Lagunitas retools cannabis drink as Sonoma County company aims to capture growing market

More than five years ago, Lagunitas Brewing Co. toyed around with a cannabis-infused drink in combining hops with marijuana buds in a flavorful pairing.

The foray was not surprising. The Petaluma-based brewery became a pioneer in the craft beer marketplace by producing very hoppy India pale ales marketed with a stoner-friendly vibe.

Founder Tony Magee noted that he would “wake and bake” most days before heading to the brewery.

In its quest, Lagunitas teamed up with CannaCraft, a Santa Rosa-based cannabis production company, to enter the market. In 2017, the two produced SuperCritical Ale, a hoppy beer brewed with terpenes, the aromatic compounds of essential oils that were extracted from both cannabis and hops.

The brewery also helped out CannaCraft with its vaping products for its AbsoluteXtracts line that carried a beer-like aroma.

A year later, the two unveiled a much more ambitious gambit: Hi-Fi Hops, a hop-flavored tonic water that contained THC, a principal psychoactive chemical in cannabis. That product in a 12-ounce bottle could be only sold in licensed dispensaries within California and later became a top-seller based on having the Lagunitas name behind it after cannabis became legal for recreational use in 2018.

CannaCraft makes and cans the product at its plant because alcohol producers do not want to lose their federal license because cannabis is still illegal on the federal level.

But the drinks marketplace has dramatically changed over the past few years, especially as hard seltzer became a $5 billion business that has taken a sizable portion out of traditional beer sales.

The change has now spilled over to the cannabis segment.

The two companies have now revamped their product ― switching from bottles to cans and introducing more aroma notes of citrus and berries to its lineup. Next month, they are shipping out HiFi Sessions, a canned sparkling water with more tropical flavors that includes a low-dosage drink specifically targeted for those who are curious but still hesitant about cannabis beverages.

“As more consumers entered the marketplace, there was confusion: Is this a beer?” said Paige Guzman, chief marketing officer for Lagunitas, which is now fully owned by Heineken International.

The company found that more customers were looking at such cannabis drinks from a wellness aspect, whether it would be the soccer mom ditching her chardonnay for the product that has no calories and no threat of hangover to those who want a drink akin to tea to wind down before bedtime for a good night’s sleep.

“Every night, consumers have a choice: What do I want to use to relax?,” Guzman said. “As we have watched this evolution, we wanted to reflect the evolving consumer needs.”

The result? Three revamped products with a range of potency.

There is Hoppy Chilln, which features notes of tropical citrus fruits and contains 10 mgs of THC. In the middle is Hoppy Balance that has 5 mgs of THC and 5 mgs of cannabidiol, or CBD, a cannabis compound that has been used more as pain relief to treat aches.

The new entry-level drink is called Cloudberry, with tart and juicy flavors that has 2 mgs of THC and 2 mgs of CBD. A single can will cost $7 and four-packs will sell for $28.

The Cloudberry drink was designed for those looking for a micro-dose consumption as every individual has a different tolerance toward THC and that such a lower option will allow the buyer to tailor to his or her comfort level, Guzman said.

“What works for a medical patient versus what works for a stressed-out mom might be two very different things,” she said.

The low-dose option should be popular given the receptiveness to such drinks at the Solful dispensary in Sebastopol, said Eli Melrod, chief executive officer and co-founder.

“There is definitely a market for very, very mild low-does products,” Melrod said. “It’s great for alcohol replacement in a lot of ways.”

The cannabis drinks segment had the biggest growth of the past year out of all the different categories at Solful, Melrod said. In fact, the new Solful store that will open in Santa Rosa across from Montgomery Village in the spring will have three times the refrigerated drink space than the Sebastopol location because there are so many new products coming into the market, he said.

That’s supported by market research within this still-nascent industry.

The products have to be produced within each of the 37 states that allow for medical use of cannabis because interstate business is still illegal. In addition, 18 states and the District of Columbia permit adult use with California being the largest market.

Legal sales of cannabis were estimated to be at $22 billion last year and are expected to grow to more than $41 billion in 2026, according to BDSA, a leading market research firm covering the legal cannabis market.

In 2020, beverages represented only 5% of the edible cannabis products purchased, according to BDSA. Almost 70% was candy, most in the form of gummies.

But the cannabis drinks segment ― which also includes CBD-only drinks that are now available in regular supermarkets ― is expected to grow in future years, from more than $200 million in 2021 to $2.4 billion in 2026, BDSA noted in a recent report.

The firm said cannabis drinks had some advantages because consumers could control the dosages better with beverages than other products, such as smoking or vaping and products come in a more familiar and accessible package.

“They also have potential to tap into more social occasions or more traditional drinking occasions,” the report read.

There also has been more entrants after Lagunitas was able to be first high-profile brand name to enter. Constellation Brands Inc., which owns local wineries such as Robert Mondavi in Napa Valley and Simi in Healdsburg, owns a significant stake in a Canadian cannabis company, Canopy Growth. Anheuser-Busch InBev, however, recently ended last month its partnership with another Canadian cannabis company.

There also has been attempts in manufacturing a winelike cannabis beverage, though those efforts have been mostly at a smaller scale. Rebel Coast Winery of Sonoma introduced a nonalcoholic wine infused with THC in 2018 and was later joined in the marketplace by the House of Saka in Napa, which uses grapes grown in the Napa Valley.

Those efforts are likely to grow. CannaCraft last year introduced a new product called Gem + Jane, a sparkling water with THC that had flavors such as elderflower pear, lemon blueberry lavender and strawberry hibiscus.

It noted the brand was developed “for women, by women.” Vintage Wine Estates of Santa Rosa has expressed interest in developing a cannabis drink as well if federal barriers are lowered, especially as its president Terry Wheatley is chairwoman of CannaCraft’s board of directors, which provides her an unique insight into the category.

The old HiFi Hops products likely appealed to more men give their affinity for craft beer and the new Lagunitas product should be able to entice more female consumers, especially with the low-does option, said Dennis Hunter, CannaCraft founder.

“I think the goal is to broaden appeal to women as well,” he said. “I think you will see more and more people cross over.”

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.