The Potential Impact of Cannabis Legalization on Big Alcohol

Paul Weaver of Boston Beer Company on Big Alcohol's Cannabis Strategy

Paul Weaver: They're shelving cannabis-infused beverages in liquor stores. They're not putting the two together, but they're putting them in the same ecosystem, and they are really, really selling quite well. Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellan Finney. This week we've got a very special guest, Paul Weaver, head of cannabis at the Boston Beer Company. Thanks for taking the time — how are you doing today? Paul Weaver: Bryan, Kellan, nice to see you again, thanks for having me. You're in New York, right, Bryan? And then Kellan, you're in Colorado, and I'm in Toronto. Bryan Fields: Oh, so we've got the triangle of pot between the three of us. We might have to ask you on the record about your location, but I'll let Kellan set that up. Kellan, how are you doing? Kellan: I'm doing good, really excited to talk to Paul. I think it's really cool what Boston Beer's doing, really cool what they've done with this cannabis beverage, excited to learn more about it. I'm also excited to talk to Paul because I think we share a West Coast history in terms of loyalty, but I'll let Paul say where his true loyalty lies — East Coast or West Coast. Bryan Fields: Yeah, just to clarify correctly, Paul — the name of your company is what, exactly? No one here has a Boston connection, which is funny. Paul Weaver: Yeah, okay, so Boston Beer Company is best known in America for Sam Adams, Twisted Tea, Angry Orchard Cider, and Truly Hard Seltzer — those are our four big hits from the beverage alcohol space. But two years ago we set up an R&D division based in Canada, where cannabis is unequivocally legal, to prepare for a U.S. market entry. We created a product line called TeaPot, which is a line of cannabis iced teas, and we've been selling that pretty well here in Canada — we're the number one cannabis tea in the country — and an edible in the province of Quebec. We're really prepping, as the U.S. shenanigans toward legal weed continue, so we can bring it down south one day. We're excited about what we're building in Canada. Kellan: I guess just to kick it off — you are the head of cannabis at a big alcohol company. How is that received amongst the cannabis industry? Are you looked at as an ally, or pretty much enemy number one? Paul Weaver: Well, I don't know what people say behind our backs — perhaps after I get off you guys will start talking about me and our global ambitions. But no, I think representing craft beer, representing high-quality drinks, there is a difference Boston Beer brings to the conversation versus other beer companies. I don't think all beer companies are the same. Our team is a lot of experienced cannabis pros — I worked at Canopy Growth Corporation for a number of years as their director of innovation, and we have people who worked for cannabis extraction companies and grows that were funded and owned by a beer company. Our pedigree is pretty hardcore cannabis, and that gives us a sense of self-awareness about how alcohol could be viewed. But I'd say generally people are pretty up for what we're doing, they like what our brand stands for, and so far so good. Bryan Fields: I think the most important aspect is that it's the first foray into the market from a big-company standpoint — not everyone comes in and announces their presence. I'd like you to talk about your role specifically, and how it works to knock down barriers for beverages and bring innovation from cannabis to a big alcohol company. Paul Weaver: There are things that work on both sides — we have the benefit of a lot of resources in product development, liquid development, packaging, even supply chain and installing new equipment, based on 40 years of highly refined process. One of the first things we did was amend our company's drug and alcohol policy to be mindful of cannabis use — no longer mandatory testing for cannabis consumption, recognizing signs of impairment, acknowledging that we're now, through Canada, also a cannabis company. We've been welcomed with open arms, and we're able to bring a lot of what they do on the beer side to the cannabis side. Kellan: Is that a leadership move — somebody at the top interested in doing that — or more of an internal champion pushing it up to the top, saying, 'I think this is something we need to expand our organization with,' getting into cannabis generally? Paul Weaver: Yeah, it's top-down. One of the nice things about our organization is we're still very founder-centric — Jim Koch, our founder, 40 years ago, is still actively involved in our business and commercial decisions. The chain of command in terms of who I reached out to was our CEO Dave Burwick, Boston Beer's head of innovation Robert Vil, and our founder Jim Koch — those were the first three people I spoke with. It starts at the top, and in our case the company was really centered on acceptance and willingness to explore cannabis. Bryan Fields: You spent time at Molson Coors, then Canopy Growth, then transitioned to your current role. During that timeline, when did you start to really believe cannabis could be ingested in a beverage — was there a certain inception point, or did you just watch the market mature? Paul Weaver: I didn't really think about it. Funny, coming from beer into cannabis, I didn't think about anything other than base flower, because I was a medical cannabis patient and found it added a lot of value to my life — that's the energy I brought when I joined Canopy. Canopy did have aspirations of beverages and was starting to explore the idea. I met the R&D team at Canopy that had created their own emulsion tech and was figuring out ways of making a beverage out of cannabis, and that blew my mind — the idea of a true alternative to alcohol with virtually no calories, an easy-to-manipulate liquid format you can make taste like anything, that gets you high versus buzzed but is still a great experience. I didn't understand the idea until I had a chance to be part of the R&D making them, and I was hooked — it seemed like the future. Kellan: What was the first idea or inception that hooked you — was it an experience tasting it, or something you saw? Paul Weaver: Canopy Growth was founded by a guy named Bruce Linton, who's kind of an infamous character now because he built such a beautiful company and then saw it get overinvested. Bruce is someone I really admire and view as a visionary. When I first saw him speak, he had this visual — almost looked like a vodka bottle but it just said 'Hi' on it — meant to be more of a rhetorical visual, just to make you think. It was the concept, the visual of it, seeing how it would look in an ideal, beautiful package, and knowing what was inside that bottle — that was very intriguing to me. And then the first time you try a cannabis beverage with a fast onset, with a group of people all really enjoying the experience, that's pretty fun too. Seeing the idea fully realized was enough to make me a believer. Kellan: I think you hit the nail on the head. I still have that visual of handing my friends a beverage for the first time and their first thought being, 'Will this get me high?' It's incredible that we're at this early stage where everyone assumes there's no alternative except smoking flower, but beverages are such a big bridge to widening the total addressable market of cannabis consumers. Paul Weaver: Well, the fun thing is it's this interesting Venn diagram, and weed drinks sit right in the middle — one circle being the experienced cannabis consumer who's doing fine with their form factor but maybe should smoke a little less, and the other circle being the traditional alcohol drinker who probably should drink a little less alcohol. It's the overlap between these two loyal, passionate groups that we can maybe offer something to satisfy. Bryan Fields: It's funny that's coming from an alcohol company. Paul Weaver: Yeah, but the secret's out. There was a report from a cannabis research firm a week or two ago that said in the next two years they expect 18 million more American cannabis consumers and two million fewer alcohol consumers. Kellan: I did see that — that's just the future, you have to be honest with yourself and prepare for the new reality of how adults are choosing to let off some steam. Bryan Fields: So you've decided to be part of that future — what made you choose teas over every other kind of liquid you could mix with THC? Paul Weaver: We always lead with what we can make taste awesome, and I believe TeaPot is the best-tasting cannabis drink I've ever had — totally biased, but I think tea as a flavor works really well with cannabis, the tannin profile complements the taste of cannabis, so it's a natural fit. With 20 years of making and refining Twisted Tea, no one makes a hard tea like we do — no carbonation, well-balanced tea versus lemon flavor. There's a fun idea with TeaPot about pairing the right tea with the right pot for the right occasion — we have a lemon black tea, a daytime tea, caffeinated, made with a sativa strain, and a blueberry chamomile evening iced tea with no caffeine, made with an indica strain, meant to replace your glass of wine at night, with 35 calories instead of 100 and a fraction of the sugar. TeaPot isn't just a Twisted Tea knockoff — it has a lot more nuance. Kellan: What are the milligrams, and how many are you supposed to drink? Paul Weaver: Our aspiration is to be the least intimidating cannabis brand in the world — fun name, kind of a dad joke, exciting packaging, doesn't taste or smell like weed, and the potency is manageable — five milligrams of THC, which for a Colorado drinker doesn't move the needle, but for our drinker, one or two is enough to have a great day. Five milligrams is commercially viable — not so low it won't move on the shelf, but not so strong a new drinker gets freaked out. Kellan: What was the rollout like? Most retail is pretty rocky — they don't have fridges, right? How are you distributing it? Paul Weaver: This is where we remind ourselves that at our core we're an R&D department — we're here to learn and execute different ideas and prepare for a different model in America. But winning the dispensary grind is just grassroots — you have to knock on doors, be present, and be a friend and ally to the budtender. That was the root of our commercial rollout — understanding how budtenders think about TeaPot, knowing fridge space is minimal. We have a good head start in distribution, but really it's about budtender engagement and putting our best foot forward. Bryan Fields: Your team has this luxury asset of an established brand, both in infrastructure and consumer trust. Was that the intention rolling out TeaPot — knowing current cannabis consumers aren't your consumers today, but transitioning alcohol drinkers over, with this middle-ground product off the flagship brand? Paul Weaver: Yeah, the nice thing is TeaPot has a five-second selling story for most people: 'Are you familiar with Twisted Tea? Well, they also make TeaPot.' That's the pitch for busy dispensaries. We don't directly associate ourselves with Twisted Tea, because we're a different brand — we're not alcohol, not necessarily the same drinker — but we can learn from their successes in how to talk about a brand and throw a good party. Twisted Tea is the number ten beer in America now, a result of grassroots word of mouth and playing the long game. I think we could be doing more to bring those two worlds together and be like the Robin to their Batman, but we've got plenty of time to figure out the right way to do it. Kellan: Are there challenges internally in developing these products that surprised you — an idea one night that you stumbled through given the complexity of cannabis, or something else? Paul Weaver: Oh God, yeah — thinking of our time at Canopy Growth, operating pre-legalization with a lot of market readiness and too many good ideas, which can crumble under the weight of too much innovation. But the universal truth in product development is: always build buffer for your first production runs — you never know what you don't know until you do it, whether it's an extra pasteurization step, labels applying differently to a can, or a childproof cap working differently than anticipated. For us, one of the earlier lessons was pasteurization — making TeaPot with a decent shelf life required a few extra steps we wouldn't have known unless we'd done it the first time. Bryan Fields: Do you get to use the same manufacturing equipment that Twisted Tea uses? Paul Weaver: We can use a lot of the same stuff, but in a different building — can't co-mingle co-manufacturing, which is a big bummer, because beverage manufacturing is very expensive and capital-intensive. We have to produce TeaPot in a legally designated cannabis processing facility — ours is in Windsor, Ontario, right across the river from Detroit, and that's the only thing we make there. Kellan: Are there any cannabis-related challenges that surprised people internally at Boston Beer Company? Paul Weaver: One of the funnier things — beverage alcohol companies are blessed with data, and every business decision has retailer and consumer insights data to validate it. There's just not a lot of concrete data in cannabis, whether it's sales, brand awareness, or tracking, so you have to infer a lot and cobble together different data sources. I'd say data availability surprised the most people. And also just how good it can taste, because alcohol has a taste you have to mask, but a cannabis drink doesn't really have much taste of its own, so we pleasantly surprise people with how good a cannabis beverage can taste when done correctly. Bryan Fields: Do you think that opens up eyes internally for what's possible? Paul Weaver: Yeah, exactly. Kellan: So you have the infrastructure and data-driven teams from the beer side, people used to dealing with different chemical profiles, hops, and other media — do you get to use those same people on the cannabis side? Can you co-mingle the human knowledge, at least? Paul Weaver: Yeah — we set a certain allocation of time to stay within the bounds of legality. We have dedicated cannabis workers who do R&D, and when appropriate we can tap into existing U.S. product development experience within reason. Some of the most helpful areas are brewing, engineering, tanks, pipes, and pasteurizing equipment — people who've built breweries for 20 years know what they're doing whether they're moving THC liquid, alcohol, or soft drinks. Gaskets are gaskets, pipes are pipes. Getting that engineering experience has been a godsend. Bryan Fields: What about other big alcohol companies — what's their perspective on cannabis? Are they deploying resources, and is it hidden from an R&D standpoint? Have you been hearing anything? Paul Weaver: There's a lot of observation, research, and concept work — 'ideating,' as they'd call it. A few of us are doing beer and cannabis — Wana in California is a great example, Pabst is a great example — but for the most part, no. A few beverage alcohol companies got a bit impulsive and overinvested. I'm proud of how we've set up our business model — we don't have owned infrastructure, we're very asset-light, everything we do is about brand development, liquid development, and intellectual property, not overinvesting in one manufacturing solution. We're pretty nimble, which makes us different from our peers. Kellan: What about any future combination of alcohol and CBD? I haven't seen much of that — I know California banned it a while ago, which set up a taboo around combining the two. Paul Weaver: In Canada it's unequivocally illegal to put cannabinoids in alcohol — you can do about 0.5%, that's basically the max. So no, we don't consider co-mingling the two — we have a clear non-alcoholic cannabis beverage development path and a clear alcohol beverage path. We keep the two separate. Bryan Fields: Do you think in the future they'll be mixed together? Paul Weaver: No, I don't think so. There's health and safety risk — aside from the Four Loko situation, real talk— Kellan: I participated in that once. Paul Weaver: Four Loko was completely unrestricted co-mingling of two active ingredients, alcohol and caffeine, and that didn't go very well, so I can't see a scenario where regulators allow meaningful amounts of two psychoactive ingredients — alcohol and cannabis. CBD maybe, but I think Four Loko ruined the party mixer for everyone, so I think it's likely not happening. Bryan Fields: I can only imagine regulators would struggle enough with the idea of mixing those two together. Kellan: But are you guys following this hemp Delta-9 Minnesota explosion that's going on? Bryan Fields: Yes — you want to give some context for our listeners who might not be familiar? Kellan: Yeah, so through the current version of the 2018 Farm Bill, there's a lack of clarity — very vague ambiguity around THC levels in hemp-derived food and beverage products. Through clever chemistry and aggressive legal interpretation, people are creating hemp-derived THC beverages and edibles sold under the auspices of the Farm Bill as a hemp product, which is pretty unrestricted. So you're seeing these products sold not just in California dispensaries but in Texas liquor stores, Florida convenience stores — states where weed isn't going to be legalized anytime soon. They're shelving cannabis-infused beverages in liquor stores — not putting the two together, but putting them in the same ecosystem — and they're selling quite well. It shows the potential of these products in the periphery of the right buyer — a beverage alcohol consumer probably isn't walking into a dispensary, but if the product's there, they're intrigued, and once they try a cannabis drink, it's pretty awesome. So it's hard to pull that back once the cat's out of the bag. Bryan Fields: I think that's perfectly said, and what really opens people's eyes is that a lot of these people — call them boomers — have a doctor telling them to drink a little less booze, so they walk into their liquor store like normal, see the THC beverage, and think, 'I'll give this a try.' Once they have that experience and realize it tastes great and gives a nice little buzz, it's a replacement product — it's beautiful. Kellan: And the pricing is really high for those — more than a craft beer — so it's an attractive business for retailers, they're making good money, and drinkers love them. So it's really a question now of what we do next — pull it back under the next Farm Bill, ban it state by state, or embrace it and formalize it with regulations. It'll be fascinating to see how this continues over the next 12 months. Bryan Fields: What do you think happens? Paul Weaver: I have no idea, seriously — if you'd asked me six months ago, I would've said no way, they'll ban it again in the next Farm Bill. But it's doing so well, it's hard to deny the commercial upside, and these are small business owners who'd love incremental taxes and profit. I think they'll have to acknowledge the commercial success of these hemp D9 drinks, and whatever they do — even if it gets pushed through a state-level marijuana program — there's money being made, and money tends to make these ideas follow. Success breeds success. Kellan: And the genie's out of the bottle, right — if I bought my hemp Delta-9 beverage in Minnesota and came back and it wasn't there, I'd be like, what? So personally, I think at this point there's no going back. Paul Weaver: Yeah, but I do think the spirit of the regulations — I personally believe it's a little reckless, because I don't think the Farm Bill envisioned this. I'd like to see an actual plan, because there's a lot of risk in continuing to self-regulate and trust that retailers act responsibly. There are a lot of corners that still need to be rounded out — it's still a little rocky. Kellan: It brings up a macro conversation about the driving forces behind this, because you had people growing high-CBD hemp, extracting it, companies sitting on warehouses of CBD isolate, not knowing what to do with it, losing money, going out of business. Chemists came in and converted it to Delta-9, found an avenue to generate money. Now hemp is supported by the Department of Agriculture, you can grow it at massive industrial scale, and you can make the Delta-9 THC molecule from hemp significantly cheaper than from the actual cannabis plant, where industries have been stifled by limited grow licenses. From a pure economic standpoint, it's going to be really challenging not to see a lot of these form factors just start coming from hemp. What are your thoughts on those macro headwinds? Paul Weaver: These are deep questions, Kellan. I don't know — I do think farmers should farm, and the reality is it's agriculture. I love craft, high-end cannabis, but it's still a commodity at the end of the day, and it's a business, and timing regulatory changes is virtually impossible — someone's going to get burned no matter what. I'd love to see outdoor grows in farm-belt communities growing cannabis, whether you call it hemp or marijuana, and let the commodity follow, treating it as agriculture under a Farm Bill for both sides. The synthesis stuff, going from CBD to THC, is outside my depth on the chemistry, but it spooks some people in terms of residual chemicals and processes, so I'd want clear, safety-driven regulations on the source of THC. My yada-yada answer is: treat it like any cash crop, like any piece of agriculture, and then regulate the source of the cannabis. And respectfully to those farmers, Kellan — you should never bet the farm on a product with as many ups and downs as this one. Kellan: Yeah, or don't get high on your own supply, or something. Paul Weaver: No, our approach is always to respect the plant and the farmers — everything we do ties back to reverence for the farmers. We had our product development team in Humboldt County for a week-long excursion in the woods, just to touch some pretty plants and feel part of the harvest, even if we're far down the supply chain. I don't want to speak lightly of the challenges of growing cannabis — like the challenges of growing anything, honestly, it's a hard business. Bryan Fields: What about communicating internally about what's going on in Minnesota — is that conversation weird or uncomfortable, given legal considerations? Paul Weaver: I was in Minnesota a month or two ago and took my own photos, saw it firsthand. You have to see it to believe it. It's real, and it's doing really well. We had an all-hands team meeting about a month ago where I spoke to our entire company about what's going on in Minnesota, why we're not there right now, and what we want to see. There's a little bit of recklessness in the interpretation of those regulations and the Farm Bill — it's not really the spirit of the Farm Bill — but there's still tremendous commercial upside, and people we do business with are now in hemp Delta-9. We're monitoring it, but it's still ambiguous, and there's still a chance the whole thing gets shut down. We're trying to be patient — we're a 40-year-old company, we built Twisted Tea over 20 years, we're not going anywhere. Bryan Fields: Does this synthetic D9 trend impact the Canadian market? Can you sell hemp-derived cannabinoids in the Canadian cannabis industry? Paul Weaver: Great question — we had to ask that ourselves, because we're launching our first hemp-derived CBD TeaPot this summer or next summer. The reality is we don't think of it as a source plant, we think of it as the end cannabinoid. All cannabinoids — CBD, THC, CBG, CBN, THCA, even Delta-8 — are regulated under the Cannabis Act in Canada, sold through Canadian dispensaries under different provincial models. So the answer is simple: it's all weed in Canada. Kellan: Dream cannabis session, three people, dead or alive? Paul Weaver: Oh right, you told me this question in advance and I wrote my answers down and forgot them. One was Carl Sagan — I feel like he'd find it very fascinating, I'd love to hang out with that guy. Steve Nash, maybe — Phoenix Suns Steve Nash — probably a pretty cool guy to hang out with and get high with, he's Canadian with some Arizona roots, so that'd be a fun mix. Pretty good crew. Bryan Fields: I love seeing people think about that — it's such a challenging question, you don't want to leave anybody out. Paul Weaver: Yeah, I think the right answer is your dad or your wife — I should've said my wife, but I don't think she wants to be in that conversation, she'd be bored. Bryan Fields: Well, we won't tag her in the conversation. What is one fact or statistic in the cannabis industry that would surprise or shock others to know? Paul Weaver: I'm going to butcher this stat, so let me pull it up — just the percentage of people who are actual cannabis consumers, and how much room there is to grow. In Canada, where we're generally considered a pretty pro-cannabis market, only 27% of the population consumed cannabis last year. The longer you're in the industry, the more you think everyone's a pothead, but the reality is it's still a growing category — general population is still the biggest source of growth, and that's why drinks are so fascinating — three-quarters of the population doesn't consume weed, and if they were going to start, they probably weren't going to smoke a joint or hit a dab pen. Maybe a cannabis drink is the right scenario for that three-quarters of unenlightened future drinkers. Bryan Fields: How challenging is it to forecast the potential size of the cannabis beverage market, given state-by-state hurdles and the expectation of unlocking that huge non-consuming population? Paul Weaver: I think part of that is our business model — we don't own infrastructure, so we have the luxury of letting it develop in front of us. We don't try to forecast against hypotheticals — we look at the current size of the category and put a modest growth projection against it. We're up a pretty decent chunk in Canada — most of us are up about 20-plus percent — so the growth is there organically, and we stay flexible so that when there's an unexpected pop, we can double down in production. We're just a brand and a recipe. Kellan: Well said. I thought of another stat — they were measuring pothead cities in Canada by wastewater. They pulled the wastewater streams in Montreal, Halifax, Toronto, and Vancouver, and tested the THC level in what was flushed down the toilet, and Montreal had the highest per-capita THC content in wastewater of any city in Canada — funny, because they don't sell a lot of legal weed there, still a thriving black market, but they tested pretty hot. Bryan Fields: Can you imagine being the one running that experiment? They were doing COVID testing that way too, testing COVID numbers through wastewater. Kellan: If you could put anything on a billboard, metaphorically speaking, to get a message to billions of people — an image, a quote, a word, something that inspired you — what's the first thing that comes to mind? Could be to inspire people or to sell more TeaPot. Paul Weaver: Well, I should sell more TeaPot, so I'd probably say something existential — a nice TeaPot logo with our tagline, 'The Original Chill Tea,' and a beautiful product shot on a billboard with millions of viewers, that's enough for me. I'd just love to see a billboard for the product, like you do for alcohol — in Toronto there's a highway called the Gardiner Expressway with a big, water-tower-sized beverage can up for grabs for any advertiser — some years it's wrapped in Budweiser, sometimes Coors Light, sometimes Moosehead. Getting something like that for a cannabis product, with that level of above-the-line awareness, would be enough for me. Bryan Fields: All right, prediction time, Paul — do you anticipate a transformative collaboration between big alcohol companies and the cannabis sector? If yes, how visible do you think that will be in the next few years? Paul Weaver: I think most big alcohol companies will probably just wait until they can acquire somebody outright — I don't think there are a lot of companies like us that are patient brand builders trying to build their own culture and credibility in the space. So yes and no — I think there will be strategic investments in cannabis companies by alcohol, you're already seeing it pick up in pharma and tobacco over the last year or so. But I don't think it'll be as fun, collaborative, and crafty as what we're doing. Kellan: Well said. I think you're going to see more of an under-the-radar approach from big alcohol companies, especially in America, given federal illegality. I think they'll either purchase a brand that's already successful, or try to build something separate and isolated to capture that revenue — but I don't think you'll see anyone doing what Boston Beer and TeaPot have done. You also have to think about alcohol's three-tier system in America — that middle-tier distributor network might be more proactive; a lot of those guys are distributing hemp beverages right now, deciding whether to lean into proper cannabis distribution or buy state-level cannabis distribution assets. Some of those distributors run businesses in Canada as sales agents and distributors too. So it's not just the brewers making drinks, it's also the distributors and retailers who could flex into cannabis. Bryan Fields: Yeah, I agree, and I think that report is eye-opening for those who've had their head in the sand — maybe they've realized this is coming and something they need to prepare for. Maybe they won't do it publicly, but I think all of them are taking active efforts to be ready to act when the time is right, because you have to know which companies to buy and know the rules of the game — sometimes that means taking time and effort ahead of time to be prepared. Paul Weaver: Yep, right. Bryan Fields: Cool. So Paul, for our listeners who want to get in touch, or want to try Twisted Tea, where can they find you? Paul Weaver: Well, first, if you're in America and want to try Twisted Tea, just follow us on Instagram — we've got a beautiful Instagram account, basically just jokes, like a meme account. And go to drinkteapot.com, or drink TeaPot on Instagram — you can find our brand, we've got a nice product finder, or you can buy our merch. Bryan Fields: Awesome, thanks for taking the time, this was a lot of fun. Kellan: Thanks, thanks for having me. Paul Weaver: Cheers.