Minnesota’s low-dose THC beverage market is booming

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Image of a Cub Wine & Spirits model display containing low-THC products.

A Cub Wine & Spirits model display containing low-THC products. This display is used for training purposes. (Photo courtesy of Cub Liquor Stores)

Minnesota, of all places, has become the hottest market for low-dose, hemp-derived THC beverages in the country – and likely anywhere else, including Canada and Europe.

The unexpected success of these cannabis beverages could bode well for the state’s nascent recreational marijuana market, with adult-use sales expected to begin in a little more than a year.

Recreational marijuana possession, use and homegrows became legal in the state on Aug. 1.

In the meantime, consumers of all stripes are flocking to hemp-derived THC beverages, with monthly sales likely topping $1 million.

The rush has been fueled by widespread retail access, easing stigmas associated with cannabis and the state’s geographic position on the map.

Illinois and Michigan, the nearest states with adult-use sales, are hours away from most residents.

Minnesota regulators and lawmakers paved a wide path where hemp-derived THC could be sold in the Midwest market, a big reason why these types of beverages are selling well at liquor stores, restaurants, grocery chains – such as Cub supermarkets – and other locations that have largely been closed to THC products nationwide.

The 2018 Farm Bill legalized hemp and opened the door for sales of delta-8, delta-9 and other intoxicating hemp-derived cannabinoids with up to 0.3% THC by dry weight.

The Minnesota market, which doesn’t require a license to sell hemp-derived THC products, kicked the door wide open.

The widespread availability of low-dose THC offerings has helped bring new customers into the fold as well, particularly nonsmokers and baby boomers, industry insiders tell MJBizDaily.

“It has exposed an entire state of consumers to the fact that they can purchase these products the same way they can purchase alcohol,” said Leili Fatehi, partner and principal of Blunt Strategies, a government relations and communications firm in Minneapolis that helped craft the state’s cannabis legalization policies.

“And the sky hasn’t fallen. If anything, we’re seeing that consumers are much more prepared and comfortable engaging in conversations, learning about the products and approaching them safely.”

The beverage boom has also been a boon for local manufacturers – including one of the state’s larger independent craft brewers, Minneapolis-based Surly Brewing Co. – as well as national cannabis brands such as California-based infused beverage maker Cann, one of several companies shipping hemp-derived THC beverage products from Minnesota to consumers across the country.

A paradigm shift

The groundwork for Minnesota’s current boom in hemp-derived THC beverages was laid a little more than a year ago, in May 2022.

That’s when state lawmakers passed a groundbreaking law that allowed the sale of hemp-derived THC edibles in mainstream retail outlets such as grocery and convenience stores – distribution channels largely prohibited in recreational and medical cannabis markets.

“We saw an absolute explosion of our THC beverage market here in Minnesota almost overnight,” said Jason Tarasek, a Minneapolis-based cannabis attorney at Vicente.

“I won’t say it’s entirely incorporated into our culture and society, but it’s well along the way.”

Under the 2022 law, which took effect July 1 of that year:

  • Edibles must contain 5 milligrams or less of hemp-derived THC per serving, or 50 milligrams maximum per package.
  • Beverages must contain 5 milligrams or less of hemp-derived THC per serving, or 10 milligrams maximum per package.

The prolonged hot streak, insiders say, could serve as a harbinger for a strong adult-use market, which will likely carry far more restrictions similar to those in other recreational marijuana states.

Minnesota became the 23rd state in the U.S. to legalize adult-use marijuana after Gov. Tim Walz signed a unique legalization bill into law last May that also permits the sale of hemp-derived cannabinoids such as delta-8 THC.

The adult-use legalization law will likely usher in changes for Minnesota’s hemp-derived THC marketplace – changes that could affect sales.

“The adult-use cannabis bill will impose greater regulation and licensing requirements upon these hemp-derived THC products,” Tarasek added.

“We may have started out fairly lax in terms of regulation, but we will be tightening that up.”

Retail sales in the adult-use market are expected to begin in early 2025, sources told MJBizDaily.

For comparison, the state’s medical marijuana retailers are projected to generate $110 million this year, growing to $230 million by the end of 2028, according to the 2023 MJBiz Factbook.

Brewed up opportunities

In developing the 2022 legislation that kicked off the low-dose THC frenzy, Minnesota lawmakers and industry stakeholders prioritized local business opportunities and a homegrown supply chain, according to Fatehi.

“We’ve gone through great effort to pass a law that creates this very Minnesota business-focused marketplace,” she said.

As a result, national brands have sought out Minnesota manufacturers.

For example, California-based Cheech & Chong’s Cannabis Co. is partnered with two Minnesota craft brewers – Surly and Duluth-based Bent Paddle Brewing Co. – to produce the celebrity brand’s expanding line of low-dose THC drinks.

“About 90% of the product sold in Minnesota is grown and manufactured in-state,” the Cheech & Chong’s chief marketing officer, Brooke Mangum, told MJBizDaily.

“We take pride in supporting local businesses.”

Los Angeles-based Cann, one of the country’s top-selling low-dose THC beverage makers, is partnering with Fair State Brewing Cooperative of Minneapolis to expand direct sales and wholesale distribution to 33 states.

“Because of the Minnesota law that has allowed for hemp-derived delta-9 beverages to flow pretty freely through the country, more than half of our revenue comes from non-cannabis dispensary channels,” Cann co-founder Luke Anderson said.

“It’s our manufacturing hub for products that are sold all over the country.”

Even the state’s homegrown grocery chain Cub – widely known as Cub Foods – is in on the action.

“Consistent with Minnesota state law, and where it does not conflict with local ordinances, Cub Foods has begun selling edibles and beverages containing low dosage amounts of THC in the company’s liquor stores,” confirmed Charles Davis, spokesperson for parent company United Natural Foods.

Cub, headquartered in Stillwater, operates about 80 supermarkets and pharmacies primarily in the Twin Cities area.

Getting a good economic read on this emerging product category is a challenge, with sales data and growth forecasts scant.

Seattle-headquartered cannabis analytics provider Headset told MJBizDaily it does not track hemp-derived THC sales in the Minnesota market.

The 2023 National Hemp Report, released in April, valued production of floral hemp grown in Minnesota at $11 million last year.

But that doesn’t account for hemp-derived products, which would escalate that estimate significantly.

The opt-out dilemma

While consumer access for low-dose THC products is widely available across the state, dozens of cities and counties have enacted measures to stymie business operations.

Municipal opt-outs of commercial marijuana and hemp programs are all too common from California to New York.

The bans undercut a market’s true potential and could provide a chilling effect.

“Cub will not be selling low-dose THC products where local municipality ordinances prohibit it,” Davis told MJBizDaily without a prompt.

According to statistics from the Public Health Law Center at the Mitchell Hamline School of Law in St. Paul:

  • 80 Minnesota cities and five counties have adopted moratoriums related to the sale, testing, manufacturing or distribution of THC products.
  • 42 cities and two counties have adopted licensing and sales restrictions.

“These moratoriums are incredibly problematic because they’re not actually based on any good public policy considerations,” Fatehi said.

“They seem to be a reflex against the concerns of something new.”

The long game

Legalizing and regulating CBD and low-dose THC products is a bit of a contrarian move in a market developing a recreational marijuana program.

Other adult-use states, such as Nevada, New York and Vermont, have enacted product bans and other restrictions related to delta-8 products.

But some Minnesota policymakers have a longer view in mind.

They want to develop a new crop of local entrepreneurs who can create their own unique retail presence, business plans and supply chains while enjoying certain federal protections and benefits related to banking, lending and capital, according to Fatehi.

“Operating in the hemp-derived space is one of the best on-ramps for transitioning to operating in the adult-use space and being set up for success,” she said.

“And it makes them more competitive when they’re applying for an application, because now they have a track record.”

It appears such early entrants also have room to run.

“There’s a ton of pent-up demand for cannabis products in Minnesota,” Tarasek said.

“It’s the only game in town.”

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.