Whether it’s a feast in Minnesota or a famine in New York, the emerging cannabis beverages market is nothing if not a fluid, actively developing situation. With that in mind, we called up Brendan Mitchel-Chesebro, industry analyst at market research group BDSA, to unpack some of their latest insights, which showed beverages as the fourth-largest edible subcategory (6%) in Q1 2023.
White Spaces
BDSA forecasts the total cannabis beverage market in the U.S. to reach $277 million in 2023, and to $381 million by 2027. In other words, it’s growing, but still only around 1% of total dollar sales across all categories.
Across 14 tracked markets, beverages make up only 6% of total edible dollar sales; for comparison, candy is at 76%. Within the latter, there are 422 brands producing around 5,660 individual SKUs — compare that to beverages, with just 122 brands producing just 883 SKUs in Q2 2023. Depending on individual markets, there may be just a handful of products available to choose from, meaning “there’s a big gap there that brands can catch up on” to draw in new consumers, Mitchel-Chesebro explained.
There’s also the issue of need states: Roughly 30% of consumers claim they are willing to pay more for products that claim to offer specific benefits, such as aiding in sleep or helping to relieve pain. While heavy users favor inhalables, and gummies and tinctures serve wellness-related occasions, cannabis RTD consumers are seeking out more social or high-energy states. That market has begun to emerge via THC-infused drinks positioned around energy, zero-proof drinking and sports recovery.
California Compression
Cannabis beverages consistently grew their share of unit sales in California’s edible category, representing 15% of edible unit sales in Q2 2023, even as overall dollar sales fell about 10% year-over-year in Q2 thanks to ongoing price compression. But over that same period, equivalent beverage sales grew by about 13%, indicating strong interest among consumers.
Within that mix, Mitchel-Chesebro referenced Uncle Arnie’s, Sip Elixirs and Good Stuff Beverages as examples of brands charting strong growth, but not necessarily with revolutionary tactics. For the former brand, which locked up its first outside capital earlier this summer, the analyst cited its strong price point, distribution know-how and brand authenticity as keys to success.
Powders Power Up
While perhaps not as sexy as an RTD, cannabinoid-based powder drink mixes have proven a formidable segment of the category, according to BDSA numbers. In most markets, the powdered mix subcategory represents 10-12% of beverage dollar sales, Mitchel-Chesebro said, and it has strong alignment with certain markets like outdoor-living Colorado, where it totaled 27% of beverage sales in Q2 2023.