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As Californian wine AVAs pave the way for weed, brewers are taking note.

By W. Blake Gray | Posted Sunday, 08-Nov-2020

Pabst Blue Ribbon now comes in lemon-flavored seltzer. There’s no beer, or alcohol of any kind, in this can of PBR, but there is THC – and it’s a harbinger of more to come.

Funny thing, though, is that when you go to the web page for Pabst Labs, which makes and markets the Pabst Blue Ribbon lemon THC seltzer (“A different kind of buzz” is the slogan on a skinny can with the familiar PBR logo), you see this unusual disclaimer: “Pabst Brewing Company does not manufacture, cultivate, distribute or sell any cannabis products.” Got that?

Pabst is one of several beverage alcohol giants that is taking a test hit from the burgeoning cannabis market. Pabst allowed some employees to leave and form a separate company, and it did a licensing deal with them, perhaps to give a layer of insulation from US federal law that still frowns on combining alcohol and cannabis.

But the two intoxicating products overlap in many ways and, as cannabis legalization expands rapidly in North America, overlap and some competition is inevitable. This was one of the main points from Wednesday’s annual Wine and Weed symposium, held virtually this year.

“There is no one cannabis consumer,” said Jessica Lukas, senior vice president at cannabis analyst firm BDSA. “There is a lot of crossover between cannabis consumers and wine consumers. Legal cannabis is mainstream. The majority of the US populace agrees with legalization. The cannabis consumer is all consumers. If you’re thinking of the stoner stereotype, that is officially gone. I’m a mom. I have a master’s degree. And I am a cannabis consumer. I smoke joints. I consume edibles. And that is acceptable.”

Lukas said 68 percent of cannabis consumers also drink alcohol, while 43 percent of alcohol drinkers in states where recreational cannabis is legal also enjoy weed. She said of people who use both, 50 percent said they pair the two and when they do, they have a bit less alcohol.

“This isn’t a replacement, but it is an impact of one or two units of consumption,” Lukas said.

Thus it’s not surprising that beverage giants like Pabst are interested. Molson Coors and Lagunitas also have cannabis seltzers. And beer and wine giant Constellation Brands made a big investment in Canopy Growth, a Canadian cannabis company.

“Constellation’s investment is public and they’ve taken a large loss on that,” said cannabis attorney Marc Hauser. “They invested at a time when valuations in the industry were still extraordinarily high. They’re not dumb. This is a long-term investment. This is a very long-term play to get into a new industry.”

For now, most of their efforts are on one type of product: cannabis-infused seltzers. The reason is that state laws frown on combining alcohol and cannabis. Right now you can’t even serve them in the same restaurant, much less the same bottle.

“I thought there would be a lot more grape-based beverages, more beer-like beverages,” cannabis attorney Rebecca Stamey-White said. “The regulatory challenges and the production challenges in making those products has led to somewhat of a monotone set of offerings around seltzers. I didn’t expect that trend to be quite so large. Right now there are very few manufacturers that are doing (cannabis) beverages. I thought there’d be more by now.”

A big hurdle is that because cannabis is illegal in US federal law, products cannot be shipped from state to state. This makes building a national brand difficult. Many analysts thought cannabis brands would be built in Canada, which legalized cannabis nationwide in 2018. But that has not happened.

“In Canada, it’s been much more of an industrial product and not treated as an agricultural brand-based product,” Stamey-White said. “The size of the entire Canadian market is smaller than the California market. Yes, it is a laboratory but it is a very different market from the market in the United States.”

Hauser and Stamey-White both said the pandemic has been good for the US cannabis industry in multiple ways. First, more consumers seeking anxiety relief have turned to cannabis. Also, restrictions in many local cities and towns against cannabis shops led to the development of cannabis delivery services. In most of California it is quicker and easier to get cannabis delivered than wine.

A big change in the market in the past year has been a huge growth in sales of flower, which is smoked, rather than vape cartridges. Illegal vape cartridges were found in 2019 to be responsible for lung damage, which cast a pall over even the legal vape cartridge industry.

There’s an interesting wine-related development with the popularity of flower. Vape cartridges and edibles are based on extracts, which can be from anywhere. But flower is a plant, and that means, like wine grapes, it can be grown in specific terroirs and marketed that way.

California recently passed a law that will set up an appellation system for cannabis next year, similar to the AVA system for wine.

“The appellation program gives us an opportunity to talk about those products, their genetics, their sense of place,” Stamey-White said. “I’m interested in seeing more products based on that, rather than on who has the best Instagram account. I’m really excited about the appellations program.”

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