EXCLUSIVE: The Evolution Of Cannabis Beverages And Why Betting On Federal Legalization Is 'A Bad Business Model'

While federal legalization of cannabis could be nearing the corner, several experts in the cannabis beverage sector told attendees at the Benzinga Cannabis Capital Conference not to bet on it.

Instead, the panel shared tips and tricks of what companies should be doing to prepare for legalization and also survive without it.

The Evolution of Cannabis Beverages: Cann started in 2019 and had the first THC-infused beverage on market. The company is now the market leader by volume.

“We went legal cannabis state by state, thought that federal legalization was right around the corner,” Cann co-founder Luke Anderson said.

Cann has also introduced its hemp-derived delta 9 beverage line that is more than 50% of company revenue.

"We went legal cannabis state by state, thought that federal legalization was right around the corner,” Anderson said.

Boston Beer Company Inc SAM, a leader in craft beers has grown its portfolio to include cannabis-infused beverages in Canada.

“We’re a patient organization, we believe cannabis is a force for good,” Boston Beer Head of Cannabis Paul Weaver said.

Weaver added Twisted Tea is now a top 10 beer in America, but it took around 20 years to reach that level as it was slowly built out.

Azuca is working on several products for the cannabis industry acting as a partner and licensor selling a ready-to-drink activator and cannabis cocktail kit.

Sands Lane invests in the space and acts as a brand builder with several years of experience in the cannabis beverage sector. Founder Evan Eneman said Sands Lane builds brands, builds community and can address regulatory reform.

“We don’t look at this as dollars and cents,” Eneman said.

Related Link: EXCLUSIVE VIDEO: Cannabis Leaders High Tide, Trulieve & Boston Beer Co. Share An Inside Look Intro Their Strategy

Preparing for Legalization: Weaver told the Benzinga Cannabis Capital Conference audience that Canada has federal legalization which allows Boston Beer to work on research and development for products as it prepares for legalization in the U.S.

“We’ll bash it out when that moment happens,” Weaver said.

Anderson argues dispensaries are not set up to support cannabis beverages currently and it might not happen until federal legalization. Instead, it is better to put the cannabis beverages similar to alcohol distribution, Anderson said.

The state of Minnesota and several others are interpreting the Farm Bill to help with distribution of cannabis beverages.

Eneman said Minnesota and new interpretations of hemp beverages could change things.

“This is what we’re seeing now. Could be much faster with some other regulations,” Eneman said.

Weaver echoed the sentiment that wholesalers and brewers are best equipped to handle distribution of cannabis beverages.

“That’s their business, moving heavy ass liquids from point a to point b,” Weaver said.

Azuca CEO and co-founder Kim Sanchez Rael said a challenge facing the market ahead of legalization is consistency and potency on the shelf.

“For this category to be what I envision, walk into a bar and get a cannabis cocktail, have to make sure customer is getting predictable, consistent experience,” Sanchez Rael said.

Sanchez Rael said that she bought several cannabis beverages off the shelf and tested in the lab and none of them matched their advertised potencies.

Cann counts dozens of celebrities among its investors and is able to tap them to help with marketing and promotion. Anderson said this helps with the state-by-state push as keeping the logo and packaging consistent and the strong celebrity names attached can lead to brand awareness as it enters new states.

With federal legalization, Cann could better tap into its backers that include Rosario Dawson, Nina Dobrev, Rebel Wilson, Kate Hudson, Tove Lo, Paul Scheer, Adam Devine and others.

Legalization Might Not Happen: The members of the panel recognized the opportunity that federal legalization could bring to the beverage space, but also have been around through years of waiting on legalization.

“I think it’s a bad business model to bet on federal legalization,” Sanchez Rael said. “So many of us have done that, bet hundreds of millions of dollars.”

Sanchez Rael added that it doesn’t make sense to wait on the U.S. Congress to “do anything sensible.”

Those in the business, Sanchez Rael, said, “Have to build business models and brands that can survive and thrive.”

Weaver said that Boston Beer is on a nice trajectory of what it’s built internally and federal legalization could see peers trying to catch up to compete.

“Can’t bet on timeline for federal legalization, no one’s top priority in Washington,” Weaver said.

Weaver said Canada doesn’t allow the use of certain marketing approaches including the use of celebrities, which means the company has to focus on taste and product above all. This could continue to be the focus without federal legalization in the U.S.

Here’s a bit of what you can expect from our extraordinary Psychedelics Capital Conference taking place in Miami on April 13.

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Photo: Kelsey Wilkerson