Cannabis products maker Caliva announced its first beverage brand partnership today to distribute and merchandise THC-infused drinks from mood33 in California adult use dispensaries.
The agreement with mood33 aims to give Caliva, which also works with other cannabis brands in categories including vaporizers, a retail foundation to build on within the emerging cannabis-infused beverage market. The announcement comes a month after Caliva’s acquisition of plant-based beverage company Zola and the appointment of its CEO Chris Cuvelier to the newly created role of head of beverage. Speaking with BevNET, Cuvelier said Caliva intends to develop its own line of beverage brands while also building out a portfolio of partner brands, not dissimilar from Keurig Dr Pepper’s (KDP) allied brands model.
“Our belief is that the current cannabis-infused beverage market is broken because it is merchandised in a lot of dispensaries as an afterthought,” Cuvelier said. “We see the opportunity to have, in addition to our own products, partner brands like mood33 that would have their own brand ambassadors in market driving execution, merchandising, helping selling the product and driving awareness around beverages.”
Cuvelier said mood33 will be one of several beverage partner brands for Caliva, but the company is aiming to keep its portfolio small with a focus on finding the “best in class.”
The market for cannabis beverages was valued at $89 million in 2018, but is projected to grow rapidly to more than $1.9 billion by 2023, according to Zenith Global. According to Cuvelier, Caliva’s aim is to dominate in California, which is currently the largest legal market for cannabis worldwide. The company’s products are in about 250 of the more than 500 licensed adult use dispensaries in the state and operates its own DSD network.
The partnership will also give mood33 access to Caliva’s direct-to-consumer market, which the company intends to expand in the coming months, Cuvelier said.
Launched by BeyondBrands last June, mood33 was founded by former Steaz president Eric Schnell and LOFT co-founder Michael Christopher. According to Schnell, the brand is currently available in about 60 dispensaries in California, including all 11 MedMen locations — one of the leading cannabis retail chains in the state — and plans to double its store count by the end of the year. Working with Caliva, the company anticipates sales will grow more than 400 percent over the next 12 months. Over the long term, mood33 has an eye on national expansion with plans to “duplicate the Coca-Cola and Anheuser Busch model” by building production facilities and distribution networks state-by-state over the next 10 years, Schnell said.
Schnell and Cuvelier have known each other for several years, they said, noting their mutual interest in the cannabis industry often kept them in close contact as the recreational market developed following its 2013 legalization in Colorado. They also said their experiences with building beverage brands was a strong driver for the partnership. Cuvelier lamented the lack of beverage experience within the cannabis industry, noting many people entering the space are coming from technology or are “just wanting to join the Green Rush.” Schnell said mood33 has had similar difficulties building the brand.
“As a year-one category pioneer in California, we found ourselves teaching our distributor how to distribute beverages, and that’s not where you want to be when you’re building a brand,” Schnell told BevNET. “When we looked at the options at the end of our first year for other distributors we found that no one has done a robust beverage portfolio yet. But with Caliva, we found people who understand Beverage 101.”
While the beverage category has been slow to emerge within the cannabis industry, Caliva and mood33 aim to accelerate the brand’s presence in stores by educating retailers and consumers and initiating a strong merchandising strategy.
According to Christopher, California is still in its “transformation stage” from a medical to a recreational market, and dispensaries are now beginning to restructure their business models to serve a broader consumer base. Over the past year mood33 has worked closely with its retail partners to create beverage sets by offering co-branded coolers, he added.
“They have migrated away from this dentist office type experience we’re you’re in a waiting room and you have to go in and speak to a budtender one-on-one,” Christopher said. “Frequently [budtenders] are guiding you right to the smokable section. But retailers are now breaking up floor plans, having it be more open with shelves like you would see in normal food and beverage stores, where you can reach and interact with products.”
This month, mood33 is also launching two new SKUs — the CBD-heavy Peace, a watermelon mint basil flavored drink with 20 mg of CBD and 2 mg of THC, and a cherry limeade flavored energy drink featuring 10 mg of THC and 130 mg of natural caffeine sourced from guayusa.
Christopher also noted the potential for home delivery to play a more prominent role in mood33’s business going forward, adding that there are still many municipalities within California that have either banned recreational sales or have yet to open licensed dispensaries.
“The home delivery aspect of bringing beverages into the homes of every Californian through Caliva gives us a complete edge, particularly in these early days where we have high tax rates, long lines in the better retailers, and there’s still a thriving black marketplace we’re competing against,” Christopher said. “There’s two paths to building out this category and retail and home delivery fronts are really untapped for beverage. I could be saying in a couple years that home delivery is rivalling what we do in retail”