Inside the Epic Challenge of Cannabis-Infused Drinks

The market for cannabis-related products has grown exponentially with the increasing number of states that have legalized marijuana. However, the road to success is fraught with complex issues. Like a study of Cann, a beverage business Cann from Ayelet Israeli, is a good example.

The legalization of cannabis has turned it into a multibillion-dollar industry in a matter of minutes. Still, this booming new market has experienced more – and unique–growing issues than most.

Many experts anticipate significant market growth ahead as more states allow recreational and medical uses of cannabis. This plant is a source of brain-altering substances THC and CBD, typically present in cannabis. But a brand new analysis conducted by Harvard Business School professor Ayelet Israeli on a brand new cannabis-infused beverage business reveals sure of the critical and challenging issues that budding entrepreneurs confront in the cannabis business as compared to other areas.

“THE LEVEL OF UNCERTAINTY IS SO HIGH FOR CANNABIS ENTREPRENEURS. THE CHALLENGES ARE QUITE UNIQUE. “

Although stories of entrepreneurs’ success are abundant in the emerging cannabis market,, the market is filled with the market and regulatory hurdles not seen in other industries. They all contribute to additional expenses and burdens for new enterprises looking to establish themselves, according to Israeli The Marvin Bower, Associate Professor of Business Administration.

The issues include operating at a huge scale, when sales of cannabis remain illegal at the federal level, and operating legally across states, with numerous packaging, manufacturing, retailing, and advertising regulations.

“The level of uncertainty is so high for cannabis entrepreneurs,” claims Israeli, who wrote the report together with Annie Wilson, lecturer of marketing at the Wharton School at the University of Pennsylvania. “The challenges that regulators face in the cannabis industry are issues that other entrepreneurs do not face. The issues are unique.”

The study examines the business problems facing Luke Anderson, who received an MBA from HBS in 2016, and co-founder Jake Bullock. The two co-founded Cann while working as a consultants for Bain & Company in 2018.

A social alternative to alcohol that has a purpose

As one of the earliest cannabis beverage companies, Cann has sold more than 10 million cans of low-calorie seltzer with flavors that contain small amounts of cannabidiol (CBD) as well as tetrahydrocannabinol (THC) two of the cannabinoids that are found in hemp and marijuana.

Cann was different by offering “micro-dose,” or “low-dose,” drinks which appeal to those who want only to be slightly “buzzed,” as opposed to “stoners” who seek out more substantial amounts.

Anderson and Bullock have positioned Cann’s drinks that come in various flavors that range from lemon lavender to grapefruit rosemary in the same way as alcohol alternatives. Since they were queer founders, they committed to an inclusive marketing strategy for the LGBTQIAand community.

The company was initially established with $1.5 million of seed money and the founders’ funds, the company today has several investors, including celebrities like Gwyneth Paltrow and Rosario Dawson, and recently secured $27 million of Series A financing. The products of Cann are for sale in 34 states of the US and two provinces in Canada.

Sharks are found in these (sparkling) waters.

But Cann’s first successes haven’t been without difficulty. From the beginning, fundraising was plagued by unique issues specific to marijuana, like investors’ reluctance to invest in companies when sales were not legal in federal laws. Others were worried about consumers’ reaction to the cannabis-infused drinks as a highly new product and the possibility of the plethora of new cannabis products flooding the market.

Anderson and Bullock were also faced with with the reality that they ca unable to transport specific cannabis-related items across state lines because of federal laws governing interstate commerce, which force the owners to consolidate many duplicate business operations, like manufacturing, within states where cannabis is legally available.

“IN MANY OF THE PLACES WHERE IT’S RAISED AWARENESS, PEOPLE CAN’T EVEN BUY THE BEVERAGE DUE TO STATE LAWS. “

Additionally, there are a variety of state regulations, like certain states insisting that all products from cannabis (including smoke and vapor, edible and beverages) are sold only through specific “dispensaries,” not at the more easily accessible or popular places like supermarkets, liquor stores, and convenience stores. Regulations on the promotion and advertising of cannabis-related products, like what is allowed and not printed on labels for packaging, are also different across states.

Even when they create a memorable advertisement that is acceptable to consumers and regulators, such as the music video made by Cann known as “Taste So Good (The Cann Song),” which was recently viewed by millions, its impact could be restricted by the extent to which consumers can access the product.

“You’re creating a lot of awareness with these ad campaigns,” says Israeli co-founder of the Customer Intelligence Lab at Harvard’s Digital, Data, and Design Institute. “But, in many of the places where it’s raised awareness, people can’t even buy the beverage due to state laws.”

Entrepreneurs face challenges and have opportunities.

As a result of all the different challenges facing the cannabis industry, Entrepreneurs aren’t always able to use the most efficient methods to make and distribute, market, and promote their products.

“They’re facing challenges above and beyond what you would typically see in other industries,” Wilson explains Wilson. “In the cannabis industry, there are many additional cost and regulations, as well as an incredibly uncertain situation due to the uncertain timeline of federal legalization. It’s a daunting task.”