Canopy Growth Corp.’s lineup of cannabis-infused drinks. (Photos courtesy of Canopy Growth)

Canopy Growth Corp. is betting that the key to discovering new marijuana customers is available in a can.

The firm’s rising cannabis drinks are a part of a strategy to draw new cannabis customers with next-generation merchandise, on this case by providing an alternative choice to alcoholic drinks.

While Canopy’s early gross sales of drinks look sturdy, whether or not they’ll reach attracting and retaining new cannabis customers – one thing not seen but in mature U.S. markets – stays to be seen.

Cannabis drinks “represent a fundamentally different business proposition” from most different marijuana merchandise, based on John Fowler, former president and CEO of Supreme Cannabis and now a marijuana licensing and commercialization marketing consultant by means of his Toronto agency Blaise Ventures.

“Because there is no global market to look at, legal or illegal, that shows that consumers enjoy consuming cannabis drinks in large numbers.”

Potential market measurement

Executives from Smiths Falls, Ontario-based Canopy, which is backed by U.S. beverage alcohol behemoth Constellation Brands, poured out their plans for the new cannabis-infused drinks throughout a June 22 investor presentation.

“Based on our research, 17% of Canadian adults who currently don’t consume cannabis say they intend to use recreational cannabis. … We see a significant opportunity to recruit these intended consumers through products like our drinks,” CEO David Klein mentioned.

Canopy executives aren’t afraid to sign their excessive hopes for the potential measurement of that sector, estimating that Canada’s mixed market for alcoholic drinks and purposeful liquids, corresponding to sports activities drinks, is price 26 billion Canadian {dollars} ($19.1 billion).

Capturing solely 5% of that mixed market can be price CA$1.Three billion, though Canopy President and Chief Product Officer Rade Kovacevic informed Marijuana Business Daily that’s not formally the corporate’s purpose.

“What we’re showing is that it is a large market, (one) that, with resonating products, could be (captured),” he mentioned.

Cannabis beverage gross sales stay underwhelming in mature adult-use markets within the United States: In Colorado, weekly market share for marijuana drinks ranged from 0.9% to 1.5% through the first half of 2020.

In Washington state, cannabis drinks captured round 1.4% of the marijuana market over the identical time interval.

“There certainly are companies that have made money in drinks, and I think there will be Canadian companies that make money in drinks,” Fowler mentioned.

“But that is a path that you have to cut yourself, and I think from an entrepreneur’s perspective, that’s a very different risk-reward profile than selling products that, broadly speaking, already exist.”

Canopy’s beverage strategy

Consumer packaged items marketing consultant Rob McPherson sees no cause cannabis drinks shouldn’t succeed underneath the best circumstances.

“There’s a lot of overlap between how one might consume, or why one might consume cannabis, and why people already do consume beverage alcohol,” mentioned McPherson, a former president of Bacardi Canada.

McPherson believes key necessities for a profitable cannabis drink embody good style, sessionability (that means affordable portions will be consumed over a given time interval), an “enjoyable, safe and consistent” impact, common availability in shops and pricing that displays a fascinating worth equation.

Canopy claims to have met a few of these standards with its present slate of drinks, which features a Houseplant-branded Grapefruit beverage with 2.5 milligrams of THC, Tweed’s Bakerstreet & Ginger and Houndstooth & Soda drinks containing 2 milligrams THC in addition to a high-potency Deep Space cola with 10 milligrams of THC, the utmost underneath Canadian laws.

Kovacevic, Canopy’s president, informed MJBizDaily that the corporate’s mental property permits its drinks to supply “an onset time and an effect that’s akin to beverage alcohol,” making customers comfy with the beverage format.

In a Canopy-commissioned on-line ballot of 201 customers who tried the corporate’s Houndstooth & Soda beverage in May, 75% mentioned they favored the style, efficiency and impact and 73% mentioned they’d purchase it once more sooner or later.

“We’re very confident that once someone tries them, one, the majority of people will find that the flavor experience is something that they like, and two, that they will find that the benefits compared to beverage alcohol are something they’re interested in,” Kovacevic mentioned.

Early gross sales promising, however challenges stay

During the June investor name, Canopy mentioned it had shipped 530,000 beverage items so far and was boosting manufacturing to satisfy demand and finish stockouts in shops.

It’s nonetheless unclear whether or not these early gross sales numbers signify sustained demand from new cannabis customers, experimentation by present customers or a mixture of each.

Canopy’s strategy of attracting brand-new marijuana customers into the area is dangerous, Fowler mentioned, “because their customer, currently, is not a cannabis customer.”

“So you need to convert people not only to your brand and your product, but to cannabis, full stop,” he added.

That requires attractive new customers to buy at cannabis retailers, which have rolled out erratically throughout totally different Canadian provinces.

Once buyers get to these shops, Canadian cannabis equivalency guidelines stop buyers from shopping for massive numbers of precanned cannabis drinks – for instance, Canadians should purchase solely 5 cans of Canopy’s Grapefruit beverage without delay earlier than exceeding authorized limits on public marijuana possession.

“What we require is a change to the equivalency table within the federal regulations,” Kovacevic mentioned.

Canopy’s beverage pricing strategy can also be unproven in the long run.

On the Ontario Cannabis Store web site, Canopy’s Tweed drinks with 2 milligrams of THC retail for CA$3.95 per can ($2.90).

The 2.5-milligram THC Grapefruit beverage sells for CA$5.20, and the potent Deep Space beverage prices CA$9.20.

Kovacevic mentioned the drinks’ worth proposition affords “the same effect as beverage alcohol, but with health benefits such as not being negative for your liver and not causing a hangover, that traditionally beverage alcohol’s associated with.”

“And so, through that and our research, we believe consumers will pay a modest premium for beverage cannabis as an alternative but that we still need to be within an appropriate range of a craft beer purchase, for example,” he added.

For skilled cannabis customers who would possibly need Canopy’s heady Deep Space beverage, CPG marketing consultant McPherson believes the worth level is excessive.

“This isn’t the away-from-home, on-premise bar drink – I’m paying almost 10 bucks to be able to drink this at home,” he mentioned.

The firm expects to have sufficient information to find out whether or not Canadian customers are repurchasing cannabis drinks and turning them right into a behavior by the tip of fall.

Blaise’s Fowler is optimistic for the beverage class in Canada and believes Canopy’s plan to deliver new customers to cannabis may benefit the whole sector.

But adult-use legalization in Canada didn’t deliver “that flock of new consumers that many brands had hoped for,” he mentioned.

“Will Canopy do it? Maybe they are going to.

“Are they probably one of the best-suited companies in the space to try to do that, based on their financial backing and their support from Constellation (Brands)? Arguably yes,” he continued.

“But, there is a different risk profile in the success of their drinks business, as compared to other parts of their business.”

Solomon Israel will be reached at [email protected]

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