Keef bubbles to high of aggressive hashish beverage sector

(This story first appeared within the November-December difficulty of MJBizMagazine.)

Keef Manufacturers is tapping into the rising demand for cannabis-infused drinks.

The Colorado-based firm’s gross sales from January via August totaled $18.9 million – up 26% from $15 million throughout the identical interval final 12 months in markets tracked by Headset, a Seattle-based hashish information analytics agency.

Income within the hashish beverage class grew a powerful 11% throughout the 12 months ended June 2024, in response to a Headset research.

Keef has greater than 70 stock-keeping items (SKUs), which embody gummies, oils, vape cartridges and non-carbonated drinks – however carbonated sodas are the model’s bread and butter, accounting for about 80% of the corporate’s general gross sales.

The corporate has eight flavors of sodas and three completely different glowing waters.

“We dabble in different classes, however we’re a beverage firm,” Keef CEO Erik Knutson instructed MJBizMagazine.

The drinks retail for $5-$7 per can infused with 10 milligrams of THC and $12-$15 per can infused with 100 milligrams of THC.

Knutson instructed MJBizMagazine it prices $1.15 to supply one can of Keef.

The corporate’s margin on carbonated drinks is between 50% and 60%.

Keef Manufacturers’ hottest beverage is its Xtreme Bubba Kush Root Beer Basic Soda with 100 milligrams of THC per 12-ounce can.

Gross sales of the drink surged this 12 months, doubling from $144,000 in January to $352,000 in August within the markets tracked by Headset.

THC dosing

Keef merchandise can be found in 14 states in addition to Canada and Puerto Rico.

The quantity of THC in every 12-ounce can varies relying on the state laws of every market.

In Colorado, for instance, laws restrict the quantity of THC in every can to 10 milligrams, or what the state considers a single dose.

However in Missouri, Keef sodas are infused with 25 milligrams of THC per 12-ounce can.

“As markets turn into extra mature, individuals turn into extra acquainted about their dosing necessities, desires, wants and expectations,” mentioned Blake Patterson, Keef’s chief income officer.

“It’s like having a bottle of vodka earlier than you and understanding how a lot to drink for a way you wish to really feel.”

Knutson mentioned that Keef’s 10-milligram merchandise signify lower than 5% of the entire beverage market and traditionally have underperformed the model’s higher-dose merchandise.

Customers understand they’re getting a greater deal once they buy drinks with THC content material higher than 10 milligrams, he mentioned, as a result of they evaluate them to different edibles, equivalent to infused gummies.

A gummy may comprise 5-10 milligrams of THC, however your entire bundle has 100 milligrams.

Retailers additionally choose drinks with a better THC content material as a result of they take up a lot house on retailer cabinets.

In new markets, Keef supplies retail shops with fridges to retailer the merchandise off the gross sales ground.

The fridges, which vary from mini fridges to full-size normal wall items, price between $500 and $2,000.

Knutson mentioned the corporate has deployed 1000’s of fridges over time, and since they account for lower than 5% of Keef’s general prices, he believes they’re well worth the expense.

“It’s onerous to justify carrying massive, cumbersome merchandise with solely 10 milligrams (of THC); dispensaries aren’t set as much as be liquor shops or comfort shops,” Knutson mentioned.

“There simply aren’t as many lower-dose (beverage) customers; they have an inclination emigrate into gummies.”

Hemp business growth

Keef’s hemp-derived delta-9 THC enterprise is one other issue contributing to the corporate’s progress.

Knutson mentioned federal hemp legal guidelines enable Keef to succeed in customers in states that don’t have regulated marijuana markets.

The corporate already sells its hemp merchandise in a number of hundred shops in Tennessee, they usually quickly shall be accessible in one other 300 licensed liquor shops in Texas.

Keef doesn’t promote hemp-derived delta-9 merchandise on-line or in regulated marijuana markets as a result of it doesn’t wish to step on the toes of its licensed retail companions.

However hemp-derived delta-9 THC merchandise expose new clients to the Keef model in markets that don’t have regulated marijuana packages, Knutson mentioned.

“We’re one of many few firms that operates in each areas, however we don’t promote these merchandise in states which have regulated packages,” he mentioned.

“We have been born and raised within the regulated house, so we’re by no means going to show our again on it.”

Colorado and Missouri are Keef’s largest markets.

Gross sales in Missouri hit $14.3 million from January via Aug. 28, eclipsing the $11.2 million bought in its house state of Colorado throughout the identical interval, in response to Headset.

The Arizona market is a distant third for Keef Manufacturers, with $5.3 million in gross sales over the identical interval.

“We have been the primary edible bought in Missouri, so first-mover benefit and an excellent partnership with Clovr Hashish” drove Keef’s success in that market, Knutson mentioned.

“We have been additionally a first-mover in Colorado and have spent years constructing retail and shopper relationships.”

Model-licensing offers

Keef’s path to success hasn’t been straightforward.

In 2011, the corporate invested $1 million in a producing facility in Boulder, Colorado, solely to be instructed it couldn’t promote its merchandise in Denver except they have been made in that metropolis.

The corporate misplaced all of the capital it had invested within the constructing.

That misstep compelled the corporate to tug the plug on its Boulder manufacturing operations plan and develop a licensing mannequin, which Knutson admits was difficult.

Whereas the corporate negotiated a lease in Denver, Knutson licensed the model to Denver marijuana-infused merchandise firm Eleutherian Enterprises – now defunct –  to maintain its momentum going.

“We lower our enamel licensing out of pure necessity again in 2011,” he mentioned.

In 2014, Keef opened Denver Packaging Co., which has since been renamed Model Home Colorado.

Along with manufacturing Keef merchandise, Model Home is a co-packing firm that works with nationwide manufacturers equivalent to New York-based vaporizer firm Airo Manufacturers.

Keef is ready to maneuver into a brand new manufacturing facility by the tip of the 12 months, which is able to enable it to herald new manufacturers as co-packing purchasers.

The corporate’s early expertise with licensing serves it effectively immediately.

As Keef enters new regulated markets, the corporate establishes partnerships with licensed producers to supply Keef-branded drinks fairly than outfit a producing facility from scratch.

However licensing is hard, as Knutson discovered via a collection of dangerous agreements between 2019 and 2022.

Upon reflection, he mentioned, the usual working procedures of Keef’s companions weren’t as much as par.

Knutson mentioned he discovered Keef should spend important time on due diligence, together with attending to know potential licensees and their operations out there.

“There are numerous pitfalls in licensing,” Knutson mentioned.

“It might probably kill firms actually shortly – particularly dangerous partnerships.

“The toughest factor is working via the nuances of various partnerships, completely different state laws and discovering synergies the place we will.”

As for future targets, Knutson mentioned he desires to proceed to develop Keef’s market footprint and “lead the hashish beverage revolution worldwide.”

Margaret Jackson might be reached at margaret.jackson@mjbizdaily.com.