By David Reich, Chief Marketing Officer of Crescent Canna
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Cannabis beverages are one of the fastest-growing segments of the cannabis market. According to Headset Data, from 2021 to 2022 sales of cannabis beverages jumped 40% in the United States and Canada. Despite rapid growth, these beverages still represent only about 1% to 3% of the U.S. cannabis market, so there’s plenty of room for further growth of cannabis drink sales – and for this segment to be a major catalyst of growth for the entire industry.
Cannabis drinks have certain advantages over other forms of cannabis consumption. While smoking and vaping can have negative health effects and edibles are slower-acting, drinks are a safe option with a quicker onset time.
Cannabis beverages also benefit from the fact that younger people have been seeking an alternative to alcohol. According to a 2023 Gallup poll, the number of adults under 35 who drink is now only 62%, down from 72% a couple of decades ago. And a 2020 Harris poll suggests that close to half of cannabis consumers are using cannabis to reduce their consumption of alcohol.
Now is the time to capitalize on the burgeoning market for cannabis beverages. But the competition is fierce, and most cannabis beverages that come to market will fail. What does it take to succeed?
Crescent Canna’s first beverage, Crescent 9 THC Seltzer, was released in February, so we certainly don’t have all the answers. But here are a few things we learned from selling nearly a million cans of Crescent 9 over the past 8 months.
A cannabis drink must taste great and feel great, no matter your THC tolerance
To succeed, a cannabis drink needs to taste great. This may seem obvious, but the offerings of many brands just don’t taste that good. A big part of the challenge is that cannabis extracts are naturally bitter.
You can mask the bitterness of cannabinoids with sweeteners, but if you stuff too much sugar or too many calories into your recipe, you risk turning off customers who want low-calorie drinks. And that’s a lot of customers. Keybridge LLC found that sales of low-calorie and sugar-free beverages grew by more than 58% in 2020.
“I’ve tasted more cannabis drinks than most other humans,” says Tyler Mason, Crescent Canna‘s head of beverage development. “You’d be surprised how many don’t taste like something you’d want to consume regularly.”
When developing the recipe for Crescent 9 THC Seltzer, Mason used fruit juices, purees, and terpenes to balance the cannabinoid bitterness, always keeping in mind the goal: “It’s all about creating a positive experience. We use quality, natural ingredients to produce a delicious low-calorie beverage that gives you a fun and uplifting time – anytime.”
Mason also alludes to the second big challenge: ensuring that all consumers enjoy the experience, whether they’re new to cannabis or practiced veterans. Experienced users should be able to down several cans and feel great. Those who are less experienced or who have lower tolerance should be able to get a nice vibe from a single can – or even half a can.
Calibrating the taste and effects of a cannabis beverage so that it appeals to the widest possible range of consumers isn’t easy. It takes quite a bit of R&D before you can bring a product to market that won’t fall flat.
In a crowded market, your cannabis beverage must set itself apart
Observing the massive growth of cannabis beverages, both incumbents in the cannabis industry and newcomers like Pabst and Lagunitas have rushed to introduce cannabis drinks. From 2021 to 2022, according to Headset Data, the number of cannabis beverage brands increased by 65% in the United States and by 300% in Canada.
With so many new cannabis beverages flooding the market, you have to find a way for your product to make a splash. What makes it different from others? What makes it better? Maybe a unique blend of cannabinoids, an enticing flavor profile, or your brand’s mission. Whatever it is that distinguishes your brand, you must highlight that difference in your marketing to stand out.
Where you launch matters too. If you introduce your beverage in a relatively mature and competitive market, like California, focusing on what makes your brand stand out becomes especially important. On the other hand, you have a lot less competition to fend off in nascent cannabis markets like Louisiana’s.
When we launched Crescent 9 THC Seltzer in February 2023 in New Orleans, it was the first beverage containing hemp-derived Delta-9 THC to be widely available in the area’s stores and bars. Being first was one of our most effective differentiators. People were excited about trying a new product; local businesses were excited about a new revenue stream; and, because we were first, the media were excited too and gave us a lot of attention.
Highlight whatever it is that distinguishes you from the pack. Otherwise, you may not be on shelves for very long.
Your cannabis beverage needs the widest possible appeal
According to data from IWSR Drinks Market Analysis, the no/low-alcohol beverage market exceeded $11 billion globally in 2022, and they project 25.4% growth in non-alcoholic offerings in the U.S. alone through 2026. This represents a huge opportunity for cannabis beverages, which are unparalleled as an alternative to alcohol.
While high-potency cannabis drinks compete more directly with gummies and other THC edibles, low-potency cannabis beverages, which provide an uplifting buzz and fast-acting effects, compete directly with alcohol – while avoiding the many downsides of alcohol.
Thanks to its appeal as an alternative to alcohol, the market for cannabis beverages is much broader than the market for many other cannabis products. Potential buyers include everyone from alcohol drinkers looking for a better buzz to nondrinkers looking for a social, alcohol-free option to regular cannabis users who also happen to enjoy beverages.
But how do you reach the many potential consumers of cannabis drinks who don’t even know that this is a thing – or who are simply wary of cannabis?
You can reach and teach customers by publishing blogs and articles on your website, providing educational materials at the point of sale, and, most importantly, making sure that the people directly selling your product to customers understand it themselves.
If you’re offering marijuana-derived beverages, the sale often takes place at a dispensary, where staff and customers typically know a lot about cannabis.
Alternatively, hemp-derived beverages are often sold in places like bars, restaurants, and grocery stores, where people tend to be less knowledgeable about cannabis. Making sure the people selling your beverage know how to communicate its value proposition and that they steer clear of messaging geared to potheads is crucial.
Your beverage needs to be priced competitively for consumers and profitable for resellers
Making cannabis beverages is expensive and resource-intensive. If you’re manufacturing them yourself, you’re investing in expensive equipment. If you’re working with a co-packer, you’re paying expensive white labeling fees.
You need to keep retail prices low enough to be competitive for consumers and keep margins high enough so that distributors and retailers can earn a reasonable profit.
Most cannabis manufacturers enjoy relatively high margins on products like edibles, flower, or concentrates. Margins on beverages, though, tend to be much lower. You can’t successfully distribute to groceries, bars, and restaurants unless your prices are competitive with the prices of beer, hard seltzer, and other canned drinks.
If you are selling beverages through e-commerce, shipping is another complication. Canned drinks are much heavier than most cannabis products. For example, a 24-pack of Crescent 9 weighs about 20 pounds, so shipping is significantly more expensive than with many other products.
This is a hurdle if you sell through an online store that usually offers free shipping. Most consumers say that free shipping is their top consideration when shopping online. Whether you incorporate the cost of shipping into the retail price or separately charge the full shipping cost at checkout, customers are going to notice the price tag.
Your cannabis beverage goes places because it’s professionally distributed
It’s more expensive and just harder to store and ship beverages than to store and ship the other products you’re probably accustomed to working with. Shipping beverages directly to customers from your production facility may work fine for low-volume e-commerce sales, but not for wider distribution.
For wider distribution, you need distributors. “Our distributors aren’t just our biggest customers,” says William Thompson, Crescent Canna‘s director of beverage sales. “They’re essential logistical partners who have helped us grow in every market we sell our product.”
In addition to placing products in hundreds or thousands of stores, distributors also help with storage and logistics throughout the markets in which they operate. Most major retailers and groceries won’t add a product to their shelves unless it is being professionally distributed – often unless it’s being distributed by a distributor they already work with.
But the partnership goes both ways, says Jason Eskind, executive vice president at Best Brands, a Tennessee alcohol distributor that has entered the cannabis market. “We look for good long-term strategic partnerships. The brands we work with are not just throwing things against the wall. They have marketing plans, budgets, traditional beverage distribution models, and capable teams to help execute goals.”
Through their new cannabis division, Best Strains, Eskind’s team has placed Crescent 9 THC Seltzer and a handful of other cannabis beverages in hundreds of liquor stores and bars throughout Nashville.
“For the first time in decades, the beverage space is truly changing,” Eskind says. “It’s our responsibility to bring quality products to the shelf so that consumers, who have trusted us for nearly 100 years, can continue to trust us as we push into the cannabis space.”