[Kelly Nielsen]
Hi, everyone, and thank you for joining us today for our second of three-session holiday series with BDSA, eat, drink and be merry.
First of all surprise, Jessica Lukas is not the one who is presenting today. And I’d like to take a moment to introduce myself. My name is Kelly Nielsen, and I am the Vice President of Insights and Analytics with BDSA. And I’m thrilled to be here today. I’m just, as a little bit of my background. Prior to joining BSA, I spent the first 13 years of my career focusing on insights and innovation consulting specifically for the alcohol beverage industry, and more recently, the past year or two, focusing on cannabis as well. So I am very excited that the first BDSA webinar that I get to give is focusing on insights into the US and Canada cannabis beverage market.
I’m really thrilled to be here and over the next hour or so we have some really exciting content. Um, just to provide some perspective on how this is all going to work. The first half hour or so we will be talking through some information on what’s going on in the industry. Start with an overall market landscape and then dig into some great, Did you know about the cannabinoid beverage industry. And then the second half of this we have a fabulous panel that will be joining me. We have Luke Anderson, co founder of Cann, Jeremy Marshall, Brewmaster, with Lagunitas. And also Lori Hatcher, who is head of marketing at Trust beverages. So it is it is going to be a fabulous conversation. And I look forward, I look forward to that.
Before we jump into all of the nitty gritty on beverages, I want to give a quick refresher on what BDSA does and who we are. And at the highest level, we are all things analytics, market research and data covering the cananda cannabinoid industry, excuse me, the total market. And what that really means is that we’re providing insights in order to help our clients make the best decisions possible in his constantly evolving ever changing space. And we do that through a couple of different ways. And throughout this presentation, you’re going to see data points from a really wide range of, of different solutions that we offer. But to provide a little context on what those are. The first is retail sales tracking. And this is probably the the thing that we are most known for. But this is really about understanding what is selling in the marketplace when it what price point. And what’s really exciting here is that when it comes to retail tracking, sales tracking, we’re able to get really granular at the product level we cover today, eight states and two Canadian provinces, provinces with more coming throughout the year and into the future, which we know is a very exciting time, a lot more states and province or a lot more states are coming online. And so we’re constantly going to be updating and pushing that forward. The second is consumer insights. This is all about understanding what consumer behaviors and attitudes are towards this particular industry. We’re able to talk to folks that are currently using folks that are acceptors to the industry, folks that aren’t currently using or actually even reject the industry in order to understand what are those consumption patterns, purchasing habits, what could get folks to actually opt into this industry or purchase more. What’s really exciting about that is we even have an opportunity to provide a segmentation to folks. And so we actually have a total consumer segmentation of marketplace that takes a look at consumers of cannabis and has identified six different profiles, for example, by really helping our clients understand how they can make better decisions based on what consumers think today, what they and what’s really positive is something that we trend over time. So we’ve actually, we’re about to actually launch a wave seven of this. And so we’ll have even more updated data in the next couple of weeks. But this is something that we’re able to track over time and understand how consumer perceptions are changing as the market evolves. And this is something that is available in the United States and Canada. And we can get granular here as well.
And these two things, Retail Sales Tracking consumer insights really are part of the base of foundation also for our market forecast. So this is really about understanding the total addressable market for the opportunity size for cannabis. And what’s really great about this is it gives us the opportunity to see where we’ve been because we have all this great information where we are today and understanding what selling What are consumers thinking in order for us to project what’s going on into the future. So as we go
Through this, you will see some of our projections on our expectations for market forecasts. I’m getting as granular as looking at something like the edibles market or, in some cases, beverages specifically to identify that future opportunity. And this is something that based on the way that we’re looking at it, we’re taking into account regulatory, regulatory format and more taking into account legalization, we’re taking into account both the adult use and medical, also illicit market and in some cases, and so we’re really able to get that full picture. And it’s something that’s available for both the US and Canada. I’m getting very granular at the state or province level, different categories. But we also can provide size of opportunity going out five years and up to 38 other countries. So I’m going to provide some of this context of how this information can be used today. But as always, if there’s any questions, don’t hesitate to reach out to me or anyone else on your team.
And so without further ado, there, I want to start with a quick overall market update on what are we seeing when we take a look at the total cannabis industry, as well as digging in a little bit to edibles and beverages specifically, and I call it edibles. And as we’re going through this, we will be peppered a little bit with edibles a little bit with beverages, because in reality, beverages do fall into our total edibles category, I think it’s really important to talk about them a little bit together. And also we’ll be taking a look at both the United States and the Canadian market.
And so for those of you that were with us a couple weeks ago, when we talked about the each portion of our eat, drink and be merry webinar here, you will have seen some of the information that’s on the right hand side of the screen. So what you’re seeing here are showing you the left hand side. But what you’re seeing here is our projection for the size of the total legal dispensary markets for the United States and Canada over the next five years. And so a couple weeks ago, we talked about how the total United States market 2020 and looking at about 16.2 or so billion dollars in size when we take a look at the at the total adult use and medical market, but we expect it to be close to 35 billion by the year 2025, with medical market making about 30% of that spending.
But what I also want to call out is we’re talking about the beverage space in the edible space today is what we’re expecting from the Canadian market. And within the Canadian market, we’re expecting the overall size of that industry to increase to about $6.1 billion by 2025. So substantial difference in size of industry there. However, when we take a look at what markets really matter, California as a market and then call Canada, really reflect that one and two, that when you think about that size of Canada and what it could be, we expect the size of Canada and California to be about the same come 2025
as we dig into what we’re seeing specifically within the edible space. So again, focus on the folks on the line who might have been here a couple weeks ago when we were talking about edibles specifically. So what was on the left hand side of the screen here. So thinking specifically about the United States market edibles today make up about 15% of dollar sales, but they’re growing. So that purple line that you see is showing that the edibles categories outpacing growth of the total market. And what we actually expect is that by 2025, the total edible space will be about two and a half times as big as it is today. And what’s exciting is that we’re seeing even more substantial growth and more outpacing the total market in the Canadian Space. And so we expect by 2025, the edibles market to be about three times or so the size that it is today. And we’re really seeing substantial growth there. And it’s so interesting to me to look at the Canadian versus the U.S. legal cannabis market. Because of the difference in when the when these types of products would come along, you know that Canada 2.0 is a very new industry relative to some of the established markets in the United States. So seeing the growth in the edibles market here is very exciting.
So let’s talk a little bit about beverages specifically. So I first want to ground us in what’s going on in the United States market. And so what we’re seeing in the United States is that overall beverages make up about 5% of total edible spend in legal dispensary channels. And we don’t get to see all that much fluctuation from that number in some of the most established dates are those with the biggest beverage representation, it might reach up to about six or 7% but it’s pretty stable about five to 7%.
In Canada, we have seen a little bit of a different dynamic, which I think is really interesting. So
Within the Canadian market just to provide a little bit of perspective, Canada or beverage products really just came into the marketplace earlier this year. And we didn’t really see that big splash or those products really getting more distribution until about midway through the year. And so what that means is, if you go back to January, products, beverage products really only represented about 3% of total edibles products.
However, as we see where we are today, beverages actually, as of October 2020, make up 23% of the total edibles products. And so that’s a much different sort of representation that we’re then we’re seeing in the United States right now.
And I think something that’s really interesting here is we’re seeing that that increase in penetration is reflected by outpacing our growth of those beverages outpacing the broader edibles space, and you particularly see it between that June and July timeframe. So almost month over month, June, July, August, September into that timeframe, we were seeing 20 to 30, 34 even percent growth of the share of the beverage beverages volume versus four or five, 8% for total edibles. And so the share of beverages is gaining in terms of that overall edible spend.
It would be a miss to talk about the overall beverages industry without talking about CBD. And specifically thinking about the hemp and marijuana market, going from 2020 to 2025. We projected that the total hemp and marijuana market in the United States will be about $50 billion
by 2025. And to be clear that overall number does represent the mix of what we expect to see in dispensary, General retail and prescription and it includes a mix of hemp, CBD, marijuana as well as to THC and other cannabinoids.
And I think something to keep in mind here, when we’re talking about this overall size, we do expect that beverages will make a large splash, particularly in those mainstream channels. So as we look into 2021, and we’ll talk about what brands and products might be available in that timeframe here and a little bit. But we see that about 6% we expect about 6% of those CBD dollars in mainstream retail to be beverages in 2021. But we expect that to increase to about 10% from 2025. And I think one number that to really keep in mind or something to focus on is that when we think about that size of that CBD CBD beverages product, we’re expecting it to be roughly about a $2 billion industry or so by 2025. But other than that, we do expect about two, excuse me three quarters of it to come through a mainstream retail. And really that’s a factor of availability we expect as the FDA is regulation shift, that as those products can become more available. And if they’re available in your mainstream grocery stores, mass stores, mainstream retail outlets, they’re likely going to outpace dispensary sales.
Okay, so let’s jump into a little bit of ‘Did You Know’ tidbits. So first, I want to start by thinking about why people are consuming edibles to begin with, or excuse me, how, what is that penetration of folks that are consuming these different types of products. And based on our consumer survey work, we see in the United States that about 71% of folks are consuming edibles, and 33% actually say that is their preferred method of cannabis product. Meanwhile, when we look at Canada, we see that about 50% 57% consume edibles and about 30% prefer edibles as their primary format. This to me is really interesting. Again, if you think of the timeline of markets, the fact that edibles products have really only been available for a year-ish year and a half, that we’re seeing that market that those folks that prefer edibles is coming in line with a more established market like the United States legal market. So that’s really exciting.
So let’s take a look specifically at beverages. What are those percent of folks that are actually consuming beverages and prefer beverages in the United States, we see that about 19% consume and 8% prefer beverages that is still a bit smaller in the Canadian market. So about 10% consuming beverages 3% preferring them. But keep in mind that the time when this survey was conducted, it was earlier this year before all of these new products that we’re going to be talking about in the Canadian market, really were available to consumers. So we would expect that
This continues to increase as there’s more product availability. And as those products gain relevancy with consumers,
when we’ll take a look at the types of products that are available in the US specifically, the volume is really coming from what we would consider to be drinks. This can include things like carbonated drinks, non-carbonated drinks, which includes things like nonalcoholic beer or nonalcoholic filters, for example, or fruit flavored products. And what’s really interesting when we take a look at this total market, it is growing. And so the volume that we’re seeing from the total beverage dollar growth in the United States is up about 21% versus what we saw last year. And I think part of that is we’ll talk about here in a few slides is the types of products that are available to consumers.
So what you’re looking at on this slide is just a series of brands, the, the cannabis beverage space really is evolving in the United States, we have a really wide range of products available, that weren’t available even a year or two years ago, if you think a couple years back, so many of the products were high potency, they you know, we’re more in shot form, which we’ll talk about dosage a little bit here in a minute. But I think that’s really important because when we talk to consumers about why they’re choosing edible products to begin with, including beverages, the ability to control dosage is a really big component to that. And so having products that allow consumers more, more ability to control those types of measures are really interesting. And so I love the spread of different types of products here. So you have everything from cannabis infused wine.
I’m really excited to talk here about Cann social tonic and a little bit of Ripple, it’s a really interesting one. So this is, this is a powder that you can put into another beverage or another liquid, or put on top products or on top of other things. And ripple is an interesting one, because it’s a really, really high penetration in the Colorado market. So if you think about powder beverages across the board, they typically make up about 11% of beverage products. But in Colorado, they actually make up about a third of total beverage sales, so Ripple’s, killing it, which I think brings up another point that when we think about the top brands, what you see on the right hand side of the screen here. So if you think about products, such as can ripple hi fi, which I know we’re going to be talking about a bit later. But you see a lot of products that are doing extremely well and perhaps one or two markets, so namely something like California. But if you look at something like Keef or Dixie, it may be a situation where they might not be the number one product in any given state. But the fact that they are in multiple states in multiple markets, does give them that ability that when we look across the United States to have more of that overarching presence in those multi state situations.
I think the way things are coming to fruition in Canada, quite frankly, is a little bit different than what we’ve seen in the United States. So I think first, what’s really interesting is that nearly all of the leading products that are currently in the marketplace so if you look at that, top products in Alberta, or British Columbia, as of this past month, nearly all of them are coming from organizations that have some degree of partnership with some bigger beverage manufacturer, or I’ll call beverage manufacturer and he we’re having a lot of evolution in this particular space with a lot of these partnerships, so trust, which I look forward to talking with here in a bit but looking at Molson Coors and hexo partnership, looking at canopy growth, or ABI and tilray, a lot of really exciting brands, that that are really making a splash so far to date, as we saw that growth month over month as we’re coming into coming into October.
One thing I do want to call out as a reminder to anyone on the line here that focuses more primarily in the US market or is not as involved in the cannabis industry is that these images that you see on the screen, they’re beautiful packages. However, in the Canadian market, folks hands are much more tied to what they can actually communicate and market even than what we can say here in the United States. And so the packages that you see here aren’t actually the packages that consumers would see in the marketplace which are far more generic, not able to have that branding, that communication that really cool color. So I look forward to talking a little bit about how brands can grow and really communicate their benefits when those hands are tied in in the communication aspect.
And we do continue to see that more hemp and CBD CBD beverages are starting to get started. So obviously throughout to 2021 their regulation has probably been a little bit heavier than maybe we anticipated coming into the year. However, products are beginning to be developed. And we do expect that these types of products are going to continue to hit shelves and grow going to 2021, 2022. And beyond again, thinking about that hemp CBD beverages making up a $2 billion industry by 2025.
So I mentioned earlier that one of the reasons that folks opt into the edibles opt into the edibles category to begin with, is because of the ability to control dosage, and not only the ability to control it, but also have the ability to opt in to lower dosage options easier. And we see that the consumers that are prefer those edibles products are far more likely to, to prefer products that have less than a 10 milligram THC content. And obviously, with edibles products, it’s easier to control that sort of thing. We also see that when we ask consumers in the United States, I’m just for some perspective of what their ideal dose is about 40% are saying it’s 10% or less in Canada, that’s even higher. And so as we think about the growth of edibles, and the growth of beverages, specifically in Canada, part of that is probably a function of that lower dose preference as well. But we are seeing growth, particularly in beverages because of this. If we look at the Canada, California market, for example, we’ve seen about 16% growth versus 2019. In those products that are available that are less than 10 milligrams THC per product.
This is one of my personal favorite slides. So I think you know, the overall premise of this, of this presentation is eat, drink and be merry and thinking about the holidays coming up. I think I’ve gotten the question a couple of times now, what could we possibly expect coming into the holidays. And what you’re looking at here is a chart that’s showing the sales increase from the first portion of December. So December 1, or 17, versus the week leading up to Christmas, always a big week for cannabis sales overall, both for personal use as well as potentially gift giving. But I find it really interesting that beverages in particular, have seen a higher bump in sales in 2019 versus than even topicals, which are probably something that’s turning into a more common product for gift giving. And so I think something to take away from this as we as we go into the next couple months as we go into the holidays, be prepared expect that sort of lift in beverages, because ultimately people are opting into beverages to relax, and in some cases to have fun. And I think the holidays are the perfect time for that. Right. I don’t know anyone who couldn’t use a little help de stressing during the holidays. And I think that it’s really interesting to see the shift in the way beverage brands are coming together to promote more of a social or fun type of occasion and need state, which I think brings me to my next point, which is I don’t think we can talk about the cannabis beverage industry without talking about potential interaction with alcohol. And so what you’re looking at on this slide is when we survey consumers, we take a look at folks that are current cannabis consumers and folks that are current alcohol consumers, we want to understand that overlap. Because our perspective is that one way or another there is likely long term impacts the alcohol industry, we might not see it in the next year, maybe not even the next year and a half or so. But long term, folks that are consumers of cannabis who also consume alcohol, that group is declining.
And consumers who use alcohol, who also use cannabis is increasing. So what that means is cannabis usage among these folks who are already involved in the Alcohol Beverage category, do continue to increase. And when we talk to folks about why or when this type of product when each of these different types of products are relevant. We see that half the time folks are telling us that alcohol and cannabis are good for kind of the same times a day or the week. Or, you know, sometimes it’s the same same time of day or week. And sometimes it’s different. But one way or another consumers are starting to think about the interaction and the role and needs to add in their lives of cannabis products versus alcohol products and how those things interact.
To be totally honest, I could probably talk for an entire hour specifically about the interaction of alcohol and cannabis, but we do have other things to get to. And so keeping an eye on the clock, I want to switch gears a little bit here and we’re going to go ahead
Hadn’t introduced our panel in just a second. Before we do, I do just want to call out. First of all, thank you everyone on the panel for taking the time to talk with us today. But I also want to highlight the great work all these folks are doing with these amazing brands. So we have Cann social tonic, we’ll be here today. And we see that they’ve actually they’ve had one of the fastest growing brands in California, and three of the top skews in the California market in October. So really exciting things there. We have Hi Fi Hops has been a top five beverage brand in California for the past two years and is one of the first perceived beers and putting that log and he does name on a product. And then we have Trust, which is one of the fastest growing Canadian beverage products have three of the top five skews in Alberta in October. And so really excited to spend some time talking with all of these folks. And so I’m going to do something really dramatic here and try to maybe stop sharing my screen. And we can turn on some video and see if we can see everyone’s lovely faces. So let’s see.
Hey, everyone. Let’s see. Trying to find
Okay, I think I got the looks good from my team. I think the only thing is I can’t actually see anyone. So trying to figure out how to make that happen here. I won’t spend too much time.
Too much time there. But how about you guys, Luke, or Jeremy? Or?
Luke, Jeremy and Lori? Can you guys see everyone? We can see everyone. Okay, perfect, then as long as you guys can see everyone, we will just just go with that. So first of all, thank you guys all for being here today. Before we jump into some questions, maybe each of you could take a chance to just introduce yourselves and we’d love to hear a little bit about how you came to do what you do currently and your your evolution into the cannabis space.
Maybe I’ll pick on someone to go first maybe we start with Luke just because you’re the first picture on my screen.
[Luke Anderson]
Sure.
So I actually was never a cannabis consumer. Before starting a company, I’d never been to a dispensary and found THC to be really scary after that. I had in college.
My co founder and good friend, Jake, Colorado, and he watched the legalization for many years. And we’re both very expensive, very heavy alcohol drinkers, overlap between alcohol and cannabis consumers really salient because we were very heavy alcohol drinkers in our 20s. And as soon as we turned 30, I decided to scale back. I have a consumer packaged goods consulting background, helping big CPG companies, brands and products on short timeline, budgets and so, is experienced in cannabis industry and my scrappy startup type. Let’s get something to market proved to be a pretty good combination. And our differing perspectives in being very familiar with cannabinoids and how the market is changing from his experience analyzing Colorado and California from the investor perspective. And me as a person who couldn’t pay to walk into a dispensary. I think we put our heads together to try and create that first product that would take somebody like me and draw me in to make their first ever dispensary purchase. And so I can say, branded, really good tasting, low sugar, low calorie, non alcoholic drinking will never offer a product above five milligrams of THC because that is a risk to newer consumers a little bit scared to get started.
[Kelly Nielsen]
Now, no, I think that that’s a great, great background. Thank you, Luke. And I think as we have this conversation would love to hit on some of those points around how you identified that needs state and
thinking about that first point eventually because we do. We hear that a lot that edibles beverages. It’s such a such a familiar form to consumers. And so we’d love to hear a little bit more about that.
Jeremy, do you want to go next? Yeah, can everybody hear me okay?
[Jeremy Marshall]
Yep, can you hear are you perfect? so unusual to be of course there goes my phone ringing
so it’s nevermind it’s just going to ring so it’s unusual to be doing this inside of a little screen I so wish we could all be in person and I missed that. And I know I will hopefully get a chance to meet everybody. And um, you know, we’ll shaking hands via thing Well, we still do that or, or even hugs, I was kind of a hugger the last time. Cannabis, the cannabis drinks Expo in SAM in San Francisco, I was hugging a lot of people that I just freshly met. And now I’m a little bit worried about hugs. But now that I’ve talked about hugs for a while, my name is Jeremy Marshall and the Brewmaster at Lagunitas. I know a lot about beer, I have an intense passion for Alberta, because all of our barley farmers are located in the prairie in Alberta. So I know a little bit about about Canadians. And I like to ferment pretty much anything including foods. So I’m really big into just anything edible or drinkable. This fermented, of course, and then the love of cannabis extends very, very deep within the Lagunitas culture, we’re the only brewery that has been shut down by the government. Because we were kind of letting some people smoke on the premises back in 2005. And they sent agents, agents there to do an undercover operation. And they shut us down for it. And, of course, we were one of the early people to kind of jump into this thing. But it’s more of an acknowledgement of just a reflection of how the times are changing and how attitudes are changing. And really all the stuff that you pointed out in your presentation and all the stuff that Luke alluded to as well.
[Kelly Nielsen]
Awesome. Yeah, I definitely think that some of those stories in the history of Lagunitas make it make it a very apt apropos brand to be jumping into this space. So happy to have you here. Thank you. Thanks. Yeah. And Laurie, maybe if you could give us a little bit about your background.
[Lori Hatcher]
Sure. I spent 15 years in in CPG, marketing and food, food and drinks. That was my passion. I was 15 years at General Mills, working everything from Cheerios, although posso. And then I went into a whole other world, I went to luxury apparel, and more lifestyle brands. And when I heard about the opportunity about Trust, it was an option I couldn’t say no to. It’s not many times in our life or career where we get to really be builders and pioneers and build something from scratch. And it’s such a privilege every day to build with partners, with other brands like our here today, a brand new category, but a category that we truly believe are going to change people’s lives. When we talk to consumers, they call it they call Canvas beverages a world of wonder. And these are been people have never tried it before. Because there are so many amazing options that haven’t existed before. It’s such a great alternative to what’s existed before, whether it be other kind of beverages, or whether it be things like you know, coffee, caffeine or even pharmaceuticals. So I kind of feel like we’re building a little world new world of Wonder every single day. And it’s a pretty, it’s a pretty exciting place to be.
[Kelly Nielsen]
I love that analogy. And I 100% agree with you that I think that it comes along very rarely in a lifetime, especially if you think about think about the industries such as consumer packaged goods, or really having an industry that you get to start from scratch and really build it from the ground up. So I share your enthusiasm from that perspective. I think it’s the most exciting consumer packaged goods industry we could possibly could possibly imagine. Definitely. Perfect. Well, thank you guys for that. And so maybe we could just jump into a couple questions. And Lori, I might actually pick on you first a little bit because I’d love to just talk a little bit more. And and make sure that we’re educating the group here on some of those nuances and things to think about within the Canada industry in particular. So cannabis 2.0 is fairly new, we’re about a year in and so how do you think that as you’re building it from the ground up as you say and really have the opportunity to shape this Have you think that the Canada beverage market might look a little bit different than what we see in the United States? And I would also love as you’re talking about that keeping in mind, you don’t have the ability to really promote brands, right? Like you, you You’re, like, hey, do those things. But I’d love to hear your perspective on that as we’re thinking about the direction of the Canada cannabis market.
[Lori Hatcher]
Sure, I’ll start by saying that although edibles are 2.0, with legalized last December, like Kelly said, beverages really didn’t show up for consumers until around the summer. So we’re only around six months in as a category in Canada and trust, we’re just four months in. So it’s very, very new.
But I think I think there are two ways in which, say in the next year or two other will be very different in the US. I think the first is innovation. What I’m really, really excited to see within beverages is seeing real beverage first companies and consumer first companies entered the space. What we so so the way we think of ourselves is we don’t we’re not a cannabis company. We’re a beverage company. And we put the consumers at first, everything we can do.
When we talk about our products, this is the only category that can combine cannabis with other amazing ingredients, you know, whether it be like how hops and barley, whether it be fruit flavors, or other adaptogens to really create experiences for occasions and need states. So what I’m really excited about in the next few years is actually innovation. We have a big innovation plan to launch beverage brands against many different occasions, not just socializing the accurate recreational button wellness space, and mental acuity as well. And I think that’s going to be incredibly exciting with these kind of beverage first companies coming in, not cannabis first. So I’m hoping that in Canada, although we started behind will kind of get ahead in in the innovation space. And we really, really believe that innovation is going to drive adoption of this category. The big challenge is our regulations. So for people who don’t know where we’re one of the first federally legal market, which is fantastic, and but we are heavily regulated compared to Colorado and California. So really restrictive marketing, really restricted distribution only in legal channels, legal retail, like dispensaries.
So that’s the challenge. The way we look at that challenge, though, is that when you when you can’t market when you can’t, you know, you’re the toolkit you’re used to you go back to the craft, and the craft is making sure you understand consumers better than anything, understanding their needs and wants and making sure you build the best product. So what really, really we’re focusing on is building the best tasting product that delivers the very best experience for a broad range of cannabis occasions, and on campus up to two.
So I think those are two ways that we’re different.
[Kelly Nielsen]
Yeah, no, I can, I can totally appreciate that. And I, from my background, you know, I worked with Nielsen for 13 years. Oftentimes, I’ll call it beverage and traditional CPG. And, you know, the most successful innovations put that consumer first and understanding that point of relevance and differentiation and advantage versus the competition. And I love that you brought up product. Because I think that if you have a product that doesn’t live up to those expectations, and a product to that, you know, consumers are disappointed and they’re not going to come back. So I love that you’re putting that consumer first.
I think along those lines, and maybe I’ll open up here to Luke and Jeremy as well.
Lori, maybe love to hear from you first on what you would take away maybe looking at the US market. So is there anything that you’re looking at the US market?
You learn from that kind of set this strategy? And then Luke and Jeremy would love your thoughts on kind of vice versa. What are your thoughts on hearing about and seeing what’s going on in Canada and any applicability to the markets that you play? And
[Lori Hatcher]
I can say we learnt a lot from the US So in the first year, I thought Trust before we launched and pre COVID we spent tons of time in Colorado and California. My first cannabis beverage was the hi fi hops ever because we didn’t have it here and we couldn’t do our we couldn’t do our r&d here because of the restrictive environment. So we were in California and Colorado a lot developing our portfolio. So we can we can learn a lot.
[Kelly Nielsen]
I love to see how you guys are educating consumers about the benefits of Civ and super, super clear and fun ways that makes sense for your brands.
That is something that we aspire to do, we can only do it in a limited manner, basically in 19 plus settings, so really in the retail channel and other settings where you can age gate, so really love to see that I love. I love the innovation that’s specifically on the panel today, I’m getting into the lower doses far more approachable for non users getting in session ability. But we’ve spent tons of time in the US and we continue to look the US are very inspired as we kind of developed the what the category looks like in Canada.
Wonderful. Thanks, Lori. Luke. Jeremy, what are your thoughts on and looking at the Canadian market and the things that are going on there and finding inspiration?
[Luke Anderson]
Yeah, I think it’s super exciting.
In Canada, you have a bunch of people that are going to make their first dispensary trip and encountering beautifully branded products like trust, and appropriately dosed products at the same time. So I think that you stand a chance to retain all of these consumers and keep them loyal from day one. Whereas fornia for the first year that cannabis beverages were on the market, it 10 milligrams was low dose and 100 milligrams was all the buyer wanted to talk to you about. You walk into a cannabis dispensary, and you head over to the fridge because you’re like I’m trying to drink less alcohol, maybe one of these is a good substitute, and you accidentally drink 100 milligram lemonade, you’re never going back to the dispensary again.
And so I think we’ve had a lot of undoing, that we’ve needed to deal with a retraining people in the California channel to think not on $1 per milligram basis, you know, we don’t think dollar per percent ABV and alcohol and eventually we won’t with cannabis beverages.
And also, cannabis dispensaries build their inventory rooms, assuming that cannabis beverages were low velocity products, and so you don’t have any room to put the product even when it is selling really quickly. And so you’ll have product stock out and then you’ll have to tell people Oh, wait, the velocity was low, because it was out of stock for six and a half out of seven days, you should probably look more carefully at skew level data. And those are very clunky and difficult conversations to have Canada from day one, I think is set up to support beverage, whereas we are going to need to really kind of just shove, you know, puzzle pieces together that don’t quite fit naturally until the us individually or kids wake up to it.
Yeah.
[Jeremy Marshall]
Canada kind of scary to a bunch of Californians. Because it’s just it’s so heavily regulated, and there’s so many rules, and I think it’s a good indication of what might be coming, especially what us as mad owl are used to very heavily regulated. And I feel like there is a little bit of an element of like that Wild Wild West that exists in the States as one state pops off one by one. Whereas in Canada it’s a very rigid framework and my insight into it continues to be those Alberta and a little bit of Sach the farmers and these are salt of your earth guys that tell me that oh, I I don’t
I you know, I you wouldn’t find me in a dispensary and I find it funny because Canadians drink a lot of beer. And I think I think you know BDSA and all of us can agree that that is the tide that is that is changing. But my window into it is so colored by beer. That that I still see that old view kind of percolating through so I always try to talk to their kids.
And then I got to get the farmers away like okay, your dad’s not listening. You tell me what what are the what are the kids doing up here?
Yeah, I think that that’s really interesting. And you know, I think calling out but it’s a little bit of the Wild West or what is that regulation?
It’s definitely gotten off to that different start. I personally think that one of the other aspects that maybe we didn’t spend as much time talking about in the actual presentation is seeing that interaction and folks walking into dispensaries for the first time choosing beverages to your point of you know, if they try 100 milligram beverage they’re never going to come back to the dispensary. And so how can you make beverages in a form that is is recognizable but also maybe fits into some of the most common use cases that they’re already already drinking beverages, whether that’s alcohol or or something else?
[Kelly Nielsen]
So I think that that’s a really interesting, really interesting point there. And I think the other thing is we look at the the US versus the Canadian market which is I love thinking about is that Luke and Jeremy, I think that when you guys were launching and really coming into the coming into the beverage space yourselves, you’re already coming into a pretty established beverage category, right? Or I’m sorry, a pretty established edibles category. Whereas Laurie, I think you have a much different dynamic there, obviously, where edibles and beverages are coming online simultaneously, and consumers have the opportunity to see where all of them each of them really fits into their lives.
Which actually maybe brings me to a next next question. And maybe Jeremy would love to hear your thoughts on this.
Think about thinking about those states. So when we’re seeing states come online now, so what they’re if you’re thinking about Illinois or Michigan, that we’re seeing them get to what looks like a more mature market a little bit sooner than maybe something like I Cal Colorado when it first came into fruition. And so what are some thoughts on how, how you can keep that in mind? As more states are coming online? And what it might mean for beverages specifically? Do you think that, um, to what degree will the product be similar or different than maybe what we’ve seen in the past as some of these states, maybe are starting to look more mature a little bit earlier in their timeline?
[Jeremy Marshall]
Yeah, well, of course, no discussion to answer that would be complete without mentioning it’s blame the internet, right, where we all have everything available to us simultaneously. But also keep in mind that a lot of the people that build out earlier things in say, California, Colorado, a lot of those same people are the ones that are going to seek the opportunity in the in the new states, but it doesn’t change the fact that we as beverage producers, have two strikes against us, what we make is heavy.
And what we make requires a very intense capital build out it is it is no small feat to put in a beverage line and all the quality control metrics that you have to have in place to support a beverage line. So it does affectively shout out to the really small, less well funded kind of people on you know, unfortunately, and it’s just kind of it just comes with the territory, you know, we I, I look at the trends that are just going on and in bed out. And there’s a lot of different buckets, you know, there’s the innovation bucket. And then there’s the package type. And we have seen just a phenomenal shift from things in bottles to things in cans, not just beer, but you also have wine, wine in a can is no longer you’re not going to be judged, maybe the way you would have been 10 years ago, we’re seeing the explosion of the seltzer category with seltzer is this thing that knows no bottles, right. And then you can see a lot of the slim cans being picked up and adopted by
some of the new entrants. But the one thing is these things are, though you can max out a truck weight and get a lot more cans in there, then you couldn’t bottles, it doesn’t change the fact that what we do is heavy. And it’s heavy to move it around. And it’s capital capex intensive to build out. So yeah, and I think you just call it something else that I was going to touch on with that, too, is like the debt distribution metric, or being able to get to retailers to be able to sell the product significantly different for something like beverages versus some of the other types of products that are out there.
[Kelly Nielsen]
Yes, right. A lot of money requires a lot of logistics. So
yeah, so, um, anything else to add on that Luke or Lori?
[Lori Hatcher]
On the regional aspect, we don’t, of course have that as much because we’re federally legal. So Canada’s kind of moving together. But if, you know, if we look at a crystal ball, we expect that regionality will will play in this category much like it doesn’t in beverage alcohol. So we’re kind of starting with this portfolio, but knowing that there’ll be regional nuance and our expectation is that regions will be really, really different have different preferences. And maybe in the long run, they’ll be regional, you know, beers much like they’re much like there is in the beer industry. So we, again, we think of this cutter way more similar to the beverage counter corie then then kind of cannabis, so we expect region led to play a role once, what’s the adoption curve, we’ve gone up the adoption curve a bit more.
You know, and that is the one thing that is really holding this product category from exploding. holding this product category back from exploding in the US is price relative to premium alcohol alternatives. And as you have subscale manufacturing and supply chain in each state, and there aren’t really true co Packers in each state, operating large facilities that charge CPG level tolling fees, you’re going to see people buy these items as novelties more often than they buy them as true alcohol substitutes.
Yeah, no, that’s a great call out. And I know that we’ve had some side conversations about, or comments here about the how we don’t, we don’t necessarily shop by price per ABV and the alcohol beverage industry, but I do completely agree with you, Luke, that when you think about the price, the relative price between something like a six pack or four pack or something of a cannabis product at the absolute price point is significantly different than alcohol. And so there’s probably a bit more thoughtfulness in terms of what does that mean state? What does that occasion when it’s a true substitute versus maybe supplement? Or a completely new occasion?
[Kelly Nielsen]
Um, yeah, so so you know, guys, I’m keeping an eye on the clock. And so I wanted to maybe jump a little bit here in to talk a little bit about what you think, is next to come? And Luke, maybe I’ll start with you on this. One is, if we think about whether it’s the beverage category or something else, thinking about the next format, or form or benefit the beverage product could provide, what do you think is it what do you think is the next big innovation that could really expand this category?
[Luke Anderson]
I think it’s it’s just a volume of differentiated players in the microdose sessionable space, you know, to the only two cannabis beverages that I buy at, you know, probably by trust if I were in Canada, but are the one millet two milligram Hi, fi hops, the white label and my own product. And now you go to a dispensary and you’ll see like a fridge full of can. But if you go to a grocery store, and you see a fridge full of one brand of the same category, it’s just not an interesting place to shop. And so I think we all stand to gain a lot from more sophisticated operators with beautiful packaging and truly approachable dosed brands, brands that mean to that new consumer, I’m never going to get you to high so that you feel like you’re going to turn from this industry or this plant.
And if you look at beverage alcohol, there are many winners in seltzer. There are many winners in hard kombucha For God’s sake, there are so many opportunities for people to create just sessionable microdose drink 24 of these just like you drink 24 white claws with friends, we just need them to have a clear path to exist so that the entire category can get legitimized. So I think it’s variety. The future is all about variety and specificity of what that product is offering just just like you see an alcohol.
[Kelly Nielsen]
Jeremy, what do you think? What do you think is the next big thing?
[Jeremy Marshall]
Well, I would agree with Luke on lower dosages, that is definitely something I think it it takes the fear and the mystique out of someone who wouldn’t normally had considered it before. So I would agree with that. You know, if I looked at broader beverages, both alcoholic and non alcoholic,
you know, at Lagunitas we already believe in people being more health conscious. And we’re already working on a non alcoholic IPA that we’ve just released. And I think the the pandemic has only heightened that it’s only increased those feelings. So when you look at this face, you see a lot of things that used to be hard becoming soft, and a lot of things that we’re soft becoming hard. So a lot of meshing. And I think that will continue. But I have to draw some analogies, having been you know, 17 years in the craft brewing industry. And it started as these you know, artistic people that have a have a dream, and then it kind of grew up and then it became a real thing and then the big guys bought up the smaller guys with and you can look to cannabis and you. I guess my point is like the team always takes on the personality of the coach kind of thing. So that’s within the industry as a whole and within individual brands. And I totally agree we need a variety. You don’t ever want to just open up a cooler and see just domination right? It was no choice.
But the one key difference that I noticed that I find somewhat refreshing is that the cannabis industry tends to be a little bit more female than the bath out. And I think you can see that expressed in the nature of the products both to design, the approachability, the warmth, and it’s one thing that I know about ALC is really, you know, come to reckon with that is it’s kind of been a little bit of a boys club for for many, many years. And craft does a better job craft as the arms open, ready to give hugs just like me. And but within cannabis, you tend to find a little bit more of this feminine aspect that I find really refreshing.
[Kelly Nielsen]
I’d love to spend some time another day talking about targeting and consumers and understanding how to identify the different user groups you’re going after for different types of products. But I want to give Lori a chance to to share with us her thoughts as well on what’s next. I know we spent a lot of time talking about the Canadian market. But any any closing thoughts here?
[Lori Hatcher]
I agree with both of the guys were so we’re so early days that what’s next is variety and lots of offerings. I think one of the things I’m most excited about for the future in the next few years. That is the power of this plant, though. You know, I think with beverages now, we’re kind of playing with the THC, CBD, but all the rare cannabinoids some of the science on some of the rare cannabinoids and the benefits of the world of terpenes. Like the essential oils or the hops. So I’m super excited about exploring this the power of this plan and in many ways beyond what it is today.
[Kelly Nielsen]
Yeah, no, I am 100% with you there. And I know we didn’t get a chance to bring it up during this discussion. But you know, thinking about even just CBD. And I think between the US and Canadian markets, they’re regulated so differently, right? The US is a little bit of a mess right now. We’re working on figuring it out. But in Canada, you know, hemp really regulated the same degree as
marijuana and sold through cannabis retailers and so much different landscape up there. And so I 100% here you on looking at kind of the broader range of the kinetic cannabinoid products out there. So yes, so that brings us to the top of the hour, guys. But thank you all so much for taking the time to chat with us today. I really look forward to connecting and working with you all more in the future. But thank you all and looking forward to this exciting category.
Thank you so much. This has been great. Thank you. Yeah, we will talk to you soon. And thank you all who are able to attend. If any questions come up at this point, feel free to reach out. Thank you
everyone