Trends, Insights, and Market Potential for Cannabis Beverages


Walk into any party or socially gathering in 2021, and its likely spiked seltzers will be front and center among the alcoholic offerings. Small portions, sleek design, and a relatively high alcohol content makes for a satisfying and economical beverage. To both consumers and producers of the cannabis industry, take note: the spiked seltzer craze presents an opportunity for cannabis-based beverages to reach a similar level of popularity among consumers.

For years, industry watchers have predicted a surge in cannabis beverages sales, but “liquid cannabis” has been slow to gain traction. In 2021, however, the data is starting to back these forecasts. Based on May 2021 data from Headset, a cannabis market intelligence platform, beverage basket penetration increased significantly in both Canada and the U.S. in the past two years. “Basket penetration,” or the percentage represented by beverages in the average cannabis consumer’s basket, increased from about 1% in 2020 to 4.5% in 2021 in Canada; in the U.S., penetration rose from about 1.6% in January 2018 to 2.8% in February 2021. Cannabis beverage sales are rising in several states including WA and CA. In California alone, the state reported $15.5M in sales by January 2021, compared to $2.7M in January 2018.

Consumers and producers alike are entering the cannabis beverage space at a quick pace, with Canada serving as a prime case study. Responding to the diverse needs and interests of consumers, Canadian cannabis beverage sales have shifted to reflect a wide variety of brands as opposed to just a few brands dominating the beverage space. This increasingly diverse playing field mirrors the gradual brand expansion of spiked seltzers and enables consumers to select from a variety of dosages (ranging from 100 mg to 5 mg THC or less), flavors, and designs. While cannabis beverages are not as popular as alcoholic beverages, trends in both Canada and the States suggest they have the capacity to enter this category.

Especially when marketed and consumed as alcohol replacements, cannabis beverages allow consumers to enjoy the myriad of benefits of cannabis without the all-too-familiar side effects of alcohol. Particularly in social settings, beverages offer an efficient, discrete, and novel way to consume cannabis. Based on sales trends in CA, WA, CO, NV, and OR, consumers tend

to adopt an all-or-nothing mindset when considering their desired dosage: sales are increasingly consolidated at either 100 mg or 10 mg products, with the latter category appealing to those who prefer micro-dosing and consume the beverage as an alcohol alternative. The ability to purchase based on both dosage and flavor is likely to appeal to consumers who want a highly curated and personal experience, whether the beverage is consumed alone or with good company. Although the industry is still young and likely to fluctuate alongside COVID trends and other global factors, cannabis brands would be wise to invest in beverages as an exciting and versatile product for the modern consumer.

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New York is home to Broadway, the Statue of Liberty and now… legalized cannabis. Recent updates to New York State’s regulations and guidelines mean licensing is now available for those wanting to break into the local cannabis scene.

During the time that cannabis use was illegal, NYC Health found that 34% of those ages 18- 25 had used cannabis in the previous year. With legalization, it’s almost guaranteed New York will become one of the hottest spots for cannabis.

New York Cannabis Licensing
The type of license you’ll need in New York will depend on the nature of your business. Whether you manufacture, distribute, or open a dispensary, you’ll need the legal documentation to prove you’ve been licensed. The infrastructure for New York’s licensing system has not yet been perfected and there are still details that must be resolved. Licenses will be initially available for two years and standard age requirements will be enforced. While applying for a license, businesses will need to commit to a labor peace agreement.

MRTA
The Marijuana Regulation & Taxation Act (MRTA) legalizes the creation, selling, and local use of cannabis. This bill was fundamental to the introduction of legal marijuana within the state and its supervision through the Liquor Authority of New York State. The MRTA was created specifically to allow newer businesses to thrive and develop within New York, ensuring both production and selling are within guidelines. The MRTA also allows for small-scale production and implements the use of micro-licenses, providing opportunities for businesses of all sizes.The MRTA specifies a tax breakdown that ensures local communities are provided for and the cannabis industry is contributing towards positive change. Forty percent will go towards the Community Grants Reinvestment Fund, which focuses on providing programs for the community; 20% will be focused on drug treatment options and the remaining 40% is dedicated to the Department of Education.

The Office of Cannabis Management
Officially signed and created on March 31, 2021, the Office of Cannabis Management is going to be responsible for many of the licensing duties. This group will also oversee the Cannabinoid Hemp Program. Because of the relatively recent instatement of this group, their full role is still being decided upon. However, what is known is they will play an instrumental role in the approval process for cannabis licensing within New York.

One of the prominent goals of current legislation is to provide licenses to those that are social equity applicants. The

purpose of this is to welcome minorities and encourage diversity. It is possible for both counties and municipalities to not allow cannabis sales within their boundaries. If they choose to do this, it will need to be before December 31, 2021.

Licensing Information Required
While there are some things, such as a business plan, that aren’t necessarily required, there is a list of information that must be filled out when going through the application process. Fingerprints, financial background, and ownership details will all need to be submitted. This is all part of the process and allows the Office of Cannabis Management to determine whether the business is within current guidelines.

Going through the licensing process is a monetary investment. Not counting legal counsel costs, it can total $210,000. Paying this amount is the only way to ensure your business is operating legally within New York’s guidelines. Tax specifications are expected to be enforced in 2022.

If you’re interested in learning more, reach out to us today!

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The cannabis industry is a unique investment opportunity with the potential for big returns – if you’re looking in the right places. Consumer demand for cannabis products already exists, and cannabis businesses – both plant-touching and non-plant-touching – are actively looking for investors to meet to fuel growth.

But there is a problem.

There is a substantial lack of institutional investors, loan capital, and while steadily increasing, not enough professional venture capital in the cannabis industry. Companies need access to capital to scale, but finding those funds is challenging.

The good news for angel investors is the absence of those investors, loans, and venture capital equates to a buyer’s market and opportunities for those with capital to place.

In 2021, five key cannabis investment opportunities should be top priorities for angel investors. and venture funds. Despite the risks involved in investing in the cannabis industry, the growth projected for these five opportunities should outweigh the potential risks.

1. Markets in the Northeastern U.S. Markets
The Northeast represents a significant opportunity for angel investors thanks to soon-to launch adultuse programs in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia.

These states have high population densities, and growth of the cannabis market in the region once all adult-use programs are operational is expected to eclipse anything we’ve seen in the past.

2. License Holders Operating in One or Two States
The cannabis industry is all about mergers and acquisitions in 2021, and savvy angel investors should be looking at successful operators with active businesses in one or two states. As larger multi-state operators (MSOs) look for ways to enter new markets or expand their footprints, these high-performing operators are poised to deliver exceptional returns.

3. Medical Market after OTC Repositioning
The medical cannabis market is not sustainable in its current form. With threats from the adultuse market and the pharmaceutical industry, the medical market will need to be redefined in order to survive and thrive in the future. Many experts predict the medical market will shift to an over-the-counter market, which could create new opportunities for angel investors.

4. Companies across the Supply Chain with Unique Processes, Products, or Services
Cannabis companies that have created competitive advantages through their processes, products, or services (or a combination of all three) represent attractive investment opportunities.

These companies can be found across the supply chain with every one of them having one thing in common they’ve established a position in the market that cannot be duplicated and is easy to defend.

5. Consumers Not Yet Buying from the Legal Cannabis Market
In 2021, legal cannabis sales in the United States are expected to reach $23.6 billion while illicit sales are approximately $75 billion. As more consumers move from the illicit market to the legal market, legal sales will increase. When cannabis is legalized for adult-use at the federal level, legal sales will go up. And as the stigma surrounding cannabis fades and more non-users enter the market, sales will increase.

Therefore, angel investors should look at businesses creating innovative product form factors and experiences targeted to the expanded legal cannabis consumer audience of the future.

The cannabis industry needs angel investors now. Private equity and venture capital investments in the cannabis industry are growing, but they represent just a small fraction of what the industry requires. Angel investors are needed to fill the gaps, and those who get onboard now will enjoy the benefits that this industry can deliver as a generational wealth creation opportunity.

About the Author


Jeff FinkleCEO, The Arcview Group

Named one of the “25 Angel Investors in New York You Need to Know” by AlleyWatch, Jeff Finkle has been a venture investor for ten years, an angel investor for eight years. Jeff is presently CEO of the Arcview Group and Arcview Ventures and co-founder of the Arcview Collective Fund, the first member-managed fund in cannabis. He also serves as Chairman of the Evaluation Committee and Treasurer of the Angel Round Capital.

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Will Cannabis Banking Finally Be SAFE?

Imagine you have a profitable business. You want to expand your existing business, but the local bank won’t even have a meeting with you. In fact, you’ve had multiple bank accounts closed without warning. Three years into your profitable business and you’re on your third bank paying 20% more than the hardware store down the block.

With no option to get a bank loan, you have to take on private debt at a much higher
interest rate or give away equity to outside investors.

Credit card companies are also a no go. You’re forced to take cash only from your customers, and multiple times per week, you have an expensive armored car take the cash to the bank. In the meantime, all that cash has been sitting there tempting criminals.

Your only crime – you run a cannabis business

Why Is Cannabis Banking a Problem?

At the federal level, cannabis remains illegal under the Controlled Substances Act. Today, 37 states have legalized the sale of cannabis for medical and/or adult-use. This discrepancy between state and federal law leaves many cannabis-related businesses (CRBs) in the lurch with much higher costs to operate, higher taxes, fewer tax breaks, limited access to financial services and loans, and cash-only payment processing, which adds to security concerns and costs.

Because U.S. financial institutions are regulated by the federal government, CRBs are treated differently than non-cannabis businesses when it comes to banking and financial services. The reason why stems from federal regulations related to banking.

Federal anti-money laundering (AML) laws are the primary barrier to banks serving the cannabis industry. Banking regulations promulgated under the Bank Secrecy Act (BSA) establish multiple recordkeeping and reporting requirements for banks.

Under the BSA, financial institutions are required to file a Suspicious Activity Report (SAR) when they know or suspect a transaction involves funds from a federally illegal activity. This would include any transaction involving funds from manufacturing, distributing, and dispensing cannabis because cannabis is federally illegal under the aforementioned Controlled Substances Act.

Whether cannabis is legal and regulated at the state level doesn’t matter. Financial institutions are bound by the BSA or they risk losing their national charters – the legal document that authorizes a bank to conduct business.

Over the years, federal regulators have issued guidance for how to deal with SAR reporting when it comes to cannabis businesses operating legitimately under state law. Hundreds of banks and credit unions (mostly state-chartered) do now offer limited services for cannabis businesses but considerable hurdles and expenses remain.

There is a solution – the SAFE Banking Act

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November brings snow to the mountains and colder weather to the rest of the country. Most companies are wrapping up harvesting and processing of this year’s crop, with grim news trickling in from the whole sale market. Due to current volatility in the wholesale market we are advising our clients to focus on proper storage of the crop in order to wait out the dip in wholesale prices for both hemp and cannabis on the west coast. Volatility is associated with growing pains for maturing markets, which is a good sign for the cannabis and hemp industries as both markets continue to move forward, even with less then perfect market conditions. Due to the volatility, most companies we speak with are looking to automation to try and increase margins while they wait out the storm. The good news is we will be here to provide insights and tips on how to weather the storm and be prepared to thrive once the sun comes out again.

Growing Pains and Seasonal Changes

Kellen Finney, Eighth Revolution

Post MJBIZCON it’s almost impossible not to be extremely bullish on the direction of the industry. Skilled, creative passionate teams have found their calling and are flooding into the cannabinoid industry. We are on the verge of a much-needed welcoming of breakthroughs everywhere from genetics to retail. On the medical side, conversations and early studies of these findings in cannabinoid therapies will be eye opening to the public. As someone who spends most of their time reading everything in the space and asking questions to dive deeper into true understanding, I am shocked by the incredible insights being uncovered. My predictions for 2022 include a myriad of innovations with potential to set a new standard for the industry, accelerating its growth to another level. So buckle up!

Innovation is on its way!

Bryan Fields, Eighth Revolution

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When you own the supply chain, you can take a more extreme cost cutting approach to drive down costs to either keep your margins healthy and consistent or drop them in relation to the internal costs. In some extreme cases, these operators are willing to undercut their competitors to attract customers and build brand loyalty, often leading to slashing margins even further.

Competition continues to heat up with many operators looking to catch market leader Trulieve. According to the OMMU or the Official Medical Marijuana Use, Trulieve has 91 dispensing locations, that is 15% more than the next two largest operators Florida COMBINED (Liberty Healthy Sciences 40 locations and Surterra Wellness 39 locations). That is a massive advantage in a key battleground state. Challenging the current market leader, who has a stranglehold on the market, requires aggressive marketing tactics. Just the sheer number of dispensaries will keep Trulieve out in front of the competition based on customer proximity. As competition heats up in this battleground, margin consolidation will likely occur which does ultimately benefit the end customer. The important part is to consider the quality of the product and to optimize those margins with technology.

Last month at MJBIZCON, 8th Revolution’s own, Kellan Finney, spoke about optimization of the cannabis industry via Smart Sensors. The conversation centered around the importance of understanding how to maximize your margins through automation as well as keep a consistent, high-quality product that adheres to the highest quality control standards. This technology is a mainstay in other mature industries that manufacture products for their importance of monitoring the process in real time. What does monitoring your process in real-time actually do and how does this apply directly to the cannabinoid space? Being able to monitor your manufacturing facility in real-time allows for endless opportunities to maximize margins. Separation of cannabinoids allows you to recognize when your run is optimal or monitoring potency ensures your products are within anticipated product characteristics to ensure the customer has a repeatable experience.

The ability to understand your true costs, and maximize your extraction run while minimizing your operational costs, whether its consumables or personal, will allow operators to continue to deliver highquality products at competitive margins.

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