Canopy Growth Launches CBD-Infused Beverages in US
Canada’s Canopy Growth Corporation announced Tuesday the launch of its CBD-infused beverage line, called Quatreau, in the United States.
Available in four flavors — Cucumber + Mint, Passion Fruit + Guava, Ginger + Lime, and Blueberry + Acai — the new drinks have 25 calories, contain 20 milligrams of CBD isolate derived from hemp, and are sugar free.
Speaking to THCnet, Canopy chief product officer Rade Kovacevic hinted that Constellation Brands, the New York-based alcohol manufacturer which has invested more than $4 billion into the cannabis firm, could help broker a broader distribution deal within its so-called “gold network” of beer wholesalers.
“We will launch our product on Shop Canopy, so that we’re able to have that direct relationship with our consumers and receive feedback, but I don’t think there’s any doubt we will look at distribution beyond e-commerce,” he said.
The debut of the Quatreau brand in the U.S. follows a rollout across Canada last year. However, at least two of the flavors being sold north of the border contain THC, the psychoactive compound found in cannabis. The other two contain trace amounts of THC.
According to Canopy, Quatreau is the top-selling RTD beverage infused with CBD in Canada.
In the U.S., hemp-derived CBD drinks eclipsed $100 million in sales last year, according to market research firm BDSA.
Canopy is hoping to establish itself as a dominant player in an increasingly crowded field, and the stakes are high. According to BDSA, the hemp-derived CBD beverage market could be worth $1.4 billion by 2025.
And Canopy isn’t the only Canadian cannabis firm hoping to grab a slice of the CBD beverage market in the U.S. Molson Coors, which formed a joint venture with Hexo called Truss Beverages, recently launched its CBD-infused beverages called Veryvell in Colorado.
Much of the potential growth hinges on traditional retail opportunities opening up, and major chain store operators are waiting for the U.S. Food and Drug Administration to issue final regulatory guidance for products containing CBD before they start stocking their shelves.
Nevertheless, Kovacevic is bullish on Canopy’s prospects, and he believes Quatreau is primed to disrupt a $20 billion functional beverage market.
“We have a long history of being able to lay the groundwork and be among the first to enter markets in a compliant way, working with regulators,” he said. “We’re very comfortable with the position we have and with the future opportunity.”
CBD, short for cannabidiol, is the nonintoxicating cannabinoid found in the cannabis. Those who advocate for its use say it can alleviate stress, improve sleep, reduce inflammation and help regulate mood.
The efficaciousness of those claims is still unclear, however.
Canopy is also still on track to launch its THC-infused drinks in the U.S. via a partnership with New York's Acreage Holdings this summer.
THCnet spoke to Kovacevic about the launch of Quatreau. Our interview, which has been condensed and edited for clarity, is below.
THCnet: Can you talk to us about Canopy’s desire to participate in the CBD beverage segment in the U.S. at a time when federal cannabis legalization is still uncertain, and the FDA has not issued final guidance around CBD drinks?
Rade Kovacevic (RK): We have been very clear that cannabis beverages are a strategic priority for us. We’re lucky to have a strategic investor in Constellation Brands that brings a wealth of knowledge in terms of operations, supply chain, route-to-market, and branding in the beverage category. When you combine that with Canopy Growth’s desire to win in the cannabis space, we feel like we have a winning formula. At this point, there are no federal laws or regulations prohibiting hemp-derived CBD inclusion in dietary supplements and foods, and so we’ve worked to support both the FDA and Congress to regulate the CBD market, sharing things like our research around CBD. We think there is a clear way to enter the market. We think it is a very large market, and there’s a big opportunity for us within it.
THCnet: Can you tell us more about the work you’ve done with the FDA?
RK: We’ve made sure to take part all of the consultation processes and give them our perspective. Part of that comes from our experience in emerging markets. Additionally, we have a significant amount of research we’ve done with a variety of third parties as well as internally around CBD, safety, dosage and so forth. We’ve really just opened our research to the FDA so they have an archive of data to make decisions as they look at how to set regulations.
THCnet: The drinks are only being sold online right now, but will there be a traditional retail play as well?
RK: So, I’ll take a step back and talk about how we came to the product. We examined market opportunities and took a look at what need states and trends consumers were looking for ahead of the pandemic. Unwinding and relaxation were clear need states that consumers were looking at, and CBD beverages are a known format for these need states. We also have intellectual property around how to create CBD beverages that are shelf stable, and so we were able to develop a formulation that addresses the need states consumers are looking at. We will launch our product on Shop Canopy, so that we’re able to have that direct relationship with our consumers and receive feedback, but I don’t think there’s any doubt we will look at distribution beyond e-commerce.
THCnet: The Biosteel brand is being distributed by Reyes in multiple states, and by Manhattan Beer in New York. Is that something you plan to leverage for this brand as well?
RK: We plan to leverage our playbook, working with strong distributors to get our products on shelves and in front of consumers. We are excited to launch our product to consumers on March 2, and in our typical fashion you will learn more in the weeks and months to come.
THCnet: And can you talk about your decision to use a CBD isolate as opposed to a broad-spectrum or a full-spectrum CBD?
RK: What we found is that consumers are looking for a product that helps relieve stress and gives them a chance to relax. We also found that they want to feel confident that CBD is causing the effects, and that there aren’t other ingredients in the product they are unsure about. Having a clear label and clear ingredients was a key insight for us, and so we decided to go with a CBD isolate because it lets us be very specific with consumers.
THCnet: So, this product doesn’t contain any other cannabinoids. However, other beverage companies have promoted the “entourage effect,” and the importance of other cannabinoids. Are you able to speak to some of those approaches and how effective they might be?
RK: We are a global leader in the cannabis space with operations in numerous countries around the world. We have a lot of experience with broad-spectrum products as well as targeted cannabinoid products. From that perspective, our focus is on the consumer, what they are looking for in a product, and what we need to put in a product to deliver on those expectations. When you look at the CBD market, we need to be clear on why the product exists, and what it offers to the consumer. 86% of Americans know about CBD, but two out of three are unable to name more than one brand. Our approach is not to look at the competitive set and follow where it is, but rather to look at consumers and understand their core motivations.
THCnet: And is Quatreau a brand that consumers are ultimately going to remember, especially without someone like Martha Stewart behind the label?
RK: We launched the brand in Canada in the fall of 2020. There is a competitive beverage market in Canada, and Quatreau has very quickly become the no. 1 CBD drink brand across Canada. At the end of the day, Quatreau has a proof point that it resonates and now it is really about scaling it across the United States.
THCnet: Most of the CBD drinks we’ve seen range from about 5 milligrams to 25 milligrams of CBD. The majority seem to fall in that 10-to-20 milligram range. Why have so many companies zeroed in on that as the appropriate dosage of CBD in drink form?
RK: For us, dosages within our products are based on the R&D that we do. There are two key pieces that we consider when we determine dosage. One is the desired effect that comes from each dose, and the second is the estimated number of occasions per day someone would use the product. For Quatreau, we would expect someone to use it mid-morning, mid-afternoon and after work to relax. So, 20 milligrams was the right amount to deliver on our brand promise.
THCnet: And at $3.99 per can, that’s a pretty expensive habit. How do you bring the price down over time and really make this a volume business?
RK: For us, we’re looking at functional beverages, and those tend to range around $3 to $5 per unit. It’s really about what type of consumption patterns we are trying to disrupt. When you think about coconut waters, or coffee, we’re in a similar price range and we purposely price against those analogues. $3.99 was a great place for us to put it, and I think if you look two or three years ahead, I don’t see any reason why it is not still priced at $3.99 per unit.
THCnet: As you think about the possible evolution of the CBD space, do you ultimately feel like consumers will want CBD-specific beverages, or will they look for drinks that include CBD as a complementary ingredient to things like adaptogens and nootropics?
RK: We have a large focus on innovating within “mood management.” So what moods and effects are consumers looking for? Our view is that CBD needs to deliver an effect to be in the product. So, it doesn’t make sense to add adaptogens that are the hero of a product that includes CBD. However, I think it can make sense to add co-active ingredients that complement CBD. But at the end of the day, if we release a CBD product, it's because the CBD has an effect.