Since its launch in May of last year, the cannabis-infused drink company Cann has sold 150,000 cans of its THC and CBD-infused, alcohol-free, intoxicants, in a sign of success that’s bucking current industry trends,.
On its way to that milestone, the company has sold out multiple times as it wrestled with manufacturing facilities that simply couldn’t keep up with demand, according to the company’s co-founders, Luke Anderson and Jake Bullock.
Now, thanks to a $5 million investment from new backers led by Imaginary, an early stage investment firm launched by the founder of the Net-a-Porter group, and JM10, a leading cannabis company, Cann is hoping to break through the legal obstacles surrounding distribution of cannabis-derived intoxicants and overcome investors growing skepticism around the viability of cannabis as a business.
“Overall, the industry is hurting. They’re not meeting the growth expectations that they set out,” says Bullock. “What’s happening on delivery platforms is not connected with the mainstream. You have folks that are not going to smoke or are not going to inhale vapor… [and so] you’ve seen a much slower adoption of cannabis as a mainstream mild intoxicant.”
Those problems are threatening the existence of one of the cannabis industry’s most recognizable startups, Eaze. According to earlier TechCrunch reports, the company is running low on cash thanks to a perfect storm of working capital constraints, increased marketing spend and lower customer demand.
Cann’s co-founders think their drink offers something more appealing to a casual consumer than vaping or smoking — but the company chafes under the distribution constraints that tie it to the dispensary businesses.
Cann wants to transform the social alcohol drinker into a Cann consumer, but is hampered by its inability to appear next to beer and wine on grocery store shelves. In fact, the company’s products can’t appear in the grocery store at all.
So to woo these would-be Cann fans, the company is casting about for new distribution deals and cutting its pricing — selling its drinks at a retail price of roughly $4 per Cann.
The $16 four-pack or $24 dollar six-pack is more palatable to consumers than the $27 price point for a euphoric like Kin, the company’s founders think. Investors have backed other would be bud beverages. K-Zen Beverages raised a $5 million from the investment firm DCM and California Dreamin’, a Y Combinator-backed intoxicant containing a whopping 10 milligrams of THC, has also nabbed some investor cash. Even traditional breweries are getting into the act, with the Heineken-owned brewery Lagunitas offering a THC and CBD-infused, alcohol-free version of their famous beer under the moniker HiFi Hops.
Bullock and Anderson say that their company’s drinks, which pack 2MG of THC and 4MG of CBD, could be a challenger to traditional liquors — offering all of the buzz and none of the bad hangover — if they could only get over the regulatory and supply chain hurdles.
To address their manufacturing issues, the company found a co-packer called Space Station, the Sacramento, Calif.-based producer that will help boost volumes.
“We are trying to create a product that can appeal to mainstream consumers,” says Bullock. “There are only 600 licensed distributors so how do you meet customers where they are?”
Instead of vertically integrating (just as Eaze is rushing to make its own products, Cann could build out its own distribution channels and delivery services), Cann is doubling down on third parties and will spend at least some of its new money to reach beyond California into other states where weed is legally sold and regulated.
Right now, it’s pretty much a land grab for shelf space at dispensaries, with few THC and CBD beverages on store shelves, but one reason for the new capital is that both Bullock and Anderson know that any edible company would be foolish not to explore the beverage market too.
Investors like Massenet view the investment in companies like Cann as a bet on the increasing movement toward sobriety among younger generations.
“We have been tracking the new generation of consumers who are searching for and embracing new forms of responsible social drinking which do not involve alcohol,” said Natalie Massenet, Co-founder of Imaginary. “Cann, with its formulation that has the potency of a light beer without the alcohol or calories, addresses this growing trend in a brilliantly formulated series of beverages. Being obsessed with backing the best new disruptive consumer product companies, Imaginary also loves the fantastic branding and positioning of Cann.”