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The convenience industry is ground zero for cannabis-infused product innovation

“Greenfield” refers to a virgin market yet to be commercially exploited. From a business perspective, it’s elusive and appealing because of how infrequently it occurs, as well as the potential for windfall results.

Greenfield opportunities are generally not for lack of foresight, but rather a function of structural, technical, regulatory or other barriers. When circumstances change, competing parties typically scramble for prime positioning. 

The passing of Bill C-45, The Cannabis Act, in 2018 ushered in a new age of cannabis legalization in Canada. Legal sales of cannabis via retail outlets, as well as limited personal production, opened up for the first time, setting the stage for future cannabis-related innovation. 

On Oct. 17, 2019, the commercial sale of cannabis-infused edibles (baked goods, drinks etc.) became legal, however there was already much work ongoing to define a framework for what many see as the next greenfield opportunity. For instance, CBD-infused products will start hitting store shelves before the end of of the year.

This is no doubt of interest to the convenience industry and c-store operators, who may be uniquely positioned to grab a piece of this greenfield market.

Screen Shot 2019-10-18 at 3.45.57 PMIt’s also welcome news to consumers. According to a study out of Dalhousie University in Halifax, of the 68% of participants who were in favour of legalizing cannabis in 2017, 93% were also very likely to try at least one edible product, while 46% of all Canadians would try cannabis-infused food products if they were available. 

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Consumers have a taste for cannabis

Earlier this year Deloitte surveyed 2,000 adult Canadians regarding cannabis and edibles consumption, concluding that edibles and cannabis-infused beverages represent a multi-billion dollar opportunity. 

The Arcview, a cannabis investment and market research company, projects the cannabis edibles market will be worth more than $4 billion in Canada and the United States by 2022, with Canada representing nearly 40% of the opportunity.

 As a means of projecting the potential of cannabis for the Canadian food industry, Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, examined data from U.S. states that have already implemented legalization. The data pointed to rapid market penetration in Canada, with edibles sales expected to account for more than 10% of total cannabis sales within two years of opening the market.

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CBD: The first wave

The first wave of change will be food and beverage products that reference cannabis, but include non-hallucinogenic cannabidiol (CBD) derivatives and/or hemp-based products.

Hemp and CBD products became legal in the U.S. with the signing of the Farm Bill at the end of 2018. In its annual Chef Survey, The National Restaurant Association and the American Culinary Federation found that 75% of the 650 chefs surveyed said CBD and cannabis-infused food would be a hot trend in 2019.

In the U.S., legalization has sparked innovation and, ultimately, consumer demand.

Screen Shot 2019-10-18 at 3.47.46 PMThough, it is still early in the adoption process for CBD-infused foods and beverages, there are many examples of both emerging and global drink companies aligning to prepare for the coming market gap. 

For instance, L.A.-based Kickback Cold Brew offers coffee and tea-based CBD-infused beverages made with organic ingredients, 100% single origin and shade grown coffee beans, and high-grade hemp.

In the QSR segment, Carl’s Jr., a burger chain with 1,500 locations, including more than 20 in British Columbia, Alberta and Saskatchewan, recently tested a CBD Burger in Colorado. The limited edition $4.20 Rocky Mountain High: CheeseBurger Delight featured a Santa Fe sauce infused with CBD, a non-psychoactive hemp derivative. It was a nod to consumers’ pent up desire for cannabis innovation and may yet find a place on Carl’s Jr. permanent menu.

 “(It) ties back to our core strategy of being the first to bring bold and unexpected flavours, that are at the forefront of hot restaurant trends, to a quick service menu,” says Patty Trevino, Carl’s Jr. senior vice-president of brand marketing.

Cannabis express

Last year, convenience operator Kohanoff Affiliated partnered with Swissx Oil & Confectionary to distribute its Swissx CBD products in more than 500 convenience stores and gas stations across Southern California. 

 Earlier this year, Canada’s Alimentation Couche-Tard Inc. entered into a multi-year agreement with Canopy Growth Corp. to open a Tweed-branded cannabis store in London, Ont. “Alimentation Couche-Tard is excited about taking a leadership role in the development of cannabis retailing excellence,” says Brian Hannasch, president and CEO of Couche-Tard, adding Couche-Tard is looking at this venture as a vital entry opportunity to a new market.

Then, in July, the convenience giant announced a partnership with cannabis retailer Fire & Flower. “Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers,” said Hannasch. “This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.”

With the legalization of cannabis, we are in the midst of a revolutionary paradigm shift. Having lived in The Netherlands during the 1990s, I was first exposed to a tolerant attitude towards cannabis: Legalization blows open the door to normalization, commercialization and potentially explosive growth. It promises to be one of the largest “land rushes” in modern memory and the time to get your claim flag in the ground is now.

 

Darren Climans is a foodservice insights professional with close to 20 years’ experience partnering with broadline distributors, CPG suppliers, and foodservice operators. His practice is to understand issue-based decisions by taking a data-driven approach to strategic decision making.


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Tilray, AB InBev to launch CBD drinks in late 2019, THC drinks need more time

Photo: Canadian Press

Photo: Canadian Press

A joint venture between B.C. cannabis company Tilray Inc. and the world’s largest brewer Anheuser-Busch InBev plans to have CBD-infused drinks on the Canadian market as early as December, but says it needs more time to research beverages containing THC.

Fluent Beverage Company’s chief executive Jorn Socquet said that through the two companies’ previously-announced research partnership, it has determined how to formulate beverages containing cannabidiol, the non-intoxicating compound also known as CBD, in a way that keeps the active ingredients stable and potent over the lifecycle of the product.

Tetrahydrocannabinol, the cannabis compound which produces a high and is known as THC, has proven much more unstable, he added.

“When you put CBD or THC into a beverage, it has a tendency to degrade over time… And so we’ve figured it out, but we didn’t figure it out for THC yet,” he said in an interview.

Socquet said he didn’t have a timeline for when he expects Fluent’s THC beverages to be ready.

“We’re not going to rush it, because again, we want to always deliver a safe experience for our consumers,” he said. “Obviously, we are aiming to be in market as soon as possible.”

The impending beverages launch comes after the parent company of Labatt Breweries of Canada and Nanaimo, B.C.-based Tilray in December announced a deal to research and develop non-alcoholic beverages containing CBD and THC.

It’s one of several tie-ups between alcohol giants and Canadian pot companies ahead of the next wave of adult-use legalization in Canada later this year.

Molson Coors Canada and HEXO Corp., a Quebec-based cannabis producer, announced a similar partnership last August. Alcohol producer Constellation Brands Inc. announced its $5 billion investment in Canopy Growth Corp. that same month.

Canada legalized cannabis for recreational use in October last year, starting with dried and fresh flower, seeds, plants and oils, but legislation governing next-generation products such as edibles, beverages, vapes and topicals comes into force on Oct. 17.

Due to the mandatory 60-day notice period companies must provide to Health Canada before selling these products, the earliest CBD beverages or THC-infused hand creams and other Cannabis 2.0 goods can legally go on sale in Canada is mid-December.

Socquet said Fluent, a joint venture between AB InBev’s Labatt subsidiary and Tilray’s recreational cannabis subsidiary High Park Company, is preparing to launch its portfolio of CBD-infused products in Canada in December, but it will depend on the various provincial and territorial bodies governing cannabis retail and distribution.

Fluent hasn’t produced any product yet, but it is currently commissioning the machines needed and expects to start commercial production in the coming weeks, said Socquet.

Developing cannabis drinks has been a challenge, he said, in part because when the active ingredients are concentrated it forms an oil, which is tough to mix with water into a beverage. Fluent has looked to a technology called nano-emulsions, a mixture of liquids with very small droplet sizes, in order to get CBD or THC into its drinks, he added.

Fluent has looked to address the lag in onset time that ingestible cannabis, such as pot brownies, can have.

While those who ingest cannabis typically feel its effects anywhere from between a half hour to four hours after consumption, Fluent is looking to speed up the process in its beverages.

“We are working on a platform that has an onset in less than 10 minutes and offsetting in about an hour and a half,” Socquet said, noting that it may differ between consumers and is more relevant for the intoxicating effects of THC rather than CBD.

Socquet would not give too many specifics about Fluent’s CBD beverage lineup but said, based on their research one thing is sure: it will not taste or look like beer.

“The reason why that is, is that consumers don’t want it… We’re going go into sparkling, slightly sweet beverages, we’re going to go into teas.”


Martha Stewart says CBD products with Canopy likely ready in mid 2020

A CBD line of products Martha Stewart is developing with Canopy Growth will likely hit the market in the middle of next year, said the American food and lifestyle guru.

The pair is working on some “really good projects right now” and if all is approved they would be ready by mid-2020, said Stewart.

“We’re developing different things for the home, for food and for pets at present. I’m also interested in skin care and other things like that,” she said during an on-stage interview at the Elevate Conference in Toronto.

In February, Stewart said she was teaming up with the Smiths Falls, Ont.-based licensed producer in an advisory role to develop a line of products containing cannabidiol or CBD.

Canopy said at the time it would leverage Stewart’s knowledge of consumer products while exploring the use of CBD and other cannabinoids as they related to both humans and pets.

CBD is the non-intoxicating compound found in cannabis and hemp. While pot remains illegal at the federal level south of the border, the U.S. legalized hemp cultivation at the end of last year.

Meanwhile, the U.S. political climate is becoming more receptive to cannabis with legislation potentially opening the door to the massive market. Earlier this year, the bipartisan STATES ACT – legislation that would amend the Controlled Substances Act and could effectively make cannabis federally legal in states where recreational consumption is legal – was reintroduced in Congress.

And this week, the U.S. House of Representatives is set to vote on the Secure and Fair Enforcement Banking Act – legislation that would offer protections for financial institutions that serve state-authorized cannabis and ancillary businesses.

Stewart also said during the discussion alongside Canopy’s chief executive Mark Zekulin that she hoped that cannabis would be legalized eventually in the U.S.

“There’s been a tremendous stigma attached to it in terms of crime… And I think that, that will all go away.”

She said she ventured into the space because it was an “emerging and exciting market.”

Stewart, who has written several cookbooks, said she isn’t ruling out developing one focused on cooking with cannabis.

“I’m not ready to do it yet, but that might be a possibility,” she said.


Packaged beverage options are exploding: 4 tips for boosting offerings and efficiencies in-store

From new ready-to-drink (RTD) coffees to infused teas to sparkling waters, packaged beverage options are at an all-time high, driven by innovation and consumer demand for variety.

BeverageBuyer-teaserBeverage manufacturers recognize that having diversity in their offering is critical and the same is true for convenience store operators, who want to keep customers coming back for more.

“Culturally, we’ve become so accustomed to having more choices than ever and from a consumer’s standpoint, beverages are low investment, low commitment,” explained Satoru Wakeshima, chief engagement officer at New York-based branding agency CBX. “It’s not a major decision and people like to try new things.”

Wakeshima predicts 2019 will see more of the rising beverage trends and new product explosion seen in 2017 and 2018, but with greater blurring of product types — more hybrids.

“Our expectations are higher than ever, and the bar continues to rise,” he said.

How can convenience store operators manage the packaged beverages category in a way that capitalizes on new and emerging opportunities, but maintains efficiency?

Beverage experts, offer the following tips:

1. Allocate intelligently

Because the category cannot expand infinitely, especially within the limited confines of the convenience store format, space needs to be allocated intelligently, which includes scaling back in some areas. It’s a simple concept that is not always executed.

“Reducing space for declining or slow-moving segments to make room for innovative or higher-velocity segments that attract shoppers to the store is the key to success,” says Peter Keaney, business analyst at Cadent Consulting Group. An example would be to reduce space for milk, where sales have been declining, to make space for more sparkling waters.

2. Rotate offerings with marketing support

“People want to discover new beverages, but they also want to be reassured that they’re making a good choice,” said Wakeshima. “Educating customers at retail, mobile or online to aid the deselection process becomes the expectation.”

3. Think like consumers

Thinking like consumers means in terms of “need states” rather than subcategories, as this is how consumers shop, according to Keaney. Moving forward, the plethora of packaged beverage options could be rearranged in the cooler by needs.

The NPD Group has identified four macro consumer needs: fueling, wellness, connecting and gratifying.

The NPD Group has identified four macro consumer needs: fueling, wellness, connecting and gratifying. These fundamental needs can then be broken down into more specific behaviors, known as need states. Examples of need states under fueling include “easy on-the-go” and “staying awake.” Meanwhile, need states under gratifying include “nostalgic drinks” and “morning drink favorites.”

4. Keep abreast of beverage trends

In addition to staying on top of the latest packaged beverage trends, retailers also should watch what’s trending outside the category, since trends often spill from one category into another eventually.

The fastest-growing packaged beverage segments currently are sparkling water, energy drinks and RTD coffee, all which are up by double-digits recently, according to Keaney.

Still and sparkling water continue to be big as consumers seek alternatives to carbonated soft drinks, he added. “In addition, plant-based and probiotic beverages are driving sales, as well as functional beverages and innovations like nitro cold brewed coffee. We’ll have to see how high CBD-infused beverages can fly.”

Originally published at Convenience Store News.