Ginger flavor and 5 mg THC, 5 mg CBD, 3 mg CBD and 2 mg CBN. Its Nightcap seltzer has flavors of apple tea and warm spices and contains 5 mg THC and 5 mg CBN.
In time for Valentine’s Day, LEVIA launched the limited-edition Raspberry Cheesecake seltzer in Massachusetts. This seasonal drop followed Blueberry Cobbler in fall 2022.
“For this limited-edition drop, we incorporated more innovative cake and sweets flavorings so our customers can experience something new,” said Troy Brosnan, co-founder of LEVIA.
Stalwarts of the traditional beverage industry have not been strangers to cannabis, and at least two others joined the fray in 2022. Jones Soda Co. launched its Mary Jones brand — featuring cannabis-infused sodas inspired by its popular uninfused flavors — in California in June. Mary Jones will hit shelves in Jones Soda’s home state of Washington early this year.
"Now that our Mary Jones business is off and running in California, bringing Mary Jones to Washington with a strong strategic partner like CompCanna makes perfect sense as we pursue our plans for international rollout in all recreational use markets,” said Mark Murray, Jones Soda president and CEO.
The Boston Beer Company, Inc., maker of Sam Adams, Truly Hard Seltzer and Twisted Tea, turned its attention to Canada, introducing its TeaPot brand in July. The first offering, Good Day Iced Tea, features Pedro’s Sweet Sativa grown exclusively in Strathroy, Ontario. The non-carbonated beverage is made with black tea and was designed to minimize cannabis taste and aroma.
“TeaPot purposefully pairs the right tea with the right pot for the right occasion,” said Paul Weaver, director, head of cannabis at The Boston Beer Company. “Each can is precisely dosed for social gatherings with friends and family.”
Minnesota unique’s market
Many in the cannabis beverage space have their eyes on Minnesota, which legalized incorporating hemp-derived THC into food and beverages in July 2022. The rule paved the way for retailers, restaurants and bars to offer beverages made with hemp-derived THC — in some cases, alongside alcoholic options.
Bullock would like to see that continue — and expand across the U.S.
“As more and more retailers stock cannabis-infused drinks, we want to be available in all of them,” he said. “We hope that the laws in Minnesota allowing liquor stores, bars and restaurants to sell cannabis beverages with less than 5 mg of THC become the norm.”
Some of Minnesota’s breweries have launched their own hemp-derived THC options. Fair State Brewing Collective debuted two terpene-forward seltzers at the end of 2022 under the Chill State brand. Bent Paddle Brewing Co. offers two sparkling waters with THC and CBD, both featuring tropical and citrus flavors.
Meanwhile, Minneapolis Cider Company introduced the Trail Magic beverage brand in August. The line features four offerings with 3 to 5 mg of THC. They include Half and Half, with iced tea and lemonade, and three sparkling options: Berry Basil, Lime Margarita and Hop Water.
HighBridge Premium, which offers cannabis-derived THC beverages in California, reformulated its faux beers with hemp to bring them to Minnesota. The company has partnered with MOB Distribution in the state.
However, the rules may soon change. In January, Minnesota State Rep. Zack Stephenson and Senator Lindsey Port introduced companion bills that would authorize adult use and licensed cannabis cultivation, manufacturing and retail sales.
The bills, which are making their way through committees in the state’s Senate and House of Representatives, allow for the manufacturing of edible cannabis products in separate facilities on dedicated equipment. The proposed rules would also provide for “cannabis microbusiness” licenses, which would allow its holders to offer zoned-off on-site consumption.
At least one brewer has expressed concerns over how these rules would change their hemp beverage operations. Additionally, Reposa pointed to the potential for cannabis product sales to cannibalize hemp product sales in Minnesota and beyond.
“There is a chance that hemp will eat cannabis edibles/beverages across states that allow it,” he said. “It's a very gray area, but something to be aware of.”