Lagunitas Brewing leads rush by beer companies into cannabis space

As the marijuana industry ramps up in California and other states in the aftermath of legalization, brewers are seizing an opportunity to collaborate on cannabis drink products to capitalize on this burgeoning and potentially lucrative sector.

At the forefront is Lagunitas Brewing Co. of Petaluma, which has partnered with CannaCraft of Santa Rosa to produce a THC-infused sparkling beverage. The new product, which hit the market Monday, is flying off the shelves at licensed California dispensaries, said Bill Silver, chief executive officer of CannaCraft, which produces vape cartridges, oils, drinks and edibles from cannabis bought from local growers.

“We had to limit the product to two per person so people wouldn’t be upset that we ran out,” said Brandon Levine, owner of the Mercy Wellness dispensary in Cotati. “If not, we would have sold out in an hour.”

Even with the limit, Mercy Wellness has sold out of its first allotment of Lagunitas-branded Hi-Fi Hops, a hop-flavored tonic that comes in two varieties. One contains 10 mg of THC, a principal psychoactive chemical in cannabis, while the other version has 5 mg of THC and 5 mg of cannabidiol, or CBD, a cannabis compound that has been used to treat aches and pain. It sells for $8 for a 12-ounce can, which contains no alcohol.

“It’s definitely gotten a lot of exposure,” said Levine, whose dispensary has set up a text messaging system to alert customers when the next shipment will arrive. “We have even had some employees from Lagunitas call and try to pick some up.”

While Lagunitas has been the first notable brewer to enter the newly regulated space, it certainly will not be the last. Expected to follow soon is Constellation Brands Inc., the giant Victor, New York beverage company that owns San Diego craft brewer Ballast Point Brewing Co., as well as local wineries including Clos du Bois in Geyserville, Simi Winery in Healdsburg and Robert Mondavi Winery in Napa. Last year, it bought a 10 percent stake in a Canadian medical cannabis provider, a country where recreational use will become legal on Oct. 17.

Constellation Brands CEO Rob Sands was quizzed about Lagunitas’ foray into the cannabis drink space by a Wall Street analyst on June 29, and said his company would not be complacent.

“We are pretty interested in what they (Lagunitas) are doing and how they are doing it and we don’t intend to get caught and be coming from behind. So, I suppose, therefore, the answer to your question is yes, we are looking at it pretty carefully, and if we see that opportunity within the confines of what we can legally do, we will do it,” Sands said in a transcript of the conference call.

On Wednesday, Molson Coors Brewing Co. of Denver said its Canadian unit would work with a cannabis company to produce a nonalcoholic cannabis drink for the Canadian market.

The North Coast wine industry has been more reticent to enter the cannabis space, but that shouldn’t last long given the interest expressed privately by some vintners, said Rebecca Stamey-White, a San Francisco lawyer with local winery clients. She spoke Thursday at the second annual Wine & Weed Symposium at the Hyatt Regency Sonoma Wine Country Hotel in Santa Rosa.

“Wine is happening,” Stamey-White said. “I talked to folks who want to do a whiskey experience with cannabis. ... I think cannabis drinks (are) going to be huge.”

Brewers and vintners are attempting to determine whether cannabis - which was legalized in the state for recreational use on Jan. 1 - will be a competitor or an opportunity to expand into a new category. Some say it will likely be both as the marijuana market matures, triggering a rush to get into the sector.

Beer sales in the United States reached $111.4 billion last year, while U.S. wine shipments in 2017 had an estimated retail value of $62.2 billion. Cannabis sales in California are expected to reach $3.7 billion in 2018 and increase by $7.7 billion in 2021, according to a report by Arcview Market Research and BDS Analytics.

One key for entrants is not having any alcohol in the new cannabis drinks. Last year, Lagunitas and CannaCraft teamed up for SuperCritical Ale, a beer that was brewed with terpenes - aromatic compounds of essential oils that were extracted from both cannabis plants and hops.

SuperCritical Ale did not contain any THC, but Silver said Thursday that federal authorities called on Lagunitas to stop selling the product after three weeks of its limited release because cannabis is still illegal under federal law. A SuperCritical vape cartridge by CannaCraft is still being sold, however, in California.

This time, the two companies worked on a better church-state separation that would pass regulatory muster. Lagunitas made the hop-flavored seltzer at its Petaluma facility and it was trucked over to CannaCraft, where the THC and CBD were added and then the drinks were canned. CannaCraft will use its own distribution network in California to deliver the product to as many as 250 dispensaries in the state.

“They are just licensing the Lagunitas brand,” said Stamey-White, who was not an adviser on the product. “That’s what I have told other clients who want to do it. You do a brand licensing deal. Then it’s an entirely cannabis product within the cannabis system.”

Hi-Fi Hops has only been distributed to six dispensaries so far, but CannaCraft is ramping up production that could result in as many as 100,000 cans per month, Silver said.

“This taste likes hops ... the wonderful essence of an IPA,” Silver said, referring to the hoppy flavor of India pale ale beer. Some customers are also attracted to the drink because it has no calories and is less filling than a traditional beer, he said.

Hi-Fi Hops has brought in new customers who are intrigued by the Lagunitas-branded drink, Levine said, in addition to regular clients who use cannabis for recreational and medical purposes. “We are definitely going to see more imitators,” he said.

Lagunitas also has seen other benefits from the collaboration. It is selling a noncannabis version of Hi-Fi hops tonic on its own. The drink is available at its Petaluma taproom and local liquor stores and bars, said spokeswoman Karen Hamilton.

Costumers are drinking it straight as well as using it as a mixer for cocktails, Hamilton said. One owner went through 10 cases in a couple of days and quickly ordered 10 more cases, she said.

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