5 Differences Between Selling Cannabis and Alcohol Beverages
5 major differences between selling cannabis and alcohol beverages that you need to know.
“The illegality of cannabis is outrageous, an impediment to full utilization of a drug which helps produce the serenity and insight, sensitivity and fellowship so desperately needed in this increasingly mad and dangerous world” - Carl Sagan
The good news is that the cannabis industry is finding its way to grab a legal spot across the United States, and slowly across the world too.
The cannabis industry is becoming a large sector in the United States and is getting bigger with time. As the cannabis industry is growing, the trend of edibles and cannabis drinks is also growing along with it. The industry has already found its legal place in certain states in the US, including California, Colorado, Illinois, Nevada, Oregon and others.
Cannabis sales were brought into the light in Nielsen Company’s 2019 Total Consumer Report. The data and information company predicted the sales of cannabis consumer packaged goods to rise five times of 2018’s sales.
Now let’s take a look at the alcohol industry in the US - which is a large and important industry, always has been, and let’s be honest, it always will be.
The market value of alcoholic drinks in the United States has steadily increased in recent years. In 2015, the industry was valued at approximately 230 billion U.S. dollars. By 2019, this had increased by slightly more than 13 percent to 250 billion U.S. dollars. This is expected to increase further by 2020. (statista)
With both industries on a rise, some might think that the selling and distributing part of it might be the same. However, that’s not always the case. Alcoholic drinks have officially been in the market for the longest time - but the area for legalised cannabis products is very new, and has a lot of rules and regulations to it.
At the 2019 Cannabis Drinks Expo Conference, Charlie Cangialosi - VP of National Sales at Old Pal, and Rebecca Stamey White - Partner at Hinman & Carmichael LLP discussed the differences between selling and distributing cannabis drinks and alcoholic drinks.
Click here to hear Charlie and Rebecca speak at the 2019 Cannabis Drinks Expo conference.
Selling and distributing alcoholic drinks and cannabis drinks might sound similar, but they are both on different ends of the rope. Let’s take a look at some of the differences between selling and distributing cannabis drinks and alcoholic drinks.
Trade education is an important part of selling and distributing any product to the market. With alcohol, trade education is pretty much unregulated. You can educate traders, retailers, and buyers about alcoholic drinks anywhere - you can meet with them anywhere and talk to them about methods of preparation, you can make them taste different products, and there is usually the provision of samples. This makes it easier for a buyer to leap into the idea of the product as everything is there in front of them, and they are able to try it themselves, and decide whether it’s going to work or not.
Cannabis, on the other hand, has a lower opportunity for trade education. Due to the regulations confining the industry, the cannabis sector doesn’t have the retailers, importers, distributors that the alcohol industry has - making it very hard to explain cannabis drinks to a new trader, especially without tasting - as consumption of cannabis isn’t regulated everywhere.
“Pre-regulation trade education was actually a great dynamic because we could go into a shop and set up a table and engage with patients at that point and actually provide them with samples, and tell them what their experience is going to be like,” said Charlie, when asked about how he dealt with the lack of trade education provision for cannabis.
“When I was with Kiva Confections, with any edible product, we produced sample pouches that gave people the product in a small amount and we talked to them about what the dosing was and what experience they’re going to get,” he continued.
“Now that’s completely restricted, you can’t do that anymore. So, we still do demos and we go in and we talk to people about what the product is, and brand positioning, but that’s it”
With restrictions to consuming cannabis, it’s hard to educate people about what’s going on, what the product is, and the experience they should expect.
One of the main reasons that there is a vast difference between selling and distributing cannabis beverages is the lack of on-sale and off-sale retail licenses.
Both on-sale and off-sale retail licenses for alcoholic beverages are much higher than that of cannabis, making the cannabis sector a very small one to delve into as a trial round. Consumers like to try things first at a small level, before getting into it completely - but the lack of options to consume cannabis due to rules and regulations, and the lack of shops selling those products is confining sales of cannabis beverages to a limited amount.
Knowing the product
With alcoholic drinks being around for so long and being easily accessible, consumers know what they’re getting into. They’re educated about what they’re going to drink, in fact, they know what they want to drink. They know what is expected and they know what they’re going to get.
With cannabis, things are different. The consumer doesn’t know what they’re going to expect, and due to the regulations in place, tastings can’t be offered as such. So now, to educate the consumers, a business has to go through budtenders.
“The budtenders are the gatekeepers of the cannabis business,” says Charlie. As a cannabis drinks business, or any cannabis business, it’s very important to pitch your product to a budtender. This is simply because once a consumer goes to a dispensary, they usually ask the budtender ‘what should I get?’, and they’re going to end up buying what the budtender recommends to them because people don’t have the education of the products.
So, to help consumers know the product, it’s best to educate the budtenders first, who will then go ahead and recommend the product to the consumers - and they, in turn, will educate consumers on-site as well.
Charlie’s Tip: It’s best to educate budtenders, or tell shop owners to educate their budtenders and make them love your product so it sells to the end consumer.
On a sheet of paper, distribution for alcoholic drinks and cannabis products is essentially the same.
The biggest challenge for people that are operating as distribution companies for cannabis products is the infrastructure they need. Compared to alcohol, cannabis products have a very limited number of stores across the state - let’s say around 500 to 600 - whereas a company like AB-Inbev has over 3500 accounts just in LA itself.
But a cannabis distributor has to get to around 500 shops, in over 5-6 geographies, making it a challenge for cannabis distributors. Another big challenge is finding the right salespeople to go on the street and sell a cannabis portfolio.
Like mentioned above, not everyone is educated on cannabis, and it’s very hard to educate people in this sector as well. A lot of shops don’t even realise what they have on their shelves; so, finding a salesperson who is competent enough, understands the products, and knows how to sell the product is becoming a huge challenge as well.
Even though it is tough to distribute, there is still a lot more flexibility in the cannabis sector. “I think there’s a lot more flexibility where you have distributors that offer anything from your basic testing, and Q&A testing, to full service getting to accounts, and have that portfolio of brands” explained Rebecca.
Vertical Integration vs Three-Tier System
For alcohol, you have to follow a strict three-tier system (importer/producer, distributor, retailer). There is hardly any way to go around it.
However, for cannabis products, it’s not the same. Due to the fact that cannabis isn’t legalised everywhere, brands and companies can go straight to dispensaries and pitch their product to be kept there.
This is a huge advantage for cannabis beverage brands as they can find their way into cannabis dispensaries and stores, placing a monopoly of their products - if they offer the shop a suitable deal from their side.
With the cannabis industry set to grow, hopes are that the selling and distribution side of it gets easier with time.
About Cannabis Drinks Expo
Cannabis Drinks Expo is a must-attend event for those curiously eying the future of the burgeoning U.S. cannabis industry.
We also cover the key issues surrounding the likelihood and timescale for legalization to other countries, as well as the impact of legalized cannabis on the traditional alcoholic and non-alcoholic drinks markets globally.
Who should Visit?
Cannabis Drinks Expo promises to be relevant for anyone involved in the development, production, distribution and retailing of cannabis and related products. It will also provide a vital networking opportunity for political analysts, medical experts and those involved in the development and implementation of legalized cannabis into new markets.
Attend Cannabis Drinks Expo in preferred city
Who should exhibit?
If you’re serious about the cannabis drinks category, we’re still keeping it as real as ever. At Cannabis Drinks Expo, our goal is to empower you with knowledge, network, and platform so you can grow and build your cannabis drinks business. CDE is where you will find cannabis brands and suppliers who are serious about building their business in this category exhibit.
Exhibit in preferred city
Potential exhibitors include (but not limited to): Medical marijuana producers, Cannabis growers, Cannabis producers/ product developers, Cannabis processors, Cannabis distributors/transporters, Wineries, Breweries, Distilleries, Branded drinks companies, Drinks manufacturers/producers, Pharma companies, Equipments and service providers, CBD manufacturers, Marijuana-Infused products and edibles providers, Testing and laboratory services, Logistics and supply chain operators, Drinks distributors/wholesalers, Drinks importers, Lobbyists/ public affairs businesses, Political advisors, and more.