Beverages struggle to gain footing and market share in marijuana retail

marijuana-inufsed beverages sales, Beverages struggle to gain footing and market share in marijuana retail

Cannabis-infused beverages receive a lot of hype when they are rolled out, but they seldom turn out to be the hit their financial backers expect.

According to Bethany Gomez, managing director at Chicago-based market research firm the Brightfield Group, many executives inside and outside the cannabis space have the mentality that their target consumers are exactly like them. But that’s often not the case.

“We see that play out in the drinks space a lot. You hear so often with drinks that we’re targeting the future user, the curious, the newbie. That’s why beverages are such a small part of the market. That consumer is a teeny-tiny percentage of the market. And they’re not buying drinks,” Gomez said. “The drinks consumer is not a new user, it’s not an occasional user, it’s a heavy user that’s adding that in on top of their other five or six products.”

Gomez added: “A lot of the (beverage) business strategy has not been based on strong consumer data. It’s been based off of a lot of assumptions that are not playing out in the market today.”

Lance Mathis said beverages have been a struggle at Inyo Fine Cannabis Dispensary, a Las Vegas marijuana store where he is the store manager.

Beverage sales were better a few years ago, when Inyo sold Dixie Elixir cans that contained 100 milligrams of THC, Mathis said. But sales have waned as more beverages have capped potency at 10 milligrams per can.

“The way that this market is built, everybody was trained on wanting the strongest, most potent products,” Mathis said. “The main problem with drinks in our market is nobody understands the micro-dosing sector enough to even want to tap into it. They just go straight to the highest-testing, most potent one.”

Headset analytics manager Cooper Ashley said that, “last time I checked, 100-milligram package sizes were about 60% to 65% of sales within the beverage category,” he said. “More often now, those products are physically as small as possible, like the size of 5-Hour Energy shots. It’s a portable, discreet, efficient way to get THC.”

Success Story

One company that has found success is Ray’s Lemonade, which has more than half of Washington state’s market share for cannabis-infused beverages.

Allan Mullen, inventory buyer at Cannabis City in Seattle, attributed Ray’s success to marketable branding and an eye-catching bottle.

“They’ve done a really good job at their branding. They provide a wide variety of flavors and a low, consistent price point,” Mullen said, comparing Ray’s to Pepsi and Coke. “Tourists like the Ray’s Lemonades because they’re small, cheap, portable and potent.”

At Premiere Provisions in Big Rapids, Michigan, General Manager Edwin Maguire said the tonic lines the company carries don’t do as well as expected.

However, drink enhancers—powdered THC that can be added to beverages, Kool-Aid style—have shown promise and are being tried by a growing number of businesses.

“They have a longer shelf life as well,” Maguire said, adding that most drinks infused with THC are printed with an expiration date around three months out. “When you have a powder that could last a year or two on a shelf, it makes it more cost-effective.”

The Future of Beverages

Headset’s Ashley believes low-potency beverages “are the future” of cannabis drinks because they are easier to substitute for beer or wine than a drink infused with 100 milligrams of THC.

“The big problem I see with adoption is you still have to go to a dispensary to buy these things. Most people going to a party are going to swing into a gas station or a grocery store to buy a six-pack of beer or a bottle of wine,” he said. “Until you can buy cannabis beverages easily—no matter how conveniently located that dispensary is—I don’t think we’re going to see beverage adoption in the way that a lot of people have imagined it.”