Cann Social Tonics co-founders Jake Bullock and Luke Anderson saw a mile-high opportunity when they took a look at the cannabis beverage market in cannabis-legal states about three years ago.
Drinks with THC as their main intoxicant were usually sold in single-servings, with more than enough active ingredients to deliver a buzz for the cannabis-wise.
Both Bullock and Anderson figured they would aim their beverage start-up Cann Social Tonics at a much larger audience of casual drinkers interested in trying something different, but not debilitating — sold in six-packs just like soda and beer.
Fast forward, and Cann is one of the top-selling THC-infused beverages in the U.S., including a roughly 25% share in California.
Cann continues to stand out by offering a social kick with no hangover and one-third the calories of beer.
“There’s no substitute for what we’re doing,” Cann co-founder Anderson told MarketWatch. “About 80% of adult drinkers want to drink less [alcohol]. We’re meeting them where they’re at.”
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Cann’s products are now offered in about 600 stores in legal cannabis states as well as direct-to-consumer at drinkcann.com, with rapid growth expected in the near future.
Beer makers are studying the market and Cann has been meeting with them for potential joint ventures, said Anderson and Bullock, who is CEO of Cann.
Cann already has a joint venture in Canada, where its drinks are made by Truss Beverage, which is backed by Hexo Corp.
and Molson Coors Canada
Cann Social Tonics raised a $27 million seed round in February with backing from Imaginary Ventures and Green Thumb Industries
and has since raised a $10 million up-round from the same investors. The company’s full legal name is Socali Manufacturing Inc., based in California, but it operates under the Cann name.
It’s ending the year with 55 employees and expected sales of more than $10 million. It has no plans to go public and is already generating cash flow so it has enough capital on hand and is not burning through cash quickly, the founders said.
As Anderson and Bullock look toward 2023, they expect to grow Cann’s presence in both New York and New Jersey.
With restrictions for cannabis on TV and online destinations, Cann relies on tried-and-true methods of getting the product in front of prospective customers by offering samples at dispensaries and events, as well as word-of-mouth through Cann evangelists and 45 celebrity shareholders.
Kate Hudson, one shareholder, has endorsed the drink to play up Cann’s appeal to mainstream social drinkers. Rosario Dawson, an actress also known for her political advocacy, is on Cann’s board of directors.
Inspired partly by Britney Spears’ famous Super Bowl commercial for PepsiCo
as well as the 1970s hit song “Lady Marmalade,” Cann also produced a video, “Taste So Good (The Cann Song),” directed by Jake Wilson.
The video for the song, performed by singer-songwriter-producer Mnek, features Kenworthy, Sarah Michelle Gellar, Hayley Kiyoko, Vincint and Patricia Arquette. They’re joined by top contestants from season 14 of RuPaul’s Drag Race: Kornbread, Kerri Colby, Jorgeous, and Willow Pill.
The song was a top pick on Spotify’s New Music Friday and has been streamed 5 million times.
“People didn’t know it was a promotional video — it was just a fun thing to watch,” Bullock said.
Cann also supports an active social equity agenda, with a focus on corporate social responsibility. It said it dedicates 1% of its revenue to support entrepreneurs of color in the cannabis industry and has also raised money for local groups.
When Jake Bullock and Luke Anderson launched Cann in 2019, the cannabis beverage space was virtually non-existent.
High-dose cannabis products were all the rage and “regressive heteronormative branding and marketing permeated much of the cannabis, alcohol and beverage industries,” Bullock said.
Inspiration for Cann for Bullock came from his experience living in Colorado, where he saw cannabis products including vapes, edibles, flower and drinks. Existing drinks typically contained higher amounts of THC.
He thought there would be an opportunity to aim for a product with lower THC for people who consume alcohol products socially. He branched into the cannabis business after working at private equity firm Bain Capital and started using his prowess as a company builder to launch his own business.
Bullock said he’s also been inspired by the accomplishment of GT’s Living Foods LLC’s Kombucha brand, which led the way to turn a traditional Asian beverage into a new, $5 billion drink category.
Anderson was working as a consultant at Bain & Co. where he focused on helping big beverage companies behave more like startups.
He said he was getting tired of hangovers from drinking and experimented with substituting part of alcohol with a nibble on a gummy and chasing it with seltzer water.
Anderson applied some of the start-up tools he was using at Bain & Co. and helped launch Cann.
Anderson said he’s been influenced by the success of Spindrift Beverage Co. Inc., the company that helped pioneer the spiked seltzer category
Instead of 10mg or more per bottle, Cann offered a microdose of 2 mg of THC combined with 4 mg of CBD in each can.
Anderson said Cann products have helped him drop his alcohol consumption from about 25 drinks a week to 15.
Cann’s eight-ounce six-packs retail for $24, but the price will likely come down over time as economies of scale improve in the business and the cost of the ingredients drop.
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