You’re reading a story from Strategy C-Suite, a weekly briefing on how Canada’s brand leaders are responding to market challenges and acting on new opportunities. Sign-up here to receive the latest stories.

Before cannabis was legalized in Canada, it was all about bud. Purchasing pot meant scoring a bag full of dried flower, rolling it into a joint and smoking it. If you walk into any of Canada’s cannabis dispensaries, bud is still the main attraction. However, beverages infused with cannabis are growing in popularity.

The cannabis beverage market in Canada currently sits at about $100 million, according to Terry Donnelly, CEO of Averi Infusions.

“From a standing start in 2020, it grew to $40 million in year one and another $60 million in year two,” says Donnelly, whose company plans to begin selling a line of four cannabis beverages this spring. “The market will likely grow by another 60% or 70% this year. How many beverage categories do you know are growing at that rate?”

It’s already a crowded market, and we’re only just at the start. In Canada there are about 20 Licensed Beverage Producers. Consumers can choose from around 32 brands and 70-80 SKUs. Market share is quite volatile, changing from month to month. Market leaders like Aurora, Tilray and Canopy Growth have been challenged by new entrants and lots of product innovation.

At the moment, Collective Project, an offshoot of Collective Arts Brewing, is the best-selling brand in Ontario by units sold.

“To be honest, we’re a bit shocked at how well our Blood Orange Yuzu has taken off,” says Toni Shelton, director of brand marketing and communications at Collective Arts. “I can’t say for sure, but I suspect that it’s partly due to Collective Arts’ brand recognition as a leading craft brewer.” It may also be due to its flavour. “It’s delicious,” admits Donnelly, Collective Projects’ competitor. “It tastes like an orange creamsicle, without being sickly sweet.”

The market growth is remarkable given the challenges that brands face in this category. The first is pricing. For a 355ml can with a THC level of 10mg, you can expect to pay up to $10. That’s three times the price of a 355ml can of craft beer. But then, you will never get a hangover from a cannabis beverage.

Then there’s packaging. Up to two-thirds of the label on a typical cannabis beverage is taken up by regulatory information and government warnings. As with any cannabis product, you are not allowed to use any language that refers to effects, even metaphorically. You cannot promote; you can only “educate.” You are not allowed to use any imagery.

The only opportunity to express the brand on pack is to create a “display” version for use on merchandising cards. These counter cards are displayed at the discretion of the dispensary. But even the imagery on the display version needs to be abstract. (See the difference on Collective Project cans below.)

Compare Canada’s restrictions to the United States, where the market imposes no such limitations. Jones Soda, for instance, just launched its Mary Jones (get it?) brand of cannabis beverages and edibles. The packaging borrows heavily from the Jones Soda everyone is familiar with, and includes psychedelic imagery that’s far from subtle.

So how do you win over consumers?

“Consumers have been won over by the THC content price/value equation,” says Donnelly. Meaning, they wanted the most THC for the lowest price. Taste, he says, wasn’t really a factor.

“Out of the gate, the best sellers were the highest THC drinks. Now, however, consumers are realizing that what matters is taste, so they are looking for drinks that taste good, and still have a high THC content,” says Donnelly. “The top 10 best sellers include nine drinks that have the maximum THC content. But the total market is split pretty evenly in total sales between 10mg THC beverages (the max) and less than 5mg THC (what we consider low dosage).”

“The liquid has to taste outstanding,” adds Shelton. “But just as important is the product’s efficacy, from stability in the emulsion to the onset and offset times. You can’t have one without the other.”

Then there’s the question of who would want to purchase a cannabis-infused beverage.

“We see these consumers as people who are looking to discretely unwind at the end of the day without smelling up the house, or who are interested in how cannabis can be part of a modern lifestyle,” says Donnelly. Shelton adds that “beverages are a good non-alcoholic option for social occasions where a person is not looking to consume alcohol, but wants to join in on the ‘fun.’ Also, while smokers are sent to the garage or front porch, anyone can drink a cannabis beverage inside at a social gathering.

To that end, Averi – which has invested a great deal in flavour – is targeting consumers who care about taste and quality first and the THC level and price second. “Our products will have a wide range of THC dosages, but they will all sell for the same price. We are matching the THC content to the flavour of the beverage and its intended occasion.”

Like many other cannabis brands, Averi has created flavour profiles to pair with different occasions and need states. For instance, its “Uva” is a celebratory drink. The “Aurantiaco” is meant for light afternoon consumption, ideally sitting on your deck or at the cottage, or around the pool. The “Brasii” and “Juniperius” are for those social occasions where you want a nice libation that is full flavoured and social.

Collective Project’s portfolio is designed to have something for everyone. The lower dosed “Chamomile tea” was designed from a wellness lens. “Blood Orange” and “Mango” are a take on some classic cocktails.

“Maybe you’ll buy 1 x 10mg drink for yourself or to share at Friday’s dinner party, or maybe you’ll pick up 4 x 5mg Mangos to share with your friends before the football game because you know you’ll be consuming something else,” says Shelton. “Collective Arts and Collective Project are both looking to enhance social experiences and our portfolio was made with that inspiration behind it.”

Are marketing tactics different for beverages versus buds? Not really. Donnelly says there are no regulatory differences, but non-infused products can be sampled by both the budtender and the consumer, so they can at least taste the drink before purchasing it. Shelton points out that, because of the process of emulsifying cannabis, it’s a challenge for brands to describe them as Sativa, Indica or Hybrid – a common way for users to know what kind of experience they’re after.

In beverages there is a massive gap in what the consumer knows. Beverages have different onset and offset times than smoking or vaping, and they don’t have the negative health effects that smoking does. Most people who purchase bud will know how much they want to buy or how much they need to get their desired effect; they will also know what perceived value looks like (higher THC, higher quality bud = more expensive). But they don’t know how to gauge these same things in the beverage category.

“Speaking to consumers is the hardest part,” says Shelton. “We’re really focused on budtenders and winning their love. But when we’re speaking to consumers, we’re pulling a lot of our brand ethos from our Collective Arts roots: storytelling around the artists and community partners we’re working with. We’re trying to create this bright and exciting space for cannabis because there is still a stigma around consumption. Our main objective from a messaging standpoint will be focused on education, fighting that stigma and ultimately trying to leave our consumers feeling a bit more inspired than when we found them.”

Averi, Collective Arts, Terry Donnelly, Toni Shelton