Bubbles and a Buzz: The Business of Cannabis Beverages

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Introduction

Jake Litke: Welcome everyone, this is Jake Litke, the CEO of MediaJel. I have a couple of guests with me today, and we are going to talk about cannabis beverages. Abe, why don't you introduce yourself, and then Rodney, you follow suit.

Abe Miller: Yeah, no problem, thanks Jake, super excited to be sitting with another legend over here in the cannabis beverage space. My name is Abe Miller, I'm one of the co-founders of Uncle Arnie's cannabis beverages, California's premier and leading cannabis beverage brand right now, and also the vice president of sales.

Rodney: And my name is Rodney, I'm chief of operations and one of the owners at Raised Lemonade. We currently produce in Washington, expanding to California right now, as we speak, in fact, finishing up a building down there. In Washington we're kind of the dominant beverage brand for cannabis beverages.

Jake Litke: Great, well, I have lots of questions, I myself am a fan of cannabis beverages — I know some people aren't maybe a big fan of the model, or have questions about its viability compared to flower and stuff. I have not actually been up to Washington to try your product, Rodney, so I'm going to start with you — give us the short version, the Cliff Notes of how you started, when, and the big milestones since.

Raised Lemonade's Origin Story

Rodney: Sure, I'll try to give you the short version. My partners, Dan and Ray Kenny — Ray was going to school, working on his master's in plant genetics, and Dan had a construction company, and it was right at the time marijuana was becoming legal in Washington. They decided they should start a marijuana company, had a Tier 3 grow here, but decided everybody in the state was going to come with the same story, "we've got the best flower in the state," so they decided they needed something that set them apart, and started the lemonade in 2015, began selling cannabis lemonade on their own. I joined the team in 2019 — basically, in 2019, we made a decision to stop growing marijuana and focus solely on the lemonade, and get better at what we're doing, learn to perfect it to the best of our ability.

Formulating the Product: Emulsions and Distillate

Jake Litke: Talk to me a little about the process — you're not producing the plant at all, you're buying isolate, resin, or some sort of product — have you gone through variations of finding better ways to get the THC or CBD into the liquid?

Rodney: Yeah, over the years we've learned kind of where our benchmark is for quality — we use premium distillate that tests over 90%. Dr. Guiyong Wu, we have a PhD food scientist on staff who does all of our emulsion and flavor profiles, she's got several versions of emulsions and suspensions she's worked on over the years, and nailed down the ones that work well in our drinks, as well as our future brands. All of our emulsions, all of our flavor profiles, are in-house.

Jake Litke: What is the product mix you have in market today, in terms of low-dose, high-dose, and other combinations of cannabinoids?

Rodney: I love this discussion of high and low dose. In Washington, 98% of our sales are high-dose drinks, 100-milligram drinks — we do have 10-milligram drinks, we did away with our 25-milligram drinks, but 98% of sales come from the 100 milligrams. But I think it's really important for people to understand, this argument of high and low dose — a 100-milligram bottle is simply a multi-serving bottle, no different than a bottle of Jack Daniels, you wouldn't sit down and drink a whole bottle, although some people may, and some people may drink a whole 100-milligram cannabis drink and be fine — everybody's all over the board, there's varying levels of how much cannabis you need for your dose. So know your dose. There's a place in the market for both — what's most important is putting quality beverages into the market, something that tastes great, that's the most important thing to us. We love it when other great drinks, like Uncle Arnie's and Pabst and others, come to market with great products — a quality drinking market is only going to increase our market share as a whole category, the more cannabis beverage users we have.

Jake Litke: That's a great attitude, and pretty healthy too — if you go to a retail or delivery and there's just one thing on the shelf, that's not a great consumer experience. People like variation, and the presence of multiple brands in a category gives it gravitas, says it's not just a one-off random idea, it's actually a good product category.

Rodney: That's a great point — if you have a brand-new cannabis beverage consumer go into a store and buy a product that just doesn't taste that great, they may say, "cannabis beverages aren't for me," and that's the most disheartening thing I can see, when they have products on the shelf, but maybe not the products they should have.

Uncle Arnie's Origin Story

Jake Litke: Abe, talk to us about Uncle Arnie's, where you are now — you've got some interesting news going on you might want to talk about, but give us the high level on your journey.

Abe Miller: I started out in the cannabis space here in California with Select Oil, did all their product formulation, made all their cartridges, left, started doing consulting, and ended up meeting my co-founder Matt at a dispensary opening — he had just founded Space Station, which was, and still is, one of the more premier cannabis beverage manufacturing facilities in the state. In 2019 they were one of the only people really infusing beverages at scale, and he had a low-dose beverage he was pitching at the dispensary, I tried it, we got along really well, and about a month and a half later we met up, and four months after that, Uncle Arnie's came out, May 4th, 2020. The journey coming here has been insane — when we launched in 2020, there weren't beverages for like 20, 25 bucks, and none of them tasted the best, like Rodney was saying, that's the biggest thing missing in the market. They weren't priced right, they weren't as effective, and they didn't taste well, and Matt did all of our product formulations for all eight SKUs — all in-house — we have a partnership with Vertosa, one of the leading manufacturers of emulsion in the country. We interviewed about 150 different buyers, and got the feedback: drinks never tasted good, they needed to be $10, taste good, and be effective. We came out with Uncle Arnie's Iced Tea Lemonade, and were the cheapest beverage for about a year and a half, the second-most-affordable edible in the state of California — launched at $10, basically bottomed out the market, trying to make beverages make sense to the cannabis consumer, to convert and try a beverage, and get mass-volume sales so retailers could believe in purchasing cannabis beverages for their store. A year and a half after we launched, my new partners came in — Theo, Assaf, Jimmy, and Alberto, original seed investors — and we've really shaped the business over the last two and a half, three years, and here we are now, the number one selling cannabis beverage in California.

Jake Litke: And you said you brought a product out at ten dollars per serving — that's 100 milligrams of Delta-9 THC?

Abe Miller: Yep — ten cents per ten milligrams, so ten dollars for a 100-milligram beverage.

Distribution Challenges and Storage Space

Jake Litke: You said you're number one in California — one of the issues around beverages I've seen, especially with delivery, is the physical space and volume beverages take up in the "ice cream truck" model. How does that impact your distribution and work with buyers to get product to consumers?

Abe Miller: Over the last three years, everybody's continued to evolve and build in more space, but three, four, five years ago a lot of dispensaries were built on almost a smoke-shop model, very small space, really only selling flower in those smaller packaged goods. So it's definitely been a hurdle, eating up back storage space — some dispensaries still don't have much space, but they're trying to purchase on volume, and when it came to distribution over the last three years, nobody really wanted to distribute beverage, it's heavy, takes up a lot of storage space, hard on the workers. I think the maturity of the market, seeing volume and the space come alive, has converted a lot of buyers to keep eating up that back storage space, plus there's been evolution in dispensary build-outs, people scaling and making their inventory space larger, because there are more brands to purchase to keep up with revenue projections. Through that, and retailers accepting cannabis beverages for themselves over the last three years, distributors have wanted to purchase more, seeing it as a viable revenue source. We've gone through three different distributors over the last three years — Herbl, Unrivaled, also Humble Root and Fume — and now we've finally found our way home with Herbl distribution, they were already built for this space and for beverage, mass-scale distribution. You've got to identify the right partners, make sure they believe in the space, and it took time to convince these people to believe in what we're doing as a viable category.

Sales Trends and Repeat Customers

Jake Litke: Given your market position, you probably have access to interesting analytics — share what you're comfortable with, but what have you seen in sales trends in California, and what do you know about repeat customers and buying cycles, is there a cohort of customers buying regularly, part of their routine?

Abe Miller: A lot of that, at least with dispensaries, leads with distribution and being able to get to stores quicker. Cannabis consumers were always curious about it, there just was never anything that made sense to them dollar-wise, because the illicit market is so strong here — but now we're averaging around a thousand dollars a month for our average order size, give or take eight to nine cases, almost 240 units a dispensary is moving on a monthly average, and a lot of our stores are seeing averages anywhere from 10 to 12 units a day, some are lower, three units a day, usually the smaller-tier dispensaries. Consumers are purchasing on a daily basis too, once they've found their niche and the kind of product they're enjoying. It's about finding the right distributor and model to get to the dispensary quick enough and stay top of mind, so they're not stocking out — even through the last three years, purchasing and inventory management for buyers has evolved, there were times two years ago we'd be stocked out at stores for three weeks, and consumers screaming at buyers that they don't have Uncle Arnie's in the store, when ultimately it was their poor purchasing, or not having a great distributor, taking 21 days to get to a store — you can't scale or convince consumers to keep purchasing without the combination of all those things working.

The Bud Tender Effect

Jake Litke: It sounds like you're in a good place now — distribution worked out, sales growing, consumers adopting. Do you see any friction at the bud tender level, in terms of how much they believe in the category?

Abe Miller: Three years ago, bud tenders were just excited about weed, plain and simple — ever since we launched, it's been extremely positive feedback, you have people who don't enjoy it, you're not going to satisfy everybody, but for the good majority, they're excited about cannabis beverages and selling the hell out of it. There are some bud tenders who say they're only flower consumers, same with customers, and over time, with proper education, relating that it's all cannabis, it's about how you layer it into how you consume throughout the day — I'm a flower smoker by heart, I smoke a half ounce a week, I dab, I eat edibles, but I'm not only a flower smoker, I get home from work, go to the gym, crack open a beverage while cooking dinner, take a dab after dinner, roll a joint waiting for the movie. Through that education, convincing the bud tender, that's how it helps. It's almost like when I worked at Zumiez — certain categories would excel certain months, whenever reps came in, talked about their products, dropped off samples, we'd see that category explode, want to push it to the front, keep it looking clean. Making sure the sampling program is good, keeping bud tenders excited about your product, is what wins them over.

Rodney: What Jake's saying is right, bud tenders are probably the leading driver of marketing for us, same as for Abe — those are also the legacy consumers saying they don't like edibles, only smoke flower, and once they try the drink, because they got a free sample, now they're telling the entire staff this drink "smacks," and going home telling friends, spreading the word that way. If a cannabis company doesn't appreciate bud tenders, and what they do for the industry, for customers, for every business selling into the store, they're missing the boat, period. I don't care how great your product is, without the bud tender, that stuff's not moving — if I walk in and know what I want, that's one thing, but so many people ask, "what do you recommend for X, Y, or Z," and the bud tender fills in the blank. Treating bud tenders with the utmost respect they deserve is something we value 100%.

Format and Serving Size Psychology

Jake Litke: I've seen beverages get more popular, I like them personally, though I like the all-in-one format, one can or bottle, a "sessionable" amount — part of it's behavior and psychology, I'm used to a soda or beer coming in a particular container, I know what's in it, I can have one or more, and it's just less effort than pouring a bit of one thing into another and figuring out doses. Rodney, you said almost all your sales are the higher concentration?

Rodney: About 98% of ours are the higher concentration. In Washington, we have to have a dosing mechanism on the bottom of the bottle, a dosage cup. I personally am a very low-tolerance guy, I've never tried a dab, too much for me, I love smoking flower, but I'm a two-hit wonder, and I'm a five-or-ten-milligram guy when it comes to drinks — I can pour a little cup, or drink it like a shot. I enjoy a low-dose drink, our 10 milligrams, Can, or Pabst, where I can sip and enjoy a whole can, but I also understand the value to customers of buying a high-dose drink and dosing themselves multiple servings at a cheaper price point.

Abe Miller: I'll add — the way customers perceive even high-dose drinks — Uncle Arnie's has always been about "crack it and smack it," but I love low-dose beverages too, when I drink one I'm usually doing 20, 30 milligrams, that's a low dose to me, a way to start my night so I can continue to smoke and take a dab without getting completely obliterated before the end of the night. Both categories have a place. In California, 53% of purchases are 100 milligrams, but are all those people consuming it all at once? Probably not.

Jake Litke: What you're saying, being able to pop open a drink and have it be more sessionable, I agree with that for sure.

Abe Miller: A lot of consumers, the way we've been consuming beverages, especially alcohol, for a long time — you crack open a can, drink it, crush it, throw it away, or crack a soda, take a couple sips, leave it, it goes flat, you throw it away — and a lot of consumers don't want that extra step, but there's also a value proposition that inclines people to purchase a multi-serve format. But I'm a huge believer in the 10-milligram soda line too — you see me promoting Mary Jones and mixing that with Barneys, single-serve products.

Rodney: It's important to remember, I keep hearing people say, "oh, high-dose drinks aren't safe, a 100-milligram drink isn't safe," and it drives me nuts — I don't know if it's infighting in the industry, or people lobbying for positioning. What I can tell you is, you don't buy a bottle of medicine and just drink it, you look at the dosing requirements and dose accordingly — every cannabis beverage in the US has dosing requirements on the package telling you how much for a dose. It's important to know your dose to get the most out of any cannabis edible — if you try 10 milligrams and it's not your bag, maybe you need 20 or 30 milligrams, but I always encourage people, don't start with 10 milligrams, not feel anything an hour later, and have another 10 — you might suddenly feel overwhelmed. Start with 5 or 10 milligrams, see if it affects you, and if it doesn't do anything today, wait until tomorrow to try more, rather than increasing right away. Figure out your sweet spot — if you're a new consumer and drink 100 milligrams and get overwhelmed, you might think it's not for you either, and that's the wrong direction. Regulatory-wise, it ties our hands, I can't start a "know your dose" campaign, though I think we're going to try to do something like that.

Jake Litke: I mostly hear stories of people who did not wait until tomorrow to try their second edible — I don't think I've heard a story that started that way.

Rodney: No different from beer and alcohol in general — if you Google the top two beverage alcohol companies in the US, number one is Anheuser-Busch, number two is Jack Daniels — that's a perfect picture of high and low dose, your beers are low dose, your Jack Daniels is high dose. You can drink a case of beer and get sick, or a whole bottle of Jack Daniels and get sick, it's up to the consumer to use it responsibly.

Jake Litke: I like to say, you can build up to your high, you can't build down from it — once you eat an edible, the train left the station, you don't get off until it comes to a complete stop.

Abe Miller: For a lot of our customers on Uncle Arnie's, the story is, "I drank your entire drink and didn't feel it" — even high-dose customers don't know their own dose. I always tell them, the product's affordable enough to buy multiple, that's the design. Some people can drink a whole bottle of Jack Daniels and not feel it, and end up having to take two. It's about knowing your dose and your way of consuming — maybe it's the way you start your night after smoking a joint, already activated. But a lot of people either turn away from it, or go back to gummies, or take too much because they're uneducated, and get scared away from beverages. That's what makes the 10- and 5-milligram lines so beautiful, people can try a single-serve option without getting completely obliterated and scared off.

Jake Litke: Socially, if you're at a barbecue and bringing something, I'd feel more comfortable handing someone without much experience a 5-milligram can, because most people don't understand their dosage levels. Starting them at the bottom, with something that tastes good — that's the other key thing, there are now beverages that taste good, and that has a huge impact on people going from trying something once to keeping it around.

Replacing Alcohol Habits with Cannabis Beverages

Jake Litke: Let's talk about people replacing alcohol habits with cannabis beverage habits — there's definitely something happening there, one could argue it's a healthier option. Millions of Americans have a pattern of grabbing a bottle of wine or six-pack with dinner, maybe every Friday or Saturday — the ability to replace that with a cannabis beverage on a regular basis requires getting the taste right, because even if something has the desired effect, if it tastes like medicine, it's not part of your culinary experience.

Rodney: 100%. We hear it all the time, people say they've stopped drinking and drink Raised or cannabis beverages solely, we've heard people talk about getting off opiates too. Before I started using Raised Lemonade, I'd drink a lot of tequila — if I drink one or two Raised drinks, I get the same desired effect, and my liver thanks me. A lot of Americans are understanding it's much safer than alcohol for a lot of reasons — you typically don't drink Uncle Arnie's or Raised and want to go race your car or get in a fistfight, it's pretty mellowing, people want to chill out and relax.

Abe Miller: I'm indifferent about marketing to alcohol consumers — a lot of cannabis beverage brands are leaning completely on winning the alcohol consumer over, converting a hundred-plus-year-old tradition, versus the real market opportunity, which is getting people who consume gummies, brownies, cookies, and other edibles to understand beverages are part of the ingestible category too, instead of leaning on subcategories outside of cannabis. We don't promote the alcohol-replacement angle much at Uncle Arnie's, though a ton of people tell us they've left alcohol for cannabis beverages — but I don't think the whole market will completely switch over. It's definitely a healthier alternative, but a lot of people with alcohol problems need to address the real issue, converting to cannabis beverages is a great way to get consumers over, but it's still a vice at the end of the day, and we're enabling something when there's a deeper issue. It's a super safe way to make a transition, but there's a real market share opportunity in getting existing edible consumers to understand beverages, rather than leaning entirely on alcohol converts.

Marketing Restrictions and the Missed Opportunity

Jake Litke: Let's unpack that from a marketing perspective — it's relatively straightforward to position a cannabis beverage as a replacement, using standard imagery, people at a barbecue with drinks in hand, riding the coattails of a beer or White Claw commercial. Uncle Arnie's, it sounds like, is pursuing more of the existing cannabis consumer base, trying to educate them about this liquid category. How do you communicate that?

Abe Miller: For us, always trying to convert consumers to try edibles and beverages, whether through text campaigns, cross-promotions with dispensary house brands, getting the person buying a half ounce every week who says "I don't do edibles, I'm only a flower smoker" to think, "you like weed, right, give this a shot." Through Instagram too, though we lost our main account two months ago, which was a bummer — now putting more effort into the cocktail angle, showing how to dose yourself, and promoting "crack it and smack it, or drink it." And the price point — a cookie edible might be $15 to $17, and there's the old horror story people have heard for 30 years about bad edible experiences — now it's, "here's something faster acting, precise dosing, nano-emulsion technology, a new liquid-based edible that's faster acting and more precise than what scared you before." Marketing is tough though, rules are so different in every state, what you can and can't do, how you can reach people, what pictures and text you can use — it ties our hands in a lot of ways. In-store events are great for educating buyers — I'm still surprised how many people ask what I do, and have no idea you can put cannabis in a drink. There's a massive untapped market, with a ton of regulation on how we reach it. Word of mouth is one of the greatest things we have — you share a drink at a party with a friend, they share with ten friends, and pretty soon you have a loyal fan base, starting with the bud tenders.

Rodney: Bud tenders are the biggest thing, I'm sure it's the same for you — they're the leading driver of marketing, the legacy consumers who say they don't like edibles, then try a free sample and tell the whole staff it "smacks," then go home and post about it.

Abe Miller: I feel like that's the biggest missed opportunity for cannabis beverages right now — that's my controversial take on the alcohol play — so many brands are trying to address everybody outside the market, versus what's here now, and getting those existing consumers to be the ones addressing the rest of the market. Because of restricted marketing laws, you'd have to spend millions to acquire a consumer who's less than 30% of the space today, versus investing in the people actually moving your product — the bud tenders — and having them be the main driver of sales and education for the consumer, because if they don't like your product, they're not going to talk about it. More beverage brands are starting to understand this now, and stopping wasting money on making the in-store display look pretty, and instead making sure the bud tenders get it in their hands.

The DTC Question

Jake Litke: I agree bud tenders are the main channel for dispensary shoppers, but let's play devil's advocate and talk about the DTC market. I come from CPG marketing, and we've been trying to bring those tools over — there are over a thousand advertising laws across the US, every state operating like a different country — but why couldn't there be a cannabis equivalent of Dollar Shave Club, an amazing marketing execution with enough education to bypass the retail channel and build a direct relationship with consumers? It hasn't been done, but seems plausible, maybe five years out — consumers are getting used to subscription products, deliveries once a month, whether it's Mud/Wtr or AG1, you see their ads everywhere. What are your thoughts?

Abe Miller: [audio cuts briefly] The D2C thing feels too far in advance to me — there's ways to message and engage consumers, but between marketing limitations and the cost to acquire consumers, there's a place for D2C, and it'll happen absolutely, but you can't take away the experience of walking into a legal cannabis dispensary, when half the country still hasn't even been able to do that and buy cannabis, smell it, see it, ask questions. I think it's interesting, we've invested some into D2C, wasn't super valuable for us at Uncle Arnie's specifically, because you have to spend so much to acquire that customer — 710 Labs and Cann are two brands I've seen actually thrive at it. And you can't ship across state lines, every state's its own country — it's frustrating when someone in Georgia gets excited about our products and I can't get them there, though that does create excitement for when they finally get it. We still haven't broken the barrier of retail dispensaries being everywhere, or how education is done at the retail level. I see value in D2C eventually, when I can spend a hundred thousand dollars and get a one-on-one authentic interaction, I can't wait for that day, but right now, with marketing restrictions and the state-by-state situation, and the retail store experience still being so important — I'm from Florida, I've been arrested for weed three times, and seeing legalization happen, walking into a dispensary for the first time — I still don't purchase online myself, I don't do delivery, even though I have tons of delivery customers, because I want to go in and talk to people. I think we're a long way from D2C being king, because that experience is still needed in a lot of other states.

Expanding to New States

Jake Litke: Rodney, you're strong in Washington and coming to California — that's a big jump, how's that going?

Rodney: It's a big, scary jump. We've built a beautiful facility in Lemoore, California, excited to enter the market, and it's intimidating — California's a unique market, started the whole legal cannabis movement, the OG people are there, it's a big piece of pie to carve our little piece out of, and we're looking forward to the challenge. But it's a market we have to be in — Washington doesn't make the radar on any analytics report across the country, and one of my frustrations is, you'd never see a mention of what we're doing. We have a team of 40 people now, started with four in 2019, now 45, pouring their hearts into a great product, and we don't make the radar anywhere — to get visibility so we can grow, California has to be on there. We're going to be in Canada in the spring, opening in Michigan and Massachusetts, New Jersey, and a couple other states — a big machine with lots of moving parts. Capital is the restricting factor for everybody.

Jake Litke: We're seeing that across the industry, has been for a better part of a year.

Rodney: Yeah, don't have any control over when that changes, but there's some things that would help — if we ever get safe banking, that'll help smaller businesses like mine, even getting loans for equipment is a treat to figure out. But we're getting it done — California's super exciting, hoping we'll be making drinks in the next 15 to 30 days and start distributing.

Jake Litke: Assuming you hit your current goal, what's the timeline from deciding to enter California to something on a shelf?

Rodney: I think we'll have stuff on the shelf in 45 days or less — equipment's installed, operational, we already have stores with desire to purchase, get it distributed, get it into the store, let customers try it.

Jake Litke: When did you start the journey into California, a year or two ago?

Rodney: Late 2020, we started thinking about California, early 2021 my partner Dan Kenny visited many cities to review cannabis taxes, where would be a good place, land and labor pool available — that started early '21, we broke ground on the facility in October '21, and we're wrapping up the finishing touches on the building now.

Capital, Fundraising, and Crowdfunding

Jake Litke: That's a lot of work. If capital, as Rodney was just talking about, at best stunts growth, at worst creates a real crisis for the business — I know you're in the middle of fundraising now, Abe, and you've gone through a couple of cycles, what have you kicked off, how's it going?

Abe Miller: Similar to Rodney's business, we're self-funded, and have been to this date — raised about 4.2 million over the last three years, between friends, family, and colleagues. Capital is definitely the big constraint on out-of-state expansion. We're doing a crowdfunding campaign right now, ends tomorrow for anyone listening who wants to invest in Uncle Arnie's — things have been going super well. It's a unique opportunity, the reason we took it is we wanted to give back to the people who mean the most to us — the bud tenders, buyers, loyal fans, and the mass market — to get in on the ground floor with a private company before we start taking bigger acquisitions and VC or strategic partner money. We're utilizing that cash to fuel out-of-state expansion — we're in Oregon and California right now, been looking at Washington big time, which, like Rodney was saying, is undervalued, the largest market for cannabis beverage, and we're launching in Nevada at the end of March, and right around 4/20 in Michigan, plus a couple other states we're keeping under wraps since no contracts are signed yet.

Jake Litke: Without getting into too much detail — for a crowdfunding campaign, you have to appeal to investors, tell your story differently than to a consumer — what are the top bullet points you convey — market size, market position?

Abe Miller: Market position, revenue we've done the last three years, out-of-state expansion, the comparison between alcohol and cannabis beverages, and how people consume alcohol, plus the decline in smoking — last year, more people were smoking weed than cigarettes, and people are trying to find less-wasteful ways to consume flower. Our revenue story — we're not a new company, usually crowdfunding is for startups that don't even exist yet, but we've been around three years, went from $400,000 our first year to $2.7 million last year in total revenue, four states coming online, projected to do $6.7 million this year. Talking about the opportunity for cannabis beverage, and where we sit in California and other states we're entering, is usually the most convincing point, even for people who aren't big-time investors — it only costs a thousand dollars to invest.

Industry Growth Trends

Jake Litke: For anyone listening, if you have questions, put them in the Q&A — is there anything you two wanted to chat about that I haven't picked your brain on, a bone to pick or a soapbox?

Rodney: I don't have a bone to pick, just good news in general — we hear a lot about how the cannabis industry has turned down this year over the previous two, which of course COVID gave us a spike we all enjoyed, and we've seen that fall off, flower's down about 20% in Washington state, pretty common across the board. Cannabis beverages, year over year, '22 over '21, were up 8% in total market share, cannabis beverage sales in the US went up 11% in '22 over '21, unit sales up 21%. So the story is, this segment is growing, maybe not as fast as people predicted, but we are definitely growing when a lot of the industry is stagnant or losing ground — that's pretty awesome as a category, and speaks to the quality of the beverages hitting the market.

Abe Miller: Couldn't agree more — in 2018 it was only about $7 million in total sales for cannabis beverages, this year it ended around $50 million in total sales, almost a 6x increase, continuing to grow over time. No real bone to pick, but it's tough in our category right now, there's been a lot of people "drinking the juice" on micro-dosing and low-dose beverages being the thing that's going to make beverages explode — so I want to thank you, Jake, for allowing Rodney and me to speak on a platform about cannabis beverages doing well, people wanting high dose, better flavors, better products and brands, and it makes it tough when a lot of people who don't own a beverage company talk about beverage and their predictions — great to hear opinions, but stay in your lane, and let the people putting in the blood, sweat, and tears — I'm surprised I still have teeth after all the punches in the face we've gotten from retailers who didn't believe in cannabis beverage, and three years later they're convinced and opening up fridge space. Thanks for the platform to show that cannabis beverage can be one of the next biggest things, and it's going to continue to grow — people said that about gummies too, and here we are.

Rodney: I'll just tag onto that — price per milligram, I don't know if it's high dose versus low dose, we obviously sell much more high-dose, 100-milligram drinks, but I think what consumers are really saying is price per milligram is what matters to them, and low dose might take a bigger market share if prices were lower — but packaging costs the same whether you put 10 or 100 milligrams in it, so it becomes a pricing proposition for manufacturers — it only costs 30 to 40 cents less to make, but you have to sell it for three or four dollars less, which makes it difficult to compete against the higher dose, where there's more profit margin left.

Getting Into a New Market

Jake Litke: That makes sense. We have a question here from Aaron — when you're entering a new state, what do you do to get your name in the door of dispensaries?

Abe Miller: Go ahead, Rodney.

Rodney: For us, it's really in-store presence — myself, Ray, our team, going and meeting buyers, meeting bud tenders, being part of store activations to help gain the trust of buyers, retailers, and consumers, that Raised Lemonade is going to put out a quality product every time, that tastes great and has a great effect every time.

Closing Remarks

Abe Miller: For us, it's identifying your distribution partner, making sure they're a quality partner with a lot of relationships, and more importantly, servicing those relationships to a standard you're happy with — that's the biggest thing I've noticed entering new spaces. We partner with Nimbl Distribution, they've got over 200 dispensaries and have really put us on their back, advocated for beverage — without that, you can't be successful anywhere, I'm just one guy.

Rodney: That's a good point, if you're not partnering with somebody who has the desire and ability to grow with you, you're partnering with the wrong person.

Jake Litke: At some point, if we talk national stage, you can't be everywhere at once, you'll need a strong business development team, and eventually support that with marketing — being able to market also helps with sell-in as well as sell-through, if you go into a retail location saying "I'm bringing this new product, and I'm going to support it with a marketing program in your market, driving people to your store," retailers are more receptive. We've seen that be effective — we work with a lot of retailers and dispensaries alongside brands, because we need to send the consumer somewhere to purchase. And while there are challenges — you can't advertise on Facebook — we've gotten most mainstream publishers to take cannabis ads, we can run ads on CNN, can't do Facebook yet, but there's a certain amount of marketing that helps facilitate that sales process.

Rodney: It's changing, a little at a time, and hopefully at some point we'll see unity and consistency across state platforms for how we can market — that'll be beautiful when it happens, maybe long after I'm out of the industry, I'm an old guy, don't have that many years left in me.

Jake Litke: Here's my — I don't know if it's controversial — take: I don't see that happening very likely, because a lot of advertising laws are adjacent to alcohol or tobacco laws that have been in place a long time and haven't moved much. There are all kinds of weird laws around alcohol too, can't advertise in some states on certain days or after certain hours. I'd like to think it'll get easier, but I'm not optimistic the advertising laws will get less complicated anytime soon.

Rodney: Same — a lot of people in our segment think, once we get national legalization, we'll be on the shelf at the convenience store next to the beer. I don't think that's right, I think you're still going to go through a licensed cannabis store to buy cannabis beverages for a long time, maybe eventually on those shelves, but I don't see it happening anytime soon.

Jake Litke: Great, well, we're a little over on time, but the conversation was interesting, so I wanted to let it roll. I want to give you both a chance to tell everyone how they can reach you, if they want to ask questions or are interested in a crowdfunding campaign.

Abe Miller: Yeah, this is LinkedIn, you already know the deal, just DM me — don't hit me with spam, I'm not going to answer it, just be genuine, and I'm always willing to connect. On social, I'm pretty active on Instagram, I run the Uncle Arnie's account, so if you're talking to anybody there, it's me 99% of the time — those are the most viable ways to get in contact. Head over to SeedInvest.com and click on the Uncle Arnie's profile, hopefully we can have you on board as an investor.

Jake Litke: Cool, thanks, good luck on all that too.

Rodney: That's awesome, you can obviously get me on LinkedIn as well, or Rodney@raisedlemonade.com if you want to send an email — I agree with Abe, we get spammed every day from people trying to sell us something, so I appreciate everybody's entrepreneurial nature, but if that's your intent, it better be really good, or I'm probably not going to look at it. Thank you, Jake, for this opportunity to come on and talk — I think this segment's going to get more attention over the next few years as it continues to grow, as we see more national brands like Jones Soda come into the mix, we're excited to be partnering with them in Washington to help with production and distribution needs at our facilities, some co-packing, making use of the lines. It's awesome to see these brands come to the table.

Jake Litke: That's great, well, thanks for the time, both of you have some interesting perspectives that very few people have — you're in a category where, as you said, a lot of people are dismissive of cannabis beverages, and I think that happens at industry conferences and mixers, a couple people say things and it keeps getting repeated through social circuits, and suddenly, "oh, cannabis beverages aren't a thing" — that's a rather pernicious rumor that's been around a while, so it's nice to have you both out here talking to those folks.

Rodney: Jake, I'd just say, Raised Lemonade in Washington state — if you compared revenue to revenue across every category, we'd be first in four categories, edibles, beverages, concentrates, and pre-rolls, second in flower, and third in vape carts. We're the seventh-largest cannabis company out of 1,200 in the state, and all we do is drinks — so to the people who say cannabis beverage isn't a real thing, I'd give you a little argument there.

Jake Litke: Those are compelling arguments.

Abe Miller: If you check us out in California, we're the seventh-largest edible brand, competing with Wyld and Kiva — if you believe in the gummy category but don't believe in beverages, keep talking, because the revenue will keep proving you wrong.

Jake Litke: I think that's right. Awesome, well, thanks guys, this has been Cannabis Marketing Live, I'm your host, Jake Litke, for MediaJel — we do compliant digital marketing for cannabis brands and retailers, have a great day, and we'll talk to you soon, cheers.

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