NedStark wrote: Hi all, I haven’t contributed to this bullboard in a few years, but thought that I would share another updated write-up about the future of the cannabis market environment. Many of you may have seen past versions floating around, but I made some updates and tweaks last night to improve it.
Suspend your current beliefs, whatever they may be, and push your ego aside for a second. Read this with an open, objective mind and then critique it as you wish afterwards. If you are a trader then stop reading now because this write-up is useless to you and will only benefit long-term investors:
Cannabis beverages with THC are going to become a transformational, disruptive product. Drinking is in our DNA. It is part of almost every single social setting whether it’s a business convention, sports game, restaurant, bar, etc...people love to drink and it has become ingrained into many aspects of our lives. Investors need to put more focus on what the long-term cannabis market is going to look like 5-10 years down the road, or even more. Cannabis is going to become just as mainstream and widespread as alcohol is today. In the future, people are going to look back on marijuana prohibition the exact same way that they look back on alcohol prohibition (and probably with even more confusion than alcohol since marijuana actually has medical uses). And there are going to be way more people that enjoy cannabis than there is right now.
With that being said, there are still going to be a large portion of the population who will not want to smoke it. Smoking, in general, has a negative connotation because it is immediately associated with cigarettes, which everyone knows is the best way to slowly kill yourself. Even though smoking cannabis isn’t anywhere near as harmful as cigarettes, it will still always have that negative perception about it, which eliminates a very large customer base. There is a much higher percentage of the population that drinks alcohol than there is that smoke cigarettes. Smoking, whether it’s by burning or vaping the plant or oil, has a much more limited potential customer base compared to drinking. Society has agreed that drinking a substance with psychoactive effects is more acceptable than inhaling it or injecting it. There are more people on this planet that would drink a product versus smoking a product.
Not only is it going to become one of the top ways that users consume cannabis in the future, but it is also going to be the method that provides the easiest transition for first time triers…especially THC drinks that taste like people’s favourite, go-to alcohol beverage, which they are routinely accustomed to drinking.
With Constellation Brands, Heineken, Molson/Coors, AB InBev (Labatt), Moosehead, and others investing in this space, the growth potential of cannabis infused beverages has been confirmed and very deep pockets are now behind it. Big alcohol has the money and infrastructure (manufacturing, distribution, marketing, etc.) to push drinks onto consumers. If they can tap into the cannabis market and maintain control of their market share without having to change their 'delivery method' then it is a no brainer. Beverages will not only have a high demand from the consumer side of the equation, but will also be significantly pushed by many big alcohol brands that come onboard. These companies are experts at marketing drinkable products and creating demand from nothing. They can make consumers want something that they never even had a desire for before. Mature cannabis consumers aren’t going to be the main target market. The mass population that currently drinks alcohol and has never used cannabis or only uses it occasionally will be the target market. The goal will be to switch them over to a healthier intoxicant without having to change their habits and behaviour.
Most people that are presented with a choice between drinking option 1, which has more calories and contains poison, or option 2, which has less sugar and calories, doesn’t give you a hangover, and can actually be beneficial to the human body through the endcannabinoid system, will choose option 2. The value proposition of being able to intoxicate yourself the same way you were before but without harming your body and potentially even improving it will be exploited and shoved down consumer’s throats by big money advertising. This isn’t about getting long-time, hardcore cannabis connoisseurs to switch to drinking beverages. It’s about getting the mass global population to switch from drinking poisonous alcohol.
But with that being said...as things continue to progress in this industry and you have the option to sip on a delicious tasting THC infused beverage that 1) mimics the exact same flavour as your favourite wine, beer, cocktail, or tonic beverage, 2) only has 0-30 calories and 0-6g of sugar, 3) has a small micro-dose of 2.5-5mg to keep you on a perfect level until you go back out for another joint, vape, or dab session, and 4) hits you within 5-10 minutes and dissipates in relatively the same time that alcohol does, then why wouldn’t you want to enjoy this? There is no valid, practical reason why a cannabis user wouldn’t enjoy this type of product. Some might argue price, but as economies of scale significantly grow, this will no longer be a factor.
Smokeable products, compared to drinkable products, have a much more limited potential distribution and retail base. Restaurants, bars, sports arenas, convention centres, etc. are not going to allow people to smoke up their venues or dab in the corner of the room. For health and sanitary reasons, there is just no way that that’s going to happen.
These type of venues are all familiar and experienced with distributing/selling liquid ingestible packaged goods. This is what they are going to stick to once cannabis becomes widespread and legalized globally. They aren’t going to start selling oils, shatter, and other concentrates so that their patrons can smoke in their facility. They will sell drinks that are easily stored in their fridges or on their shelves beside their alcohol counterparts (don’t get me wrong, it is going to take years to get to this point because of both social and political roadblocks...but there is no doubt that it will get there - time is a very powerful variable and consumer demand carries a lot of weight). You will eventually see THC drinks in the same places where alcohol is served today. It is inevitable.
The powerful restaurant, bar, and pub lobby groups in North America are not going to just sit back and watch other establishments pop up that offer cannabis consumption and steal their patrons and revenue away from them. Not a chance. They are going to do everything in their power to get in on selling cannabis products and keep their clientele coming to their establishments.
And cannabis beverages will be the format that outright wins in this part of the supply chain (especially since alcohol distributors are also very, very powerful lobbyists and will want in on the money to be made too).
Likewise, as big alcohol companies continue to enter this industry in order to hold onto their market share, they aren’t going to decide to establish brand new manufacturing lines to produce concentrates or other products. They are going to stick to the equipment and resources that they already have in place, build up similar, separate infrastructure, and start producing drinks that have THC instead of alcohol so that they compete in both markets. The cost synergies are too great not to.
If there is any chance that cannabis makes its way into mainstream outlets it will be through ingestibles (and my opinion is that there is a 99.9% chance that cannabis eventually becomes just as widespread as alcohol). No idea how long it will take, but it will get there.
Edibles will have their place at unique cannabis focused restaurants and cafes, but these types of venues will be niche. You’re not going to see The Keg or Kelsey’s start selling edibles. Nor are you going to see bars and sports arenas start selling cannabis hot dogs and french fries. It’s just not going to happen. Restaurants that focus on providing high quality food to their customers aren’t going to compromise that. Cooking with cannabis would just create risk that their meals won’t taste as good and risk that they get someone too high. And venues that don’t put much focus on their food now aren’t going to start doing so when the bulk of their revenues come from alcohol.
The entire supply chain is already setup perfectly for beverages and selling a consumer packaged good takes the product liability risk away from the restaurant, bar, or sports arena. And I think that media outlets and events looking for sponsors will be more open to working with this type of cannabis product (I also believe that there is a much larger pool of influencers, such as mainstream celebrities, that will be more willing to endorse a sophisticated ingestible vs. the plant or oil by itself).
At some time in the future it will reach the point where beverages are the most widely advertised and widely available recreational cannabis product in the market, which will lead to it being one of the most widespread methods of consumption, globally.
The value proposition that comes with being able to intoxicate yourself in a refreshing way while also getting the health benefits from THC instead of the damaging consequences from alcohol is going to be absolutely enormous. This value proposition cannot be overstated.
When you think about 10+ years down the road, THC drinks are going to make alcohol become obsolete for a very large portion of the population. Big alcohol knows this and realizes how big of a long-term growth opportunity this is to capitalize on.
Think about how popular alcohol drinks have become over the years even though they are deadly. Literally poison to the human body. Now think about how popular THC drinks can become with the added selling feature of the health benefits to the human endocannabinoid system. Consumers don’t have to feel even the slightest ounce of negativity or regret from drinking them. They can get intoxicated while improving (or at the very least, without harming) their health. Game changing.
You have the opportunity right now to be an early investor in a transformational product that is going to drastically shift conventional intoxication and displace a very large number of alcohol drinkers. It is a ‘when’, not an ‘if’. And “when’s” lead to wealth creation if you get in early enough. Do your research, choose a horse, accumulate as many shares as possible, and hunker down for the long ride. And most of all, be patient.