Cannabis beverage producer Cann announced today it has acquired Toronto-based CBD drink maker Sweet Reason, marking the company’s first acquisition as it seeks to build out a platform for alcohol alternatives. Terms of the deal were not disclosed.
According to Cann co-founder Luke Anderson, the company intends to position Sweet Reason as a functional non-alcoholic adult beverage that can scale in mainstream retail channels and is exploring removing CBD from the formulation in order to avoid regulatory hurdles.
Founded in 2018 by CEO Hilary McCain, Sweet Reason produces a line of sparkling hemp-infused beverages, including its Evening Blend made with calming herbs, adaptogens and 25 mg of CBD per 12 oz. bottle. The brand is currently available in about 800 retail stores across California, Illinois and New York and also operates a direct-to-consumer business that McCain said has become the company’s fastest growing channel.
“We have long been very pointed about the THC-infused beverage space being better suited as an alcohol alternative than the purely CBD-infused beverage space,” Anderson said. “I think it would come as no surprise to people who have been following along the Cann journey that we are most interested in taking what Hilary has built, and applying it to new spaces.”
McCain will now transition to the role of SVP, Emerging Products for Cann where she will be involved in sales and distribution, innovation and product development for all portfolio brands.
“I think the whole alcohol world today is still trying to figure out this trend of people wanting to drink less booze,” McCain said. “So I’m excited to help Cann figure that out, and also help distributors figure that out. I think the world is our oyster and we’re just starting. This is just day one.”
“I have long viewed Hilary as a pioneer in the cannabinoid beverage space, and I’ve thought for quite a long time that our skills, capabilities and experiences were very complimentary,” Anderson added, praising her ability as a founder to manage finance, operations, multiple distributor models and regulatory complexities. “This is a bet not just on Hilary and her leadership, but her ability to help Cann expand into a multi-brand and multi-channel ‘Alcohol Alternatives of the Future’ company.”
The acquisition follows Cann’s $27 million Series A round earlier this year, which has helped fuel the brand’s North American retail expansion across the U.S. and Canada.
Although he did not specify whether or not Cann will continue to seek out additional acquisitions in the near future, Anderson said he believed creating a multi-brand platform is becoming more important within the cannabis space as the industry matures and dispensaries seek out reliable brand partnerships.
“We’re starting to see, even just on the THC side in the dispensaries, that people are looking for fewer conversations, deeper relationships, broader product assortment, and we want to make sure we’re ahead of the curve on that as I think, in the cannabis space, consolidation will further drive activity like that,” he said.
In addition to a CBD-free version of Sweet Reason that can be sold more freely in traditional retail, Anderson said Cann is also considering creating a THC-infused drink under the Sweet Reason brand that could fill a white space for “micro-microdose” products containing fewer than 2 mg of THC. Though plans for a THC line are not finalized, he suggested there is a “huge untapped market” for consumers for whom Cann’s 2-5 mg per serving is overwhelming and an even lighter product could help drive incremental sales. “We only get to a place where THC-infused beverages are mainstream when we see a variety of sessionable socially geared all alcohol alternatives under that umbrella,” he added.
Beyond M&A, Cann is also looking to bring THC drinks to the mainstream through its own innovations. This summer, the brand launched a version of its core social tonic line made with 2 mg of hemp-derived Delta-9 THC in Minnesota after the state legalized the compound. Although products have only been on sale for a little over a month, Anderson said the line has been off to a strong start in liquor and convenience stores.
“We believe the alcohol alternative revolution is upon us, and it’s not just limited to the dispensary channel,” he said.