Posted: Apr 08, 2019
With cannabis legalisation gathering pace, the IWSR talks to Victor Jerez, COO of Californian cannabis group Cannabiniers, about his vision for the future of legalised recreational cannabis use in the United States.
These products would be an easy sell and a formidable opponent to the drinks industry.
Having built up his reputation with the aristocracy of the spirits industry, last summer, Victor Jerez, packed his bags for California to join the cannabis revolution. He had built up a wealth of experience in wine and spirits, having headed up the Corporate Strategy and M&A teams at both William Grant & Sons and Pernod Ricard. Jerez has tracked the development of cannabis for some time and was on the Board of Advisors to Tokyo Smoke/Hiku, the cannabis accessories retailer in Canada, before its acquisition by Canopy.
Jerez thinks it is “super early days”, but recreational cannabis will one day be adopted by the mainstream to unwind and socialise. From his view, the attitudinal barriers among consumers will be harder to breakdown, but that process has been moving swiftly in recent years as evidenced by the recreational legalisation across more US states. “I remember watching the referendum on legalisation in California and concluding that this was not being driven by some kind of hippy alliance, but actually represented a major shift in consumer behaviour.”
According to Jerez, progress in consumer attitudes will be facilitated by the conversion of the ‘cannabis curious’ and the ‘cannabis rejectors’. He recalls a trip to Las Vegas with some stalwart cannabis rejectors. “I bought a six-pack of cannabis beer Two Roots. I told them that Two Roots delivers an elevated state, as regular beer does, but has fewer calories and here’s the big one – there is no hangover. Not only were they in, they all said they would repeat the experience.”
For many potential cannabis users, the fear of the unknown is a considerable deterrent. They don’t want to be out of control. Providing products to consumers which allow them to consistently control their dosage and to easily self-titrate will be a critical step in the expansion of the cannabis category, Jerez believes. FORM factors, as Jerez calls them, relate to dosing and to “cracking the timing of onset and the offset of the effect. Consumers will need to learn how to use cannabis, because currently there is no real mainstream consumption culture.”
This is the opposite of alcohol, a product that consumers understand in terms of dosage. Whether it is a 5% ABV beer, a 12% ABV wine or a 40% ABV spirit, the alcohol user generally knows how to manage consumption to reach the desired effect on mood and behaviour, which is compatible with socialising.
Jerez is convinced that addressing these FORM factors is most easily achieved by harnessing beverages as the vehicle for cannabis. The onset of the ‘buzz’ from beverages infused with THC (the psychoactive) that are designed to closely replicate that of alcoholic drinks offer considerable advantage over other cannabis products.
Edibles that utilise candy, chocolate cookies or even gummy bears can have a delay of up to an hour and a half before the arrival of the ‘buzz’. This delay is often a trigger for overconsumption as people get impatient. Jerez explains that patience will not be an issue for smokers as vapours enter the system rapidly. The purists and the real cannabis aficionados will still want to smoke flower and Jerez is impressed by the premium presentation of some of the brands seen in the dispensaries. Vaping is a more convenient form of smoking, partly because there is no smell, it is more discreet, and the dosing is becoming more consistent. Many of the vaping brands are being well marketed and are already tapping into the high-end flower market. Jerez says that you still cannot get away from the fact that despite the plusses of vaping, you are still inhaling hot oils into your lungs and this counters the wellbeing trend.
These factors put beverages in the driving seat. The THC-infused beverages that Jerez sees as best positioned to capture the space are adult analogue beverages. “These are the key avenue to the normalisation of cannabis consumption,” he says.
“Adult analogue beverages, if positioned correctly, can meet alcohol halfway and provide an easy path for the cannabis curious and cannabis rejectors to experiment and adopt cannabis-infused products via already familiar consumption patterns associated with elevated experience,” Jerez explains.
Jerez’s theory is that THC-infused beverages can successfully infiltrate existing alcoholic occasions, rituals and habits.
Jerez’s theory is that THC-infused beverages can successfully infiltrate existing alcoholic occasions, rituals and habits. To do this, they need to be bottled and dosed consistently – just like regular alcoholic drinks. AB InBev’s investment in cannabis and the scale of Constellation’s commitment verifies Jerez’s conclusions that it will be infused beverages that establish themselves as the predominant medium for recreational cannabis.
The early products to market, like Lagunitas Hi-Fi Hops and Two Roots, look like beers and come from a brewing pedigree. They are essentially dealcoholised beer with THC added in. They deliver the ‘buzz’, but with no calories or hangover. On an even playing field, without today’s attitudinal barriers of cannabis, these products would be an easy sell and a formidable opponent to the drinks industry.
For those that imagine pubs and bars will be a safe haven for alcohol, Jerez thinks this could be a wrong assumption. A trip to Barcelona gave him the opportunity to assess a few of the 350 or so cannabis consumption clubs there. What he saw heartened him: “People were hanging out and enjoying themselves similarly to bars serving alcoholic drinks, just a bit more mellow.”
He explains that the reason why there is a bias in the US towards recreational cannabis use is because the only place to access the product is through the off-premise. The only factor holding the on-premise back is regulation and that is going to change. Already in California there are plans for cannabis consumption lounges.
He does acknowledge though that cannabis beverages may need to overcome some financial competitive disadvantages like higher cost of goods and logistics. Jerez is also unfazed by what many might consider to be the future threats of scrutiny and punitive tax levels. He embraces the threat of regulatory scrutiny and even any warning notices on packs because they will help producers to focus on the importance of building brands that normalise the products and strengthen trust in the category.
Jerez is adamant that cannabis-infused drinks will be at the vanguard. He likens the transition from alcohol to cannabis to that of gasoline to electric cars – it will take time as there are many roadblocks to overcome – but it is almost inevitable.
For more insight on the impact of cannabis on alcohol, see our Cannabis Strategic Study where we assess the real risks and opportunities to consumption behaviour.
April 4, 2019
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