Cannabis Canada Weekly: Cann enters crowded Canadian drink market; Sales jump 8.5% in December

With consumers yet to fully embrace cannabis-infused drinks, it was notable to see another company take steps to enter the Canadian market. 

Cann, one of the most popular cannabis drinks in the U.S. and backed by a laundry list of celebrities, announced plans to enter the Canadian market earlier this week through a partnership with Truss Beverages, the joint venture between Hexo Corp. and Molson Coors Beverage Co. 

The company also announced that it raised US$27 million in early-stage financing with a slew of celebrity investors including Canadian actress Nina Dobrev, comedian Adam Devine and Rosario Dawson, who also sits on Cann’s board.  

Luke Anderson, one of Cann’s co-founders who started the company in 2018 following a stint as a consultant at Bain & Co., said the company is targeting users who are looking to scale back on their alcohol use with a low-potency product that doesn’t make them feel bad the next day.  

“[Cannabis] beverages have historically been largely unsuccessful except for us,” he said in an interview. “We were one of the only cannabis companies that continues to nearly triple in size, year after year. I think the reason for that is we’re accessing a totally new consumer that’s not interested in other types of cannabis.”  

Cann’s products have a 16.9 per cent share of the cannabis beverage market in California – good enough for the top spot, while they rank second in Nevada with a 14.1 per cent share, according to Headset data. Sales figures were not immediately available, but Anderson said the company has sold 10 million cans of the beverage since its launch. 

While Cann may be atop the drinks market, it is still a relatively unproven category. Infused drinks account for between one to two per cent of the total cannabis market in both the U.S. and Canada.

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It generates roughly $7 million to $8 million in monthly sales in Canada, despite being backed by some of the biggest names in the industry such as Molson and Constellation Brands Inc. That investment gap is beginning to raise questions as to why are alcohol companies are spending millions of dollars entering a product category that has yet to gain a strong foothold amongst fickle consumers. 

“That really is the Holy Grail if you can figure it out,” said Andrew Carter, an analyst who covers several U.S. and Canadian cannabis companies for Stifel, in an interview. He said there remains interest from casual consumers in pot drinks given the relatively familiar beverage format, while alcohol companies are looking to invest in a product that can help bridge declining sales of beer and liquor.   

“People who are interested in it are definitely not interested in smoking. They’re more interested in ingestibles,” he said. “I understand why people chase it but it hasn’t caught momentum yet.”  

Carter also added that it is odd for Truss to work with Cann on their Canadian launch, given they already lead the Canadian cannabis beverage market and the tie-up risks cannibalizing their own sales.  

“Going out and signing a licensing deal with a U.S. brand that’s hot isn’t going to do anything for you,” he said.  

Anderson said that Cann decided to work with Truss because both companies lead the product segment in their respective markets and that “winners work with winners.”  

“One of the reasons why beverages do not work right now is everyone is fighting for their own share, rather than working collaboratively to take a share from unwanted alcohol consumption,” he said. 

“And that Molson Coors is brave enough to invest in a category that could threaten the share of alcohol that’s consumed, that means that Big Alcohol is waking up to the fact that pot drinks are complementary, not competitive to what they’re doing.” 

Lisa Campbell, who used to work at an alcohol consignment agency and is now chief executive officer of Mercari Agency, said that pot drinks that focus on low THC doses are not products that heavy consumers are looking for. She noted that the best way to drive interest into the drinks segment is through making them available in places like bars or restaurants, which remains restricted in Canada.  

“Unfortunately for the mainstream consumers who have not yet converted into cannabis, it will take more than a low-potency product to walk into a cannabis store,” she said in an interview. “Companies focused on converting new consumers have missed the mark to date. Using celebrities as investors is not enough to bring them over.” 

Anderson, who doesn’t have a formal position in the company, but continues to take a senior executive role in its operations, said the company has focused on producing a product that “people actually want to drink” even though it has about two milligrams of THC, compared with the legal limit of 10 milligrams.  

“While the consumer is continuing to vote with their dollar on the category and in particular, our success, we stay the course and we believe it’s a huge opportunity,” he said.

Source: BNN Bloomberg