Canadian manufacturer Canopy Growth will be hoping that its new line of CBD-infused beverages, launched last week, will help broaden its consumer base and allow the company to benefit from the growing trend towards cannabidiol-based drinks which has grown considerably in popularity during the coronavirus lockdowns.
The company’s new “Quatreau” line of sparkling waters will come in two variants — one with only cannabidiol (CBD) and the other with a limited amount of tetrahydrocannabinol (THC), the cannabinoid which causes a high. It follows Canopy’s move earlier in the year to introduce a THC-based drink, which the company says has already sold over 2 million cans.
The naturally flavoured sparkling waters are Canopy Growth’s first CBD-infused drinks, with both CBD-only and “balanced” (CBD + THC) offerings available in Canada. Launched on the heels of incredible growth in sales from the company’s THC-infused beverages, Canopy Growth will be hoping that it is uniquely positioned to win market share in the CBD beverage space.
The CBD beverage market opens up a whole new customer segment for manufacturers, due to its perceived benefits to health & wellbeing.
“Our THC beverage tends to play in more traditional alcohol beverage occasions. We think CBD has more breadth in terms of the type of opportunities and occasions it could compete in,” Canopy’s global head of beverages Andrew Rapsey said at last week’s launch event.
The company will initially be targeting the Canadian market where the company sees a strong appetite for the new range, and regulatory logistics are more easily overcome. Looking further afield Canopy has put in place an agreement with Acreage Holdings (ACRG-BU.CN), the New York-based multi-state cannabis company that Canopy has agreed to purchase subject to a number of conditions relating to changes in U.S. federal regulations.
Rapsey has also stated that the Canopy is open to working with interested distributors that already carry CBD beverages in the United States for a potential future launch of Quatreau in the country.
New Frontier Data estimates that U.S. CBD spending will be nearly $15 billion this year, with marijuana-infused products expected to exceed $21.5 billion in retail sales between 2020 and 2025. Of this market, beverages have quickly become the new ‘hot trend’. A recent report by Grand View Research has suggested that the global cannabis beverages market size is expected to reach USD 2.8 Billion by 2025 at a CAGR of 17.8%.
That report looked at both alcoholic and non-alcoholic beverages using either TCH or CBD, but many analysts are predicting that CBD-infused beverages are likely to have much wider appeal than their THC equivalents.
Competition in the space is already building rapidly from the wide array of infused beverages already sold in U.S. markets. Aphria (APHA.TO)(APHA) recently announced it will acquire Georgia-based SweetWater Brewing Company in a US$300-million deal which could pave the way for a U.S. drinks-based expansion. Truss Beverages, a joint venture between HEXO (HEXO.TO)(HEXO) and Molson Coors (TPX-B.TO), is also pursuing hemp-derived CBD beverages in Colorado.
Commenting in an interview with Yahoo Finance, Rapsey says he welcomes the competition, believing it will lure more consumers to the drinks category. He said sales so far have mimicked the seasonality of beer, strongest in the summer, tapering as the weather cools. He expects the introduction of CBD-focused products will smooth out such peaks and dips.
“The category will be more representative of something like a seltzer, which is less seasonal than beer,” Rapsey said, noting the importance of luring new consumers who may not be comfortable rolling an old school joint to the success of the nascent category.
“It’s really about unlocking new customers,” he added. “If the category stays the way it is, it’s just a bunch of companies competing for a very small market.”
Grand View Research lists some of the key benefits of the CBD beverage segment as “demand is expected to witness a surge owing to the non-psychoactive properties of CBD. Lack of psychoactive effect in the CBD drinks is widening its scope for usage of the drinks in medical purposes. Many consumers are considering CBD drinks as a wellness and anti-inflammatory products, such as kombucha-a probiotic drink. This drink can potentially be used for treating chronic pain, anxiety, substance use disorders and central nervous system diseases. These factors are expected to boost the adoption of the product, resulting in the growth of the segment.“