Market research
The eyes of the global cannabis industry were on London last month as some of the biggest companies in the category rolled up to the Future Cannabis Strategies Europe Conference 2019. Growers, brand owners and extraction specialists met to hear the latest on the fast-changing industry, and answer questions on regulation, technical challenges and the future course of the category. just-drinks' news & insights editor, Andy Morton, was there to cover all of the major talking points.
Cannabis beverages are a growing force in the food & drink retail market
- Will beverages lead the way in cannabis?
Beverage companies already in the cannabis category are confident that drinks will be the primary delivery platform for the drug in the recreational market, whether it's with the psychoactive THC cannabinoid or the non-psychoactive CBD. Their reasoning includes the idea that beverages are more socially acceptable compared to vaping and smoking, and that people are more likely to socialise over a drink than a packet of gummie bears.
But then, as beverage companies, they would say that.
Bruce Bernstein is the owner of UBIX Processing, a white-label hemp extraction company that can put your brand on a range of CBD products, from tinctures to capsules to even pet food. Bernstein, therefore, has a wider perspective on what is likely to emerge as the main delivery platform for cannabis. And, while he does concede that the cannabis beverage category will be "a monster unto itself" he's not totally on board with the beverage boosters.
"I don't necessarily agree with that," he replies when asked if beverages will be the primary force in cannabis. His take is that cannabis will be more akin to current functional beverage trends, especially in the CBD category. He thinks CBD beverages will be a mainstay on the supermarket shelf in five to ten years time, but marketed in the same way as, for example, Gatorade Endurance, which targets athletes and sells at a higher price point.
As for Bernstein's views on the effectiveness of other CBD delivery methods: "Tinctures are best if you are willing to be conscientious; capsules are for lazy people."
- THC vs CBD
Your average consumer currently has minimal knowledge of the cannabis category. Ask them what is the difference between THC and CBD and you'll be met with blank looks. Even within the industry the two cannabinoids are often lumped in together despite having widely differing effects.
This is unlikely to continue. As the cannabis industry matures, the two cannabinoids should diverge into very separate categories. And, according to many at the conference, it is the more benign - and less media-hyped - CBD that will emerge as the bigger opportunity for beverages, thanks mainly to its health-and-wellness associations.
Marketing restrictions around making health claims for CBD mean no one in the industry says this outright, but among existing consumers, the oil is widely liked for its anti-inflammation qualities. It's no co-incidence that the celebrities being approached to sponsor CBD beverages are mainly in mixed-martial arts and extreme running, two disciplines that know all about inflammation.
Meanwhile, regulation will mean THC and CBD beverages are distributed different, and face different rules on use and dosage. That regulatory environment will ensure an even wider distinction between the two cannabinoids.
- Untapped potential
Nick Clarkson is the chief scientific officer for PhytoVista Laboratories, a chemical testing lab. He has been looking into CBD products, including beverages, attempting to uncover what ingredients are in actually in them, and whether that differs from what's on the label. What he has found is that many products that claim to contain CBD actually contain CBDA, leading to the obvious question for many - what the heck is CBDA?
CBDA is the naturally-occurring source of CBD. When CBD is extracted it exists first in CBDA form. Heating CBDA - or leaving it a while to break down - gives you CBD.
The next question is, what is the difference between the two? The answer is - not much, but the benefits ascribed to CBDA are different. From a consumer perspective this is important, but currently only core users of CBD understand the difference. CBD forums - which lean to the medical usage side - are, according to Clarkson, full of people highlighting products they have found that contain either CBDA or CBD, depending on what functional benefit they want.
The problem is, the wider consumer base is not aware of the difference and, as we have seen, many products do not bother to state which they contain. So consumers could potentially be left disappointed when a product doesn't deliver the wellness effect expected.
This is obviously not great for the category. However, the CBDA issue does shine a light on the untapped potential of cannabis. CBDA is not the only cannabinoid in cannabis. More than 100 have so far been discovered. In the future, brands could be able to associate themselves with one particular cannabinoid, thus targetting a specific consumer use and widening their appeal. For the moment, however, extracting alternative cannabinoids such as CBG, which is associated with anxiety reduction and improved sleep, is prohibitively expensive. Costs should come down as more research is done.
- Is CBD water useless?
On the sidelines of the conference, a Canadian cannabis extraction specialist told just-drinks that, as far as he is concerned, many of the CBD waters currently on the market are "useless". According to Phil Kwong, head of 3 Carbon Extractions, a number of obstacles face what so far has been one of the busiest sectors of the CBD category. Firstly, the human liver is adept at flushing out a lot of the CBD consumed by bottled water, effectively neutering many products on the market. Secondly, the scientific view is that CBD on its own cannot latch on to the body's receptors. According to Kwong, it just bounces off. Only if other cannabis parts, such as THC, are in the mix can CBD connect and deliver its effects.
Within the cannabis research community, this is known as the "entourage effect", and means that only cannabis products with a full spectrum of ingredients from the plant can provide effective CBD relief. Isolates - meaning one cannabinoid is present - have minimal effect.
It should be noted that this is only a problem in North America. In Europe, only full-spectrum products are allowed in edibles and beverages. But it means that to some in the industry - and many on the CBD forums - isolates should not be bothered with.
However, Kwong qualifies this by saying that more research needs to be done on the entourage effect, as with so many other areas of cannabis and its effects on the human body. Simply put, we just don't know enough yet.
- The legal question
Another area where more insight is needed is in the laws governing cannabis production. Many at the conference, no matter where they were from, said they don't yet have a clear picture of the regulations covering the industry. As one of the speakers, Lauren Maillian from Canadian hemp brewer Province Brands, said: "The rules are not yet written. No one knows what the rules are."
That is in part because governments themselves are still trying to figure out how to regulate. The overriding feeling, however, is that a consistent and rigid framework is needed to help the industry grow and wheedle out what one conference guest described to me as industry "cowboys".
One consequence of unclear regulation is that the service industries any business needs to function are currently unwilling to work with cannabis companies for fear of ending up on the wrong side of the law. According to one UK CBD beverage producer I spoke to, banks, PR agencies and even PayPal won't work with the industry.
- Moral backing of cannabis
What is consistent in the cannabis industry is the many people who believe that it is a force for good in the world. Indeed, many - including both Kwong and Bernstein - got into it through their own medical challenges.
Meanwhile, producers of both CBD and THC beverages have positioned themselves as offering healthier alternatives to both alcohol and full-sugar drinks.
However, while there are the early-adopting entrepreneurs on one side preaching the gospel of cannabis, on the other is the incoming weight of investment from corporations keen to get involved in this relatively-new revenue stream. These larger players will likely prioritise shareholder returns over the more holistic approach of the start-ups.
As the big money pushes out the small, cannabis-based products will need to work hard to retain their high moral credentials to attract consumers.
That's going to be a tall order as the boardroom boys and girls come knocking.
Sectors: Beer & cider, Cannabis, Marketing – advertising & promotions, Soft drinks, Spirits, Water, Wine
