CBD Beverages: An Increasingly Tempting Target For Beer WholesalersOctober 1, 2019
With mainstream beer sales under pressure in recent years, beer wholesalers have been eyeing new revenue streams. One potentially lucrative area they’re watching is the nascent CBD beverage market.
While beverage alcohol players and other interested parties await guidance on how and when the products will be governed at the federal level, some wholesalers have already entered the category. Sunshine State Distributing, a craft house in Florida, for example, began selling Vybes hemp-derived beverages in March, and customers include beer-centric accounts, according to Chris Larue, president and founder of the distributorship.
The drinks are “an alternative to alcohol,” Larue says. “A lot of people aren’t drinking these days. We knew we had to diversify.” If widely accepted, CBD beverages “could become as big as the energy drink market,” Larue believes, “and could be available in a wide range of accounts, from high-end to convenience stores and everywhere in between.”
Ryan Lake, a principal at Arlington Capital Advisors, the investment bank that represented Dogfish Head in its recent merger with Boston Beer Co., also sees opportunity for CBD beverages, as well as THC-infused beer. “But of course the question is legality,” he says. “Can wholesalers do this without jeopardizing their federal license?” If the accounts for the products overlap those for beer, “it’s an easy decision for wholesalers. It will provide incremental cash flow,” he continues. But if, in the end, the accounts aren’t aligned, “there may be no built-in synergies, and they’ll have to set up different divisions,” Lake continues. “They may not make enough money for it to make sense.”
Andy McCain, president of Phoenix-based Hensley Beverage Co., an A-B house, concedes that “there will be demand for these products and we’re having conversations,” but says that for now the Arizona distributor is refraining from involvement with CBD beverages. “It would put our federal license at risk,” he explains. But McCain believes the FDA will emerge with a ruling on the products, “or this will get away from them and be a mess,” he says.
Craig Purser, president and CEO of the National Beer Wholesalers Association (NBWA), notes that his organization has asked the FDA to provide expedited guidelines on the matter. “It’s been a frustrating process,” he says. “The marketplace is rattling and rolling, but issues need to be resolved.”
As Green Thumb Industries founder and chairman Ben Kovler recently told SND, there’s a lack of infrastructure in place currently to handle vast quantities of cannabinoid drinks. “People buy 1,000 chocolate bars from us all the time, but they can’t buy 1,000 20-packs of beverages,” he explains. “No one’s system is set up for it. That’s why alcohol distribution companies exist, but that business model isn’t established in cannabis yet.”—Terri AllanSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning. You will also receive the Cannabis edition as part of your subscription.