Cannabis-infused social tonic brand Cann has closed a $27 million Series A funding round, the company announced today, setting the stage for expansion into Canada and bringing a crew of new celebrity investors into the fold.
The round featured new funding from existing investor Imaginary Ventures and a number of new individuals including actor and activist Rosario Dawson, who has joined Cann’s board of directors, and actors Adam Devine, Nina Dobrev, Zoey Deutch, Jordan Cooper and Sara Foster. The brand previously raised a $5 million seed round in 2020.
Based in California, Cann produces a variety of THC and CBD-infused beverages, including a core line of 8 oz. social tonics containing a microdose of 2 mg of THC and 4 mg of CBD per can, as well as 12 oz. “Hi Boy” cans containing 5 mg of THC and its “Roadies” line of liquid packets.
Cann is currently available in six U.S. states – Arizona, California, Illinois, Massachusetts, Nevada, Rhode Island – and as of last month has made the jump over the border to Canada through partnership with Truss Beverage Co., which is a joint venture between MolsonCoors Canada and cannabis beverage developer HEXO. The company will work with cannabis brokerage firm Kindred Partners to bring the brand to market in the country.
In the U.S., the financing will continue to fund growth and expansion, with Arizona being the brand’s latest new market. As well, Cann co-founders Luke Anderson and Jake Bullock told BevNET that the brand wants to be ready to enter “day one” in New York, New Jersey and Connecticut, which are still finalizing their regulatory frameworks for legal cannabis sales.
According to Anderson, while the brand’s footprint in the U.S. is relatively limited due to the lack of federal legalization of THC, the Canadian market – where marijuana has been legal since 2018 – provides a significant scaling opportunity. In contrast to the U.S., which requires locally based production in each new region, Canada’s open market provides a much clearer path to coast-to-coast expansion.
“Canada has entered inter-province commerce, which makes it a little bit easier to scale,” Anderson said. “But being an international beverage brand for the first time, we need more specialized heads, we need to uplevel our systems and processes, and we think that we can be a truly global, multi-brand beverage company if we continue on the path that we’re on.”
Anderson noted that Canada and California have about the same population (38.19 million vs. 39.2 million respectively as of 2021), but Canada is a more expensive market to serve due to its size. Cann’s began selling in Ontario late last month and plans to enter Alberta and British Columbia in the spring.
Bullock noted that Ontario has about 1,115 stores licensed to sell cannabis, making it a bigger market than any individual U.S. state. About 250 of those stores, he estimated, drive about 80% of the business across all categories, giving Cann a target list to work from. Since the launch, the brand is already in about 90 accounts.
While California may have the more mature cannabis market, Bullock noted that beverage comprises a slightly larger percentage of overall cannabis sales in Canada. Currently, Cann is the largest carbonated cannabis beverage brand in California, according to data firm Headset, and carbonated beverages were up 29.7% year-over-year for the 90-day period ending December 10, 2021 (carbonated drinks make up 36.9% of the total cannabis beverage category). However, although the segment is fast-growing in both countries, as of March 2021, the firm showed that beverages make up just 1% of U.S. cannabis sales and 1.5% of Canadian sales.
Cann’s positioning as a microdosed social tonic, which it helped pioneer in California, is also not as unique in Canada, where there are already numerous drinks with 2-10 mg of THC per unit. Anderson said in many ways this is a benefit, as the company can spend less time on education and more time focusing on its other points of differentiation, such as its flavor quality. However, he acknowledged that there’s also difficulty within a more crowded set that already has limited shelf space, something Cann has experienced as its launched states like Massachusetts where smaller dose brands like Levia are already established.
“Unlike in California, where we sort of wrote the rulebook, [dispensary owners in Canada] don’t necessarily have enough time in the day to think about what’s only 1% of their sales in as creative a way as we do,” he said. “So, we know it’s an uphill battle early. But at the end of the day, the consumer loves the product without fail, and they continue to return to buy the product, no matter what market we’re in. And so we’re willing to spend a little time and effort and energy and money upfront in order to convince everybody to give us half the bridge.”
Much of the toughest competition in Canada is also coming from major strategics, including Constellation Brands, rather than other startups, making Cann’s connection with Molson Coors through Truss all the more important to its ability to establish itself in the new marketplace.
As does its growing roster of high profile influencers. Prior to the new financing, Cann had already brought in names like Gwyneth Paltrow, Kate Hudson, Rebel Wilson, Ruby Rose and pop star Tove Lo. Lo joined the brand as an investor last year and also had the distinction of co-creating the brand’s first caffeinated product.
Anderson said Cann is now up to 30 celebrity investors, who he said have been instrumental to driving trial for the brand and establishing its legitimacy as a mainstream product. Most notable this round is the announcement of Rosario Dawson as a board member, who joined the company as a director in the fall.
Beyond her work as an actress, Dawson is also a passionate advocate for social justice and marijuana legalization. According to Anderson, she joined the company as a way of getting more involved in the cannabis industry, which has seen racial disparity arise as white entrepreneurs have established themselves in the market while minorities and in particular Black people continue to be incarcerated for drug possession around the country. Dawson is currently developing “storytelling projects” around the War on Drugs which will also tie into Cann’s social mission to support drug policy reform and equity in the cannabis industry.
“She’s not afraid to get arrested at a political rally, she always stands up for marginalized voices, whether it’s around income inequality or access to healthcare, or, in this case, the war on drugs,’ Anderson said. “And it’s important that we’re putting our money where our mouth is when we talk about social justice issues in an industry that has predominantly been very white and male.”
Beyond Dawson, another key addition to Cann’s celebrity strategy is actor and comedian Adam Devine, known for his TV roles on Workaholics and The Righteous Gemstones. Anderson and Bullock said Devine is helping to develop a new flavor which will launch in April. Bullock called the new product “a risk” on several fronts, including an “aggressive and bold” package design that reflects Devine’s style of comedy and a flavor profile that “playfully departs” from the brand’s current focus on fruit and herbal ingredients in order to “attack artificial flavors and antiquated taste profiles.”
“It’s a big risk, but you know, it’s drugs that we’re selling,” Bullock said. “And at the end of the day, we can’t take ourselves seriously. So we’re comfortable taking risks that maybe a traditional CPG company won’t.”