Blake’s Hard Cider, Pleasantrees look to dominate Michigan THC beverage market
This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.
Michigan’s marijuana market is among the biggest in the nation — sales averaged more than $300 per capita last year on more than $3.05 billion in total sales, the most of any legalized state.
But it’s not top shelf in THC beverages, a growing market segment nationally that reached more than marginal sales figures in states like Minnesota. In Michigan, infused liquids, which include THC tinctures as well as THC beverages, accounted for less than 0.34% of the $286.8 million in recreational marijuana sales last month.
Yet Mount Clemens-based Emerald Canning Partners, a joint venture between cannabis company Pleasantrees and hard cider giant Armada-based Blake’s Hard Cider Co., is banking on a liquid future in the weed market.
The company invested $6 million to construct a 20,000-square-foot canning operation at the old Gibraltar Trade Center in Mount Clemens with plans for further expansion.
Matt McAlpine, president of Emerald Canning and former COO at Blake’s, said the company aspires to own 2% to 3% of the total Michigan cannabis market — which would have represented about $60 million to $80 million in sales in 2023.
But regulatory hurdles are stymying Emerald Canning’s plans, as THC-infused beverages, often called “alcohol alternatives,” are currently only available for purchase at licensed marijuana dispensaries, not traditional retail stores like groceries or gas stations.
“To be competing with alcohol, it needs to be displayed with alcohol,” McAlpine said. “To really succeed, we need to get these into the hands of consumers in an appropriate setting.”
Crushable cannabis
Inside, Emerald Canning Partner’s operations at the old Gibraltar Trade Center building look like any other canning operation, not too dissimilar from what patrons of local craft brewers see beyond the glass of a taproom.
The process starts with reverse osmosis water from a 1,200-gallon holding tank. THC-infused drinks are highly sensitive to oxygen, McAlpine said, so as much oxygen is removed as possible, down to only five parts per billion. Beer is roughly 50 parts oxygen per billion.
Then the ingredients are added to make the drinks a tea, seltzer or cider. There is no fermentation process like making a beer or hard seltzer.
In the final stages, the THC emulsion is added, a pretty precise process to make sure the correct amount of the psychoactive ingredient is mixed. Pleasantrees THC distillate is turned into an emulsion by a third-party provider. In a cooler at Emerald Canning rests canisters of the emulsion containing between 2 million and 3 million milligrams of THC — the equivalent of up to 60,000 joints.
Emerald Canning produces four brands with varying THC content. Its own Highly Social seltzer brands and Pleasantea range from 2 mg THC per can to 10 mg. Its Armada Cannabis Co.-branded THC cider is 20 mg.
The beverages retail between $2 and $10 per can.
Emerald also produces a new, 7.5-mg THC seltzer for competitor Lume Cannabis Co. called Buzzn. Those seltzers are hitting dispensary shelves now.
“We entered because the overall beverage market is massive and experienced and not-so-experienced cannabis consumers want a THC beverage,” Doug Hellyar, COO and president of Lume. “It’s also an entry point for the ‘canna-curious’ people who prefer not to smoke or vape. Market data shows there is a sizable shift from alcohol to cannabis and providing a high-quality beverage will accelerate that.”
In Canada, where recreational marijuana sales began in 2018, beer sales have averaged a decline of nearly 1,600 cases, or more than 30,000 12-ounce cans, per month per 100,000 people, according to a recent study by researchers from University of Manitoba, Memorial University of Newfoundland and University of Toronto.
Emerald Canning currently produces 24 different THC-infused beverage varieties and sizes, and expects that number to grow to 58 in the next three months, McAlpine said.
The company formed between Blake’s and Pleasantrees roughly a year ago with the idea of capturing an untapped market, said Bryan Wickersham, president of Pleasantrees.
“We know how to make cannabis, but didn’t have the first clue about beverages,” Wickersham said. “Luckily, we knew the Blake family and thought we could make a go at the market.”
The company struggled for most of its first year of existence, losing money, McAlpine said. So in March, the company had McAlpine, who was college roommates with Blake’s Hard Cider founder Andrew Blake at Michigan State University, backfill his COO role at Blake’s and come over to run Emerald Canning.
Part of the reason is the slow-regulatory approval process, McAlpine said. It takes approximately three weeks to turn water into a THC beverage, and for that beverage to hit a dispensary shelf due to testing and labeling requirements, or about three times longer than getting a Blake’s Hard Cider on the shelf, McAlpine said.
Currently, Emerald is making about 400 cases of THC beverages per day, but the facility is capable of producing double that — about 300,000 cases annually.
Its canning operation is designed to produce 300 cans of THC-infused drinks per minute, McAlpine said.
Hemp or THC teas?
The Michigan cannabis market has been slow to catch on to THC beverages, largely due to the state’s regulatory framework.
Hemp-derived THC products are technically allowed in many states due to the 2018 Farm Bill, which clarifies that THC of 0.3% or less of dry weight is not a federally controlled substance. This has allowed companies to crop up across the U.S. that distribute hemp-derived THC beverages to liquor and grocery stores.
In Michigan, however, hemp-derived THC is regulated like traditional cannabis-derived THC, and therefore is barred from sales outside of a marijuana dispensary.
Emerald Canning produces THC drinks because cannabis THC marijuana is more readily available than hemp-derived THC.
The Farm Bill opened up the hemp-derived market for major beverage producers, like Seattle-based Jones Soda Co. Jones launched its own hemp THC drink under the brand Mary Jones in 2022. It plans to be available in 30 states by the end of June.
But Michigan is effectively a walled-off market for hemp-derived THC companies like Massachusetts-based Cantrip, said CEO Adam Terry.
Cantrip distributes to 39 states, thanks to the Farm Bill.
Terry said THC beverages don’t sell well in dispensaries because they are simply expensive for the dosage.
“I have no interest in returning to a dispensary-based model,” Terry said. “I don’t see a way that it’s economically viable. I’d probably spend more making the product than I could make in a market like Michigan.”
In Minnesota, which is just launching its legal recreational marijuana market, sales of hemp-derived THC products, mostly beverages, have totaled roughly $78.5 million since July last year, according to data from Andrew Livingston, director of economics and research for Denver cannabis law firm Vicente LLP. In Michigan, THC beverages and tinctures totaled roughly a paltry $9 million in 2023.
“The state’s regulation on hemp are incredibly tough,” Wickersham said. “We have probably the most specific-use facility in the country because of them. Most other beverage producers outside of Michigan can participate effectively in both arenas.”
But even if Michigan decided to refine its stance on hemp-derived THC, Emerald Canning may still be in the weeds on growth. Current Michigan regulations bar cannabis THC and hemp THC production and processing in the same facility, meaning its Mount Clemens facility would have to pick between the two to be able to be sold outside of dispensaries if the state allowed it.
The Michigan Cannabis Regulatory Agency declined to comment on the topic.
It’s unlikely traditional retail outlets, like grocers, would ever stock cannabis-derived THC beverages because of federal illegality and the high taxes associated with selling the state-legal product.
Nevertheless, Emerald Canning is prepared to expand its operations as it is becoming the marijuana beverage maker of record in the state. The company is currently running one shift, five days a week but is adding five more employees and a second shift in the next three weeks, McAlpine said.
