Beverage Experts Share Insights On Emerging Cannabis-Infused Market: Canada A 'Laboratory Of Sorts'

Cannabis infused beverages are a hot topic. Canada’s "Cannabis 2.0" phase began Oct. 17, and in two months, newly approved cannabis products including beverages are set to become available for purchase.

In the United States, the infused market will reach $1.4 billion by 2024, according to food and beverage consultant firm Zenith Global.

Tinley CEO: Infrastructure, Retail Are Key Areas Of Concern

When Jeff Maser, CEO and founder of California's Tinley Beverages, spoke with Benzinga in early October, the company was in the inspection phase for its new Long Beach production facility.

Adding to production capabilities is the latest in a series of constant development for the brand, Maser said.

Pain points like product consistency,are mostly a thing of the past, the CEO said.

Tinley explored 20 lab methods to identify product improvements during a production downtime that followed a regulations change in California, Maser said.

Areas of focus included dosage, consistency, rapid onset, visual clarity and shelf stability, he said.

Rather than product consistency, Maser sees infrastructure and points of presence as today’s key areas of concern for the sector. These factors have an impact on pricing, he said.

“The reason you can buy a beer for $1 at any corner store is because there's so much beverage infrastructure that's been built across the country for the past 100 years,” Maser said.

“There's hundreds of distributors, tens of thousands of beverage trucks and thousands of well-trained delivery people who are skilled in the art [of] direct store delivery."

Click here for more information about the upcoming Benzinga Cannabis Capital Conference Oct. 22-23 in Chicago.

'Gold Rush Mentality'

Additional responses from the industry ranged from excited optimism to concerns over a fragmented market.

Garo Keresteci is a founding partner at FUSE Marketing Group.

The infused beverage market is "not ready for primetime," he said.

Nic Balzer, CEO and co-founder of Queen City Hemp in Cincinnati, expects market growth over the next three years. He also expects corporate brands to come in, along with less-than-reputable actors.

"Unfortunately, in an unregulated category like cannabis, that gold rush mentality is likely to flood the category with copycat, mediocre-quality products,” he said.

Canada As A Proving Ground

Some cannabis execs see year-over-year growth as a sign of an emerging market, while others are concerned by a state-by-state market that hinders growth.

The entrance of major players like Constellation Brands, Inc. STZ generated a variety of reactions. The parent company behind Corona and Svedka took a stake in Canopy Growth CGC back in the summer of 2018.

While most appear to believe that independent producers have a spot at the table no matter what, some weren't sure major players have much of an advantage.

Ted Dumbauld, owner of SoNo 1420, a hemp-infused liquor and CBD cocktail brand, discussed scaling issues in the space.

"To date, the large outside producers have not been able to build the scale necessary to compete head-on with the independent producers. The MSO operators are having difficulty either starting operations in states in which they have licenses or having enough focus in a given state to compete against the strongest local competitors."

William Acevedo, a partner at Wendel Rosen, LLP in Oakland, California, suggested looking toward Canada to see what may come next.

"What should be obvious to even the casual industry observer is that big brands are using the more developed, and some might argue, more progressive, Canadian market as a laboratory of sorts."

The ability to refine products in Canada well ahead of any relaxing of regulations in the U.S. is a positive for the companies that have the resources to take advantage of the market, Acevedo said.

Beverage experts are largely optimistic about the future of the beverage market. Some raised concerns regarding California taxes and the lack of national brands. Others highlighted possible branding issues in light of the regulatory response to e-cigarette and vape marketing.

Michael Christopher, CEO and co-founder of Santa Monica, California's mood33, sees more competition as a positive.

"Friendly competition among a growing number of brands means that cannabis products will also gain more visibility at retail locations."

Queen City Hemp's Balzer sees this outcome as a step backward for the CBD beverage market.

"As more products flood the market, we’ll continue to see subpar products, dangerous medical claims and predatory business practices."

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