CANNABIS What's New in the Food & Beverage Space?

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CANNABIS What's New in the Food & Beverage Space?
CANNABIS
What's New in the Food & Beverage Space?
 Cannabis-infused food and beverage was already a growing
 category when the pandemic hit in 2020, and now, after more
 than a year of uncertainty and stress, consumers are more
 eager than ever to find products that provide them some relief
 and comfort. In fact, one report on cannabis consumption
 found that 42% increased their overall cannabis use during
 the pandemic. This has created significant demand for both
 CBD and THC-infused food and drink products, particularly as
 more and more states legalize recreational marijuana use. The
 growing market and high demand means that brands have
 plenty of room to innovate around products of exceptional
 quality that deliver on both taste and function. Read on to see
   where you and your brand may fit into the cannabis boom.
CANNABIS What's New in the Food & Beverage Space?
The State of Cannabis
Since Colorado and Washington legalized                                                                         CANNABIS IN
the recreational use of cannabis in 2012, a                                                                      COVID-19
wave of marijuana reform has taken over the
United States. As of June 2021, THC products
are fully legal in 18 states and decriminalized
in 30, and those numbers are only expected
to increase. Technavio reports that the global
cannabis edibles market is “on track to register                                                               42% OF USERS
                                                                                                           across all demographics
a compound annual growth rate of more than
                                                                                                            increased their overall
25% between 2018 and 2022, to reach $25.7                                                                        cannabis use
billion.”

                                                                                Images Sourced: Disa.com
In 2017, food products made up the largest share of THC products, with
more than 60% of the market, and that number is expected to increase through 2022.
Looking ahead even further, the Marijuana Business Factbook predicts that the U.S. market
will hit nearly $45 billion by 2025. And with more consumers searching for functional
products that taste great, there is much opportunity in this space.                                             56% OF PARENTS
                                                                                                           living with young children
                                                                                                            increased their cannabis
 “2020 was an important year in cannabis. Many marijuana businesses                                               consumption.

 were declared essential during the pandemic, and more states legalized
 cannabis markets. 2021 will see more states join in, and their programs
 are getting started faster than we’ve previously seen.”

 – JENEL STELTON-HOLTMEIER, MARIJUANA BUSINESS FACTBOOK EDITOR

                                                                                                           20% INCREASE IN EDIBLE
                                                                                                                usage across all
Want to learn more? Check out our 2020 insight on Cannabis Here.                                                 demographics

                                                                                                                Source: New Frontier Data - Cannabis
                                                                                                                     Consumption During COVID-19
CANNABIS What's New in the Food & Beverage Space?
THC vs CBD
There are multiple compounds that can be extracted from               THE FDA FACTOR
hemp, but the most popular by far are THC and CBD. So,                The use of CBD in food products has
what’s the difference?                                                increased exponentially over the last
                                                                      decade, but it still hasn’t been approved
THC                                                                   by the FDA, which currently takes the position that interstate
• A psychoactive compound that produces a “high,” often               sales of CBD food products is unlawful. However, the
  with energizing or calming qualities                                cannabis research company BSDA expects that the FDA will
• Derived from plants specifically bred for high THC                  approve its use by 2022. FDA approval hasn’t stopped the CBD
  concentrations                                                      market from booming though: BSDA also reports that 33% of
                                                                      U.S. adults use CBD products.
CBD:
• Non-psychoactive compound typically used for relaxing
                                                                      CBD and THC aren’t the only cannabinoids out there
  qualities
                                                                       –– look for other compounds like CBG, CBN, THCA
• Often derived from industrial hemp with low or no
  amounts of THC
                                                                      and THCV to start popping up in consumer products
                                                                         soon. Since these are lesser-known additives, the
Source: Disa.com
                                                                                opportunity for market expansion is huge.
                                                                                                                                       Source: Nasdaq

PRODUCTS OF NOTE:

                     PLUS SLEEP CLOUDBERRY GUMMIES                                           AMERICAN SHAMAN CBG GUMMIES
                     include 5mg THC, 1 mg CBD and 1 mgCBN, a                                feature CBG which is said to increase focus and
                     cannabinoid believed to increase relaxation.                            energy. Each cherry flavored gummy is made
                     The formulation is designed to help the user                            with apple cider vinegar and contains 10mg of
                     sleep better and features a natural cloudberry                          cannabigerol and 3.5 mg CBD per serving.
                     flavor.

                                                                                                        Images Sourced: Plus Products THC, American Shaman
CANNABIS What's New in the Food & Beverage Space?
Top 10 Edible Flavors          Top 10 Beverage Flavors
  by Sales Volume                  by Sales Volume
   Gummies - Unspecified                Citrus

       Milk Chocolate                  Lemonade

        Watermelon                     Flavorless

 Raspberry or Blue Raspberry            Water

         Strawberry                       Tea

           Other                       Strawbery

         Blueberry                       Berry

           Cherry                       Grape

        Pomegranate                      Apple

         Pineapple                     Root Beer

                                                    Source: Headset - July 2020 Data
CANNABIS What's New in the Food & Beverage Space?
Regulatory &
"The Teenager Industry"
When it comes to regulations, the cannabis industry can be
thought of as still in its adolescence.

As the industry is still new and consistently changing with
regulations, the cannabis industry can be looked at as a "teenager
industry." It's often chaotic, changing, maturing and is full of new
entries and startups. Food and beverage developers working in
this space are often discovering more about this space as they
go.

For example, some developers who are often not familiar with
food regulations or ingredient restrictions and how to apply
them. They're also often working with a restricted toolbox, highly
regulated products, inconsistent regulations and few resources.

So, how do you stay within the murky regulations and keep trust?

Our advice: Rely on your experienced partners, such as flavor and
ingredient suppliers with accessible regulatory teams. Do your
best to maintain transparency with your consumers, through
education and honest labeling. There is clear opportunity --
but it's important to be truthful and never misleading to your
consumers.
CANNABIS What's New in the Food & Beverage Space?
Who's Buying?
                            While cannabis may have once        PRODUCTS OF NOTE:
                            had a reputation for being a
                            product for young people and                      MARTHA STEWART CBD WELLNESS GUMMIES &
                            hippies, a more mainstream                        MINT COLLECTION includes gummies and mints
                            acceptance has coincided with                     featuring flavors like blood orange, Meyer lemon and
                                                                              kumquat. They are infused with a CBD isolate and
                            widespread legalization. This
                                                                              are available in quantities of 10, 30 or 60.
                            trend can also be seen in the
                            number of celebrities, including
                            Martha Stewart and Gwyneth
Paltrow, who are endorsing edible and flavorful cannabis
products. A survey from A.T. Kearney reports that as of 2017,
                                                                              CANN PARTY PACK contains 2 6pks of Lemon
more than 122 million Americans had used cannabis, with
                                                                              Lavender, Blood Orange Cardamom and 1 6pk of
30- to 49-year-olds making up 51% of U.S. consumers.                          Grapefruit Rosemary. The sparkling, non-alcoholic
                                                                              drinks contain low doses of both CBD and THC
USAGE FACTORS:                                                                for the “same buzz, hold the hangover.” Celebrities
• 55% of American adults who use cannabis do so to relax                      such as Gwyneth Paltrow have invested in the Cann
• 40% of American adults who use cannabis use it for                          company.

  stress relief or to enjoy social experiences
• 55% of those surveyed said they’d be willing to try a
  cannabis-infused product
  - 55% said they would be willing to try a food product,                     RUBY SUGAR is a flexible edible cannabis product
                                                                              created to easily incorporate into your everyday
      such as snacks, candy, or packaged food
                                                                              food and drink. It features 50mg THC per container
  - 32% said they’d be willing to try it in a nonalcoholic                    or 5mg THC per serving.
      beverage
  - 19% said they’d be willing to try it in an alcoholic
      beverage

Source: New Frontier Data - 2017 Report

                                                                                           Images Sourced: Shopcanopy.com, TechCrunch, Rubythc
CANNABIS What's New in the Food & Beverage Space?
Popular Categories
The cannabis space is booming with opportunity cross-category. Below are a few food and beverage categories we’ve
spotted flavorful products of note from.

BAKED GOODS                                                                           KANEH BEST OF BOTH WORLDS BROWNIE
• Most popular offerings include brownies,                                            DUOS are half rich fudge brownie, half
  blondies and cookies                                                                chocolate chip cookie duos that include 100
• Often incorporated as part of relaxation or                                         mg of THC per package of two.

  indulgence rituals

CONFECTIONS
                                                                                       MENDI FULL SPECTRUM GUMMIES
•   Common offerings include chews, gummies                                           feature hemp-derived CBD and are vegan and
    and chocolate                                                                     all natural. They feature less than 0.3% THC,
                                                                                      25mg CBD and a fruity, lemon , orange and
•   Small size makes these perfect for microdosing
                                                                                      cherry flavor.

BEVERAGES
•   Rapid absorption from soft tissues in mouth
                                                                                      QUATTRO SPARKLING CBD WATER contains
    makes drinks an ideal vehicle for effective                                       20mg U.S. grown hemp-based CBD and
    consumption                                                                       comes in flavors including Cucumber + Mint,
                                                                                      Passionfruit + Guava, Ginger + Lime, and
•   Development of “nanoencapsulation” process
                                                                                      Blueberry +Acai. Already the best-selling CBD
    has made it easier to blend cannabis oils into
                                                                                      beverage in Canada, these zero-sugar sparkling
    drinks                                                                            drinks recently launched in the U.S.

                                                                                             Images Sourced: PRNewswire, A Proper High, Kaneh Edibles
CANNABIS What's New in the Food & Beverage Space?
Favorite Flavors
According to FONA’s proprietary survey from 2020, cannabis consumers across all demographics
are interested in multiple flavor options , preferring that portfolios offer 4-6 choices. But what
those preferred flavors are varies by product type. Consumers do not want to be limited to just one
option, indicating the opportunity for seasonal and LTO flavors also.

CBD- CALM & REL AXED:                                                      THC- ENERGIZED & REFRESHED:
According to Michelle Sundquist, Director of Innovation and                THC consumers often seek out bold flavors reminiscent
Product design for SoRSE Technology, CBD consumers are                     of energy drinks, including grape, orange and mango. The
often looking for a relaxing, spa-like experience, including               bitter taste of cannabis can also be a plus as cannabis drinks
flavors like grapefruit, cucumber and mint.                                can give a “beer-like” experience similar to hops without the
                                                                           alcohol.

PRODUCTS OF NOTE:
                                                                                 FAVORITE FRUIT Y FL AVORS
                            MINDY’S CHEF-LED ARTISANAL EDIBLES
                            Famous for her decadent desserts, James              Fruity flavors are often the top flavors across several
                            Beard Award-winning chef Mindy Segal’s               formats. Below are a few ways the cannabis space can
                            THC-infused confections come in bold, bright
                                                                                 innovate with these profiles.
                            flavors including Cool Key Lime Kiwi, Glazed
                            Clementine Orange and Lush Black Cherry .
                                                                                 Premium Profiles:               Indulgent & Nostalgic:
Image Source: Mindy's
                                                                                 •   Blood Orange vs.            •   Apple Pie vs. Apple
                            RECESS CBD SPARKLING WATER                               Orange                      •   Key Lime Pie vs. Citrus
                            Each stylish can of Recess contains CBD,             •   Meyer Lemon vs.
                            L-theanine, ginseng and lemon balm. Creative             Lemon                       Fruit + Botanicals:
                            flavor combinations including pomegranate-
                                                                                                                 •   Grapefruit Basil vs.
                            hibiscus and coconut-lime round out the
                                                                                                                     Grapefruit
                            relaxing experience.

Image Source: Bon Appetit
CANNABIS What's New in the Food & Beverage Space?
Flavor Challenges
                              The naturally bitter flavor      PRODUCTS OF NOTE:
                              of hemp extracts can
                              be off-putting to some                                    GARDEN SOCIETY SPICED DARK
                              consumers. One way to                                     CHOCOLATE WITH CHILI
                              address the issue is through                              feature artisanal chocolates that come
                              the use of a masking agent,                               in regular (10 mg THC) and low-dose
                              but there are also plenty                                 (5 mg THC) servings and include spicy
                                                                                        chiles and cinnamon for a flavorful
                              of natural ingredients that
                                                                                        punch.
                              complement cannabis’s
bitterness. Grassy herbs, as well as other bitter notes like
hops, are all reminiscent of cannabis’s natural terpenes,                               LAGUNITAS HI-FI HOPS BEVERAGE
while contrasting flavors like tart citrus can provide some                              is a zero-alcohol offering from one of
balance . For product developers, finding this balance                                  the most popular craft breweries in the
                                                                                        U.S. This drink contains equal amounts
is crucial to creating a pleasant tasting and successful
                                                                                        of THC and CBD for an experience that
product, especially since 45% of consumers rank taste as                                is “both calming and invigorating.”
more important than dosage.

COMPLEMENTARY FL AVORS:
• Herbs including basil, cilantro and thyme
• Chocolate
• Coffee
• Smoke                                                          45% RANK TASTE AS MORE IMPORTANT
• Citrus
                                                                 than dosage in edibles according to
• Chiles
• Black pepper                                                   FONA's 2020 proprietary survey.
• Tomatoes
• Vinegar

                                                                                                     Image Source: Garden Society, hifihops
CANNABIS What's New in the Food & Beverage Space?
Cannabis and Wellness
                              The increased acceptance of           PRODUCTS OF NOTE:
                              medical marijuana over the
                              last decade has led to cannabis                     TRANQUINI WOWIE - These sparkling waters
                              products being closely tied to                      combine cannabis with other functional foods and
                              wellness in consumers’ minds;                       adaptogens like green tea, lemon balm and lavender,
                              consulting firm A.T. Kearney                        all intended to increase relaxation.
                              reports that 86% of American
                              adults surveyed now believe that
                              marijuana has valid therapeutic
                              uses. These claimed benefits
ranging from treating Alzheimer’s and arthritis to improved focus
and relaxation.                                                                    PABST BLUE RIBBON HIGH SELTZER - An alcohol-
                                                                                   free option from the well-known Pabst brewing label,
                                                                                   their High Seltzer contains 10 milligrams of THC per
                                                                                   serving and is “perfect for sparking your creativity.”
                   of U.S. adults aged 18+ think hemp derived
                   CBD products have focus-enhancing benefits

                   of U.S. adults aged 18+ think hemp derived
                   CBD products have calming/relaxing benefits

                   Source: Mintel                                             "In fully legal cannabis markets, about 60
                                                                              percent of consumers seek health benefits
In addition, a growing interest in “clean” lifestyles has also
made cannabis an appealing alternative for those who are                      from their cannabis consumption.”
avoiding alcohol, and the increased popularity of microdosing                 – BDSA

has allowed consumers to take charge of how much cannabis
they consume, resulting in sales of low-dose THC beverages
to increase by roughly 70% year-over-year .

                                                                                                                      Images Sourced: Grocery.com
SOURCES

     THE TAKEAWAYS                                                                       •
                                                                                         •
                                                                                             Disa.com
                                                                                             MJ Biz Daily
                                                                                                                 •
                                                                                                                 •
                                                                                                                     Kaneh Edibles
                                                                                                                     Mindy's Edibles
                                                                                         •   Prepared Foods      •   Recess
     The chaos of the last year has had more Americans than ever turning to cannabis     •   Nasdaq              •   Garden Society
     edibles for stress relief and relaxation, a trend that shows no signs of slowing    •   Plus Products THC   •   Mintel
     down even as the pandemic wanes. But eagerness for cannabis products doesn’t        •   New Frontier Data   •   Pabst Labs
     mean that taste can be ignored –– it’s one of the largest factors in buying         •   IFT                 •   Grocery.com
     decisions. Bold flavors and complementary tastes have been hits with existing       •   Totalfood.com       •   BDSA
     edibles, and the increasing familiarity with other cannabinoid compounds like       •   PR Newswire

     CBN means that there’s even more opportunity to play with new products
     and flavor combinations. The consumer cannabis space is only going to grow
     –– the question is: how can you capitalize and help nourish and comfort this                 REQUEST YOUR
     consumer base?                                                                                   FREE
                                                                                               FLAVOR SAMPLE HERE
You Deserve More. Let's Get Started.
What does true partnership look like? You deserve a flavor partner ready to turn these
trends into the tangible.

Let FONA’s market insight and research experts get to work for you. Translate these
trends into bold new ideas for your brand. Increase market share and get to your
“what’s next.” Our technical flavor and product development experts are also at
your service to help meet the labeling and flavor profile needs for your products
to capitalize on this consumer trend. Let’s mesh the complexities of flavor with
your brand development, technical requirements and regulatory needs to deliver a
complete taste solution.

From concept to manufacturing, we’re here for you — every step of the way. Contact
our sales service department at 630.578.8600 to request a flavor sample or chat us
up at www.fona.com/contact-fona/
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