Posted on

5 Common Mistakes Made When Entering Into the Cannabis Market

Professional struggling at work in office.

The appeal of the cannabis industry is powerful: Financial success while doing fundamental good in the world. Entrepreneurial opportunity for those traditionally excluded from the business world. Fame and prestige for industry leaders. The opportunity — and indeed the demand — to innovate.

It’s not a surprise that many people want to be a part of it. Cannabis is an industry growing in both scope and legitimacy, and new members jump on board each year. Veteran members have a responsibility to help them avoid the pitfalls. Here are some common mistakes companies make when entering into the cannabis market:

1. THINKING IT WILL OPERATE LIKE OTHER MARKETS

Over the years, many entrepreneurs have been eager to jump into the cannabis space, and they all have made the reasonable assumption that the fundamental rules of other industries will be at play here. Unfortunately, the regulatory landscape, particularly as it pertains to THC, is like nothing else in the American economy. No other ingredient is federally labelled Schedule 1 — reserved for highly addictive drugs with no medical value — yet is legal medicinally, recreationally, or both on a state level. Not only is cannabis regulated differently from state to state, regulations are constantly changing and are inconsistently enforced. There’s a reason the cannabis industry has been called the Wild West.

For executives coming to cannabis from other industries, it is critical to know your audience and the complexities of the marketplace. Most people who work in cannabis have a deep knowledge of the plant – its history, its anatomy, its chemistry, and its benefits – and are passionate about making it more accessible across the United States. Company leaders who have done their homework and aren’t afraid to ask questions will garner the trust of their employees; those who don’t will have a hard time earning the respect of their coworkers and other industry leaders.

Cannabis companies are prohibited from making any medical claims, which can be frustrating since most customers interested in both CBD and THC are looking for therapeutic effects. Because of this, euphemisms come heavily into play in branding. Some companies employ a compliance officer to review all customer-facing verbiage.

If you are working with THC, you will not be able to write off any of your standard business expenses on your federal tax return. This leads companies to fractionate their businesses, with separate companies handling payroll, marketing, and retail, which adds complexity and more paperwork. Similarly, because interstate commerce is federally governed, THC products can never be shipped across state lines, even from one legal state to another. That means that every state in which you operate must have its own THC license, processing facility, and distribution network, even if the product being sold is identical. As a result, trying to expand your product’s reach to another legal state can be expensive. Depending on where you’re setting up shop, you will have different packaging limitations for text size, package size, even the colors you can use.

The other thing that differentiates the cannabis market from other markets is its demographic diversity. People from all walks of life, all ages, races, genders and income levels enjoy cannabis. Previous categorizations can be a guide, but often customer profiles don’t match the real world. You may be surprised by who buys your product, and who doesn’t.

2. NOT GETTING IT IN WRITING

Because of the limited regulation of the cannabis industry, it’s tempting to seal deals on a handshake. That’s a mistake in any business, but the ramifications are amplified in this tumultuous landscape. When — not if — one of your partners fails to deliver on their commitments, it’s hard enough to enforce a contract to begin with, let alone in this transitional market. There’s not usually a lot of money to spare for legal battles, either. Take the time to write out the terms of your agreements and spend the money to have them reviewed by a contract lawyer.

3. NOT EMBRACING REDUNDANCY

Sourcing is one of the biggest hurdles facing cannabis companies. Choosing a supplier to provide consistent, clean cannabinoids is critical for your business, but the process finding that company can be time-consuming. Even partners that start out looking great may end up failing you though logistical insufficiency or a change in leadership integrity. Redundancy is your insurance policy. Cannabis companies should seek out several reliable suppliers, not just one. At the outset, don’t accept an exclusive relationship; work up to it through years of consistent performance.

4. DISREGARDING INSTITUTIONAL KNOWLEDGE

In a bid for legitimacy, many startups are hiring from industries outside the legacy cannabis market. That can be very useful for expanding the scope of cannabis applications and form factors, but without a holistic understanding of the plant, innovation can be dangerous. Accrued generational knowledge from growers and pre-legalization formulators can help you avoid costly formulation mistakes and contraindications. As a successful cannabis industry friend of mine puts it, “Always make sure you’ve got at least a couple of seasoned veterans on staff.”

5. RELYING ON HYPE

There is no doubt that CBD will be around for a long time and likely become a health and wellness staple. That said, the buzz can’t sustain this volume; products cannot be successful long-term on the basis of the inclusion of CBD alone. Currently, thoughtful formulations that focus on ingredient synergy between cannabinoids, terpenes, flavonoids, and herbal blends have piqued consumer interest. Of course, this could all be nullified depending on the speed of the rescheduling of THC. Companies need to be ready for everything and anything — and be able to pivot on a dime.

CLOSING THOUGHTS

Cannabis is an exciting and promising industry to be in, particularly as the federal government reassesses its Schedule 1 designation and the positive shift in public opinion on cannabis use. If you are thinking about entering the industry with an infused product in 2023, the team at SōRSE would love to talk to you about your product and how we can support your brand as you move forward with production. Book a call with us today!

Posted on

The Challenge of Scalping in Infused Beverages (and How to Mitigate It)

open can close up

When the 2018 Farm Bill passed, the CBD industry skyrocketed on a global scale. In the past three years, as consumers have sought other ways to consume CBD beyond tinctures, tablets, gummies, and soft gels, the infused beverage market has grown at a rapid pace. In March of 2021, MJ Biz Daily stated that beverage sales rose from $67.8M in 2019 to $95.2M in 2020. The uptick in sales from year to year is proof that beverages are a viable delivery platform for CBD. As the industry continues to research CBD and its potential, we’ve also learned a lot about the challenges working with it and what happens to it and other cannabinoids under certain circumstances.  

CBD Beverage Industry Challenge: Scalping 

What is Scalping in Beverages? 

Scalping is a challenge that many beverage brands have to navigate. Scalping is when an ingredient absorbs into the drink’s can liner and remains there, which means consumers are getting less of that ingredient than the label may claim. The can liner is “scalping” the ingredients from the drink, which defeats the purpose of functional beverages.   

Scalping happens after the product has already been tested and has been in the can for a while, so there’s a good chance brands don’t even realize what’s happening until it’s too late – unless they have prepared for it beforehand.  

What Types of Beverages Are at Risk of Scalping? 

Scalping is not unique to CBD-infused beverages. The wine and beer industries face the same challenge with flavors and hops. Cannabis beverages infused with THC weather the same risk. Any beverage brand with a functional ingredient such as water-soluble cannabinoids, has to navigate this challenge, but it is particularly important to control with THC because it impacts the dosing of a psychoactive or intoxicating ingredient. Delivering a consistent experience with each serving is essential to build consumer trust.   

Like cannabis, different wines boast different flavor palates, which lose strength as scalping occurs. Fortunately and unfortunately, cannabis has monoterpenes and cannabinoids, both of which are victims of scalping. However, both are crucial compounds to the health of our endocannabinoid system, so it’s important they are both present in a brand’s drinks.  

How Scalping Can Be Minimized

Scalping is not the cause for all potency loss in CBD beverages. Different ingredients, solvents, and higher storage temperatures all increase the risk of scalping, so controlling those factors is a good first step to minimize cannabinoid loss. However, the best way to reduce a beverage brand’s risk of scalping is selecting the right can liner for the beverage. No can liner is perfect and will eliminate scalping completely, but testing can liners can prove just how important a can liner switch can be.  

The can liner’s variation and weight are the two most important variables that must be controlled to prevent scalping. Lighter weight can liners are less susceptible to scalping than heavier ones. Heavier can liners are made to protect cans from corrosive beverages, and their material allows more cannabinoids to be absorbed into the liner.  

It’s also important to look at CBD beverage dosages, because most people think about what the consumer might want in terms of potency and not what their body actually uses. Understanding the potency loss will help a product developer determine the appropriate overage for the beverage. This is also common practice within the food and beverage industry. In short: more CBD to start equals more CBD left over when scalping has been factored into the equation. 

How SōRSE Helps Its Partners Minimize the Impact of Scalping 

Cannabis beverage brands will need to understand the following to stay within the legal range of dosing:  

  1. How formulations scalp at different rates 
  2. How packaging and storage factor into scalping, and  
  3. The other factors that contribute to it.  

Knowing that scalping can occur with all ingredients, the SōRSE R&D team accounts for it in the formulation phase and has invested in researching scalping to better understand which packaging might work best for our partners. With 200+ years of product development experience, plus a vetted co-packer and vendor network, we’ve done the hard work to make the process of bringing a beverage from concept to commercialization efficiently and effectively. If you’ve had trouble with scalping in the past and are looking for water-soluble ingredients that won’t scalp, schedule an exploratory call with our team today!

Posted on

What Time Is It? It’s Beer Thirty!

BREWING INDUSTRY GUIDE: BEER TREND PREDICTIONS FROM A FLAVOR SCIENTIST

Beer Thirty. If you’re wondering what this term means, consider the saying, “It’s 5:00 o’clock somewhere!” That refers to the hour when people clock out of work and head to the pub or the bar to get drinks with their co-workers and friends.

Beer Thirty is essentially the same thing – except specifically directed at those who prefer an IPA or a Stout over a gin and tonic or a glass of wine.  It’s a call to action of sorts – the Urban Dictionary refers to it as “the time of day at which drinking a beer becomes necessary.” 

beer thirty meaning

So who coined this term? “Beer Thirty” is  actually a  song written by Ronnie Dunn and Terry McBride that was recorded in 1999 by the country duo,  Brooks and Dunn.  Here’s a portion of the lyrics: “Got my paycheck, I’m on my way/It’s finally Friday, my kind of day/I punch the clock, I hit the road flying/It’s beer thirty, a honky tonk time.”   

In 2020, the popular country band Florida Georgia Line also released a song titled “Beer:30.” The song starts like this – “It’s beer thirty, and I’m thirsty/And I been workin’ like a dog all week long/So maybe somethin’ cold won’t hurt me.” That something cold is probably not a glass of water!  

You can see from the songs that “Beer Thirty” is a call to action of sorts. “What time is it?” “It’s Beer Thirty!”  There is no doubt people around the globe love their beer, and in the US, craft brews are particularly popular. To give a sense of perspective on how much the industry has grown, in 1990, there were less than 70 breweries in operation in California; 10 years later, in 2000, there were over 200. In 2021, there are more than 1,100 breweries operating in California. That’s tremendous growth over 30 years.   

There are a ton of great beers on the market today made by small and large craft brewers alike, which give the consumer no shortage of options when choosing their beverage to celebrate BeerThirty with their friends and coworkers.   

Beer Thirty: Powered by SōRSE 

BREWING INDUSTRY GUIDE: BEER TREND PREDICTIONS FROM A FLAVOR SCIENTIST

A lot of consumers who have Beer Thirty on their minds are focused on a beer’s flavor – and that flavor is often influenced by hops, the flowering  bine that contributes to a beer’s smell, taste, mouthfeel, and haze.  Like cannabis,  hops’ botanical cousin, hops’ essential oils can be extracted from the plant to be infused in products. That said, the extractions are tricky to work with because they are viscous and sticky, but the  SōRSE R & D team solved that problem by creating hops-derived water-soluble emulsions. 

At the beginning of September 2021, SōRSE debuted the hop-derived brewery product line at the Craft Brewers Conference in Denver, the largest craft brewing industry gathering in the United States. Using our patent-pending water-soluble technology,  SōRSE emulsifies hop oil and other functional ingredients to solve for common challenges among brewers. These products can be used as a beer recipe building blocks or as corrective agents in the brewing process. The three newly released brewery line products are Haze Addition, Mouthfeel, and Hop Topper. 

Haze Addition allows brewers to customize a beer’s visual appearance, resulting in a deep, stable haze. This product solves for a long-standing issue by creating a haze that maintains its stability over the shelf life of the beverage.    

Mouthfeel gives brewers the ability to create the feeling a full-bodied brew offers, providing an instant correction for watery, thin beers. Mouthfeel is also particularly useful for creating low and non-alcoholic beers that mimic the experience of drinking higher gravity styles. 

Lastly, Hop Topper gives brewers the opportunity to create a boost in flavor and aroma in their beverages. It is a full spectrum hop oil emulsion that provides and enhances hop aroma in beers, hop seltzers, or other non-beer products.    

When it comes to infusing flavor and aromatic hop qualities that consumers look for in their craft beer at Beer Thirty,  SōRSE’s brewery products are the most efficient,  stable delivery system for consistent, great-tasting beer.  SōRSE is currently working with lighthouse customer Hi-Wire Brewing, an innovative brewery based in Asheville, NC which won a GABF gold medal in the Experimental Beer category announced at CBC.  Hi-Wire is using Haze Addition for their Lemon Meringue Blond Ale.  

Great beers for Beer Thirty begin with great ingredients. If you are a brewer or product developer who would like more information on our hop-derived brewery product line, book a call with our team today to explore our products. Come to the SōRSE for your hops needs in 2022! 

Posted on

RTD (Ready to Drink) Cannabis Beverage Trends

aprch cbd sparkling water

Trends in RTD Cannabis Beverages: What to Know  

A lot has changed in the cannabis marketplace over the last ten years, 18 states have legalized THC for recreational use and even more for medicinal use. There has also been more consumer interest in CBD, the non-psychoactive sibling of THC, since  the passing of the 2018 Farm Bill legalizing hemp production. In 2011, most cannabis users would likely have never imagined that they would someday be able to buy infused beverages, let alone have as many options to choose from as they do today.  

The infused beverage market continues to grow as consumers look for other ways to consume cannabinoids beyond inhalation, tinctures, tablets, soft gels, and gummies. Here’s what you need to know about the current trends in the RTD (Ready to Drink) Cannabis beverage marketplace.   

Market Data 

In March of 2021, MJ Biz Daily reported that beverage sales rose from $67.8M in 2019 to $95.2M in 2020. According to Seattle based cannabis research firm, Headset, sales of cannabis infused beverages increased 40.3% in 2020 across all states where cannabis is recreationally legal. In Headset’s March report, “Cannabis Beverages: Analyzing Category & Brand Performance,” they reported that women tend to purchase infused beverages more often than men do, particularly the Baby Boomers group, as shown in the graph below.  

Source: Headset Data

 

 

They also found that beverages dosed at 0-5 mg THC and 100 mg THC have risen in popularity with consumers in 2020 and the first half of 2021. This illustrates that the market is moving towards offering two distinct product types – one with the maximum amount of THC per dose which would appeal to a regular cannabis user, the other with micro dosed servings that are more approachable for consumers who are “cannacurious” and looking for an alternative to alcohol.   

Source: Headset Data

US cannabis beverage sales are expected to reach $421 million this year, according to cannabis market research firm, Brightfield Group.  Bethany Gomez, Brightfield’s Managing Director, thinks that the cannabis beverage sector will clear $1B by 2025 as this sector continues to gain traction with consumers. How will the sector continue to gain that traction? By offering safe, efficacious, and great-tasting products for the consumer.  

Trends in Cannabis-Infused Beverages 

Trend #1: Hydrating with Infused Waters 

Drinking water is a critical part of healthy daily routine, but not everyone loves the taste of plain water. Because of this, there are a plethora of flavored waters, sparkling waters, and seltzers on the market, many infused with CBD, THC, and other functional ingredients. Consuming a CBD water makes staying hydrated easy, and the beverage platform provides an effective delivery mechanism for cannabinoids. A growing category in this space are infused waters for pre and post workouts when hydration is key for performance and recovery.   

Trend #2: More Functional, High-Quality Ingredients; Less Sugar! 

Consumers are highly focused on their health and wellness and doing their homework on ingredients that boost immunity, improve gut health, and ease stress and anxiety. As a result of this, product developers are creating infused beverages with cannabinoids paired with other functional, high-quality ingredients like Ginger, Elderberry, Ashwaganda, Rosemary, Cinnamon, Ginseng, and Turmeric, to name a few. Consumers are also more aware of their sugar intake and are looking for beverages with no added sugar or that use natural flavor enhancers like berries and other fruits for a hint of sweetness. 

Trend #3: Caffeine, Meet CBD 

While the combination of caffeine and CBD may seem counterintuitive, the pairing in a beverage can deliver a pick-me-up for the body and clarity for the mind. Contrary to popular belief, CBD does not make you drowsy, but it can have a calming, relaxing effect. As a result, there are more cannabinoid-infused cold brew coffees and iced green and black teas on the market, providing the consumer with a boost of energy that they might need to carry them through the afternoon.  

Trend #4: Beyond Beer, Beyond Spirits: The Rise of Infused Beverages 

While many consumers enjoy a great beer, wine, or cocktail, they don’t always enjoy how they feel the next day. For many people, the older they get, the harder it is for the body to process alcohol, not to mention the calories that pile up from high levels of sugar. As a result, consumers are looking for alternatives to alcohol like THC infused beverages that can provide a similar buzz without the hangover or beer belly. Given the array of ingredients at their disposal, product developers can create mocktails, seltzers, near-beers, and aperitifs that echo the products consumers are familiar with, replacing alcohol with cannabinoids.  

What to Know About Quality RTD Cannabis Drinks 

With the popularity of RTD infused beverages on the rise and with so many options to choose from, it’s important for consumers to know what to look for when shopping for beverages, because not all infused beverages are created equal.  

  • Look for beverages that have been tested for quality and safety throughout the production process and include Certificates of Analysis (COA).  
  • The COA is a lab report verifying the chemical makeup of the product including the amount of cannabinoids in the product.  
  • Take a close look at product labels which display dosing information, milligrams of CBD or THC, serving size/servings per container, cannabinoid oil source, and expiration date. 
  • Be aware of how cannabinoids are infused into the product and seek out products that feature a water-soluble infusion method like SōRSE.  
  • Cannabinoids are oil based, and oil and water don’t play well together.  
  • Emulsion technology enables the cannabinoids to be added to water in a stable, evenly dispersed manner so that they won’t separate from the other ingredients by rising to the top or settling on the bottom.  
  • Beverages featuring SōRSE emulsion deliver the amount of cannabinoids listed on the label and consumers feel the effects within 10 to 20 minutes. 

If a beverage doesn’t taste good, the consumer won’t drink it, let alone repurchase it. SōRSE provides the opportunity for the cannabinoid emulsions are customizable. For product developers, this means SoRSE can match the flavor profiles of their beverages, giving them a range of options, from no cannabis taste or smell to strategically infused sensory notes to complement the other ingredients and enhance the overall product.  

SōRSE is currently powering over 60 market-leading products, including RTD beverages. Products that carry the “Powered by SōRSE” moniker are safe, consistent, accurately dosed, and great-tasting, providing everything today’s consumer is looking for in their RTD infused beverages. If you are a product developer looking to capitalize on the growth we are witnessing in the cannabis beverage space, book a call with our team today to learn more about our water-soluble emulsions and the services we provide.