This post originally appeared on Ben's LinkedIn Newsletter, Infused Insights. You can read and leave comments here.
This article is the second in a series titled Low Dose Beverages Will Pave the Way for Legalization and provides perspective specifically for licensed cannabis operators.
My fellow licensed cannabis operators, I understand the challenges currently faced in responsibly operating within the state systems while competing on multiple fronts - not only with the illicit market, but amidst the surge of unregulated intoxicating hemp products. The licensed industry has been forced into an impossible dynamic. While I understand the difficulty of distinguishing hemp THC beverages from an otherwise sprawling unregulated hemp market, I believe it's the opportunity we must all consider.
The skepticism toward cannabis beverages within our community has been palpable:
"It's less than 2% of sales!"
"It's cumbersome to stock and manage inventory."
"The revenue doesn't justify the shelf space, especially compared to high value products like vape carts, flower, and edibles."
Further, the bulk of beverage sales in the regulated channel come from heavily dosed 100mg multi-dose products (where permitted), like St. Ides and Uncle Arnie's, as can be witnessed in the monthly stats viewable on Headset. According to Headset, beverages in 2023 accounted for 1.36% of all cannabis sales in CA, and the low-dose variety was approximately a quarter of that.
Low-dose beverages account for one third of one percent of cannabis sales in CA.
I've always stated that low-dose THC beverages weren't intended to serve as a direct alternative to cannabis products but to offer a substitute to adult beverages. The struggle of the low-dose beverage sector to find its footing within licensed dispensaries underscores this point.
Consider the adult beverage market in places like Minnesota, where, according to Jon Halper, CEO of Top Ten Liquors, THC-infused products now command over 10% of total sales, outpacing craft beer, wine subcategories, and vodka in volume. This surge isn't fueled by traditional dispensary clientele but by consumers seeking alternatives within the adult beverage sphere, whether for an alternative to alcohol or a richer experience than what the non-alcoholic segment has to offer.
Positioning low-dose THC beverages in mainstream markets serves as a gateway, not just to new products, but to the regulated cannabis industry as a whole. As newcomers grow accustomed to THC through these beverages, their curiosity will likely expand toward exploring other products or higher doses available exclusively in licensed dispensaries.
The normalization of THC in settings where other beverages are sold can significantly erode the stigma surrounding cannabis as a whole, paving the way for a relaxing of the stringent regulations that currently hinder the regulated market.
Further, by applying a reasonable excise tax, THC beverages in the mainstream beverage market will not only replace the tax revenue once collected in the regulated market, but could help shoulder the exorbitant tax burden placed on all licensed cannabis operators. I'm preparing a calculation of the opportunity and will be posting in my call to regulators later in this series.
By rallying behind the introduction of this niche category into the mainstream marketplace, the regulated cannabis industry stands to gain profoundly. This isn't about legalizing a single product format and alienating the rest; it's about cultivating a broader acceptance and understanding of THC in a calculated step, which, in turn, promises to unlock tremendous opportunities for our entire sector in the future.
< Low Dose Beverages Will Pave the Way for Legalization
Hemp Operators: Support Responsible and Incremental Beverage Progress >