4 Reasons Smart Entrepreneurs Should Be Thirsting To Get Into The Cannabis Beverage Industry
New technology, increasing opportunities, and a rising consumer taste or health are propelling the nascent cannabis drink space. Obey their thirst.
Consider for a moment the three most widely used drugs on earth: caffeine, nicotine, and alcohol. Collectively, they represent a nearly $2.7 trillion global market —$420 billion in the United States alone. Each has been socialized into our collective consciences and even enjoy a sanctioned time for daily use: the coffee break, the smoke break, and happy hour. Two of the three are beverages.
Cannabis has quickly emerged as the fourth leg of this legal-use psychoactive stool. This has tremendous implications for investors and operators alike, as consumer preferences are migrating from artificial and invigorating products to natural and calming. Twenty-five of the top food and beverage companies in the US had an $18 billion loss in market share in just the last five years. Consumers want functional benefits, craft appeal, natural ingredients, experimental flavors, and low caloric counts. These trends, when combined with the health benefits of cannabis, are likely to drive outsized growth in infused beverages in the decade ahead.
1. Cannabis beverages have been around for centuries.
While it may appear that cannabis drinkables are a relatively new idea, cannabis has been used in medicinal beverage preparations throughout history. The Chinese have enjoyed Mafeisan for thousands of years, while Indians have long referred to bhang as the ancient Nectar Of the Gods. Bhang is sold today at government-licensed stores in India, having never been made illegal due to its religious ties as the official drink marking the arrival of spring. As public opinion and the stigma associated with recreational cannabis throughout the world continues to soften, consumers search for social and innovative ways to consume their favorite cannabinoids.
2. Cannabis-beverage science is getting better.
Infused drinkables currently hold a market share of under 1 percent in the US, a figure that is far too low when compared with industry estimates for a $2.8 billion global cannabis beverage market by 2025. Advances in cannabis science is a factor behind this anticipated growth.
Up until recently, crafting cannabis beverages has been challenging. Cannabinoids are oily, fat-soluble substances that do not mix easily in water-based beverages. Oral consumption has thus traditionally been facilitated with oil and butter infusion. That's why gummies, brownies, and confectionaries comprise the majority of infused edibles today. The opposing nature of cannabinoids and water has challenged product developers with taste masking, dosing uniformity, and shelf-life stability. Formulation technologies honed in the pharmaceutical (60 percent of newly marketed pharmaceutical drugs demonstrate poor water solubility) and food industries can help circumvent some of these challenges while bringing infused beverage ‘onset’ closer to the 7 to 10 minutes that alcohol enjoys, instead of the 75 to 120-minute traditional edible average.
While there are many technological approaches to achieving water solubility, the most common approach to infused drinkables is nano-emulsification. The primary goal here is to increase total surface area via a reduction in particle size to below 500 nanometers. The outcome of this is enhanced solubility along with accelerated absorption and onset.
Another solubilization technology is based on using cyclodextrins which keep the active molecules solubilized in water. Compared to nanoemulsions, this methodology allows for a reduction in the use of surfactants, emulsifiers, and other additives, which achieve a higher drug-loading capacity.
3. Cannabis drinks are healthier than alcohol.
An increase in our focus on health and wellness is driving many of us to seek alternatives to alcohol to socialize and relax. In today’s fast-paced world, we strive for physical, mental, or emotional homeostasis, and alcohol simply does not fit the bill. Non-alcoholic beverages infused with cannabinoids and adaptogens offer health, hydration, and psycho-activity in a low-calorie package without the hangover effects.
Millennials, the largest group of cannabis consumers, place great value on health and well-being; and counties that offer consumers a legal choice between alcohol and cannabis have witnessed a 12 to 15 percent sales decline in the former. Big alcohol recognizes this trend and provides investment as well as exit opportunities for well-placed cannabis operators. Molson Coors projects that drinkables will eventually command 30 percent of cannabis sales and took a controlling position in a joint venture with HEXO, a licensed Canadian cannabis producer. Anheuser-Busch InBev invested $50M in a joint venture with Tilray, and Constellation Brands, brewers of Corona, invested $4 Billion for a 38 percent share in the world’s largest cannabis producer, Canopy Growth Corporation.
Cannabis beverage companies are well-served to understand these trends and adopt solubility-enhancing strategies, necessary for product differentiation as well as intellectual property generation.
4. There are a ton of new opportunities.
Unlike other over-saturated sectors in the cannabis space, the beverage vertical is ripe with new opportunities for enterprising entrepreneurs. Among them:
- Technological advancements to tailor onset and offset times
- Infusions with cannabinoids such as Delta-8, CBG and THCA
- Increased focus on fit-for-purpose strategies that address the myriad cannabinoids and methods of extraction
- Additional data to demonstrate efficacy and a more consistent user experience
- Taste-masking improvements along with the diversity of cannabis-based beverages to suit a range of lifestyles and preferences
- Incorporation of other natural substances such as terpenes, adaptogens, probiotics, vitamins and minerals
- Safety, regulatory, and legality in an increasingly e-commerce-focused market
The emergence of new infusion technologies is driving the next generation of functional cannabis drinkables and opening a door for new consumers to try cannabis in a familiar, discreet, and often healthier way. Investors are well-served to take note of those companies poised to capture both a share of this growing market as well as the attention of larger beverage companies with the resources and desire to expand their product portfolios.