Jake Bullock and Luke Anderson only want to get you "a small amount of high."
The two 35-year-olds are co-founders of Cann, a beverage startup with a flagship drink that includes two milligrams of tetrahydrocannabinol, or THC — the main psychoactive ingredient in cannabis. Anderson and Bullock refer to it as a "social tonic," or a hangover-free alternative to beer.
Cann launched in 2019, and if you haven't heard of the Los Angeles-based startup, you might be surprised to learn that it has sold more than 10 million drinks across seven states and Canada, the company says. It's one of the top-selling cannabis beverage brands in the U.S., according to market research firm BDSA.
Bullock and Anderson project sales of more than 9 million cans next year — which, with prices starting at $24 per six-pack, would generate at least $36 million in annual revenue. That would tip Cann into profitability, a spokesperson tells CNBC Make It.
Those projections rely on the country's "sober curious" movement, as younger generations consider the health effects of regular alcohol consumption. Only 62% of adults under age 35 say they drink alcohol, 10% less than two decades ago, according to an August poll from Gallup. Cultural trends like Dry January and Sober October seem to get more popular each year.
Unsurprisingly, the co-founders say they're well-positioned to fill the void — even as research into cannabis' health effects remains inconclusive.
"The younger you are, the less booze you're drinking," says Bullock, Cann's CEO. "So it would not surprise me if in 10 years, THC seltzer is a category that we talk about like beer, spirits, wine, in terms of size."
Homemade drinks in a Palo Alto garage
Legal cannabis edibles usually contain 10 milligrams of THC per serving, with inexperienced consumers typically advised to start with a smaller amount. That means Cann isn't aimed at stoners who want "to get as high as possible," Anderson says. ("No shade to stoners!" he adds.)
Rather, it targets social drinkers who still want a slight buzz from a "bubbly, refreshing" drink without booze's nasty hangover, he says. Cann came from the co-founders' own desire to cut back on alcohol: The pair met in 2014 as colleagues at consulting giant Bain & Co., where they bonded over being "both closeted queer people" at the time.
They kept in touch after leaving to get MBAs — Anderson at Harvard University, and Bullock at Anderson's alma mater of Stanford University. Repeatedly, their conversations came back to "this big idea around getting older, hangovers getting worse, and alcohol being the worst thing that we do to our bodies," says Bullock.
A Colorado native, Bullock started comparing alcohol and cannabis habits. A single beer was a lot less potent than most edibles, or even a few puffs from a shared joint, making it harder for people to casually use cannabis in social situations, he says.
In 2018, he mixed some homemade drinks in his garage in Palo Alto, California, getting feedback from his Stanford classmates. That same year, Constellation Brands, which produces Corona and Modelo beers, invested $4 billion in Canadian cannabis company Canopy Growth.
Anderson recalls hearing Bullock's idea and thinking: "Wouldn't it be cool if that [$4 billion] was us?"
'Like selling meat in a vegan grocery store'
Once the co-founders joined forces, they spent months testing drinks before packing and delivering 3,000 cans to a Los Angeles location of the MedMen dispensary chain. Within four weeks, the dispensary requested another 30,000 cans, Bullock and Anderson say.
The Cann duo scrambled to find a warehouse to rent, and outfit it with the equipment to produce that many drinks. An early misfire made the first batch taste "like chlorine" because they hadn't filtered the water properly, says Anderson.
"We threw them all out, and then we started over again and still made our delivery deadline," he says. "As long as we [avoid] being stressed out about the big picture, we've been very successful at blasting through obstacles one at a time."
Only being able to sell in dispensaries is a challenge, Anderson says. MedMen locations, which resemble Apple stores, are known for feeling accessible for novice cannabis users. Most other dispensaries don't exactly help Cann appeal to its ideal audience.
The duo learned that the hard way. When they stopped focusing on their first location to expand to 80 dispensaries across California, they quickly saw their monthly sales drop to $20,000, down from roughly $80,000.
Panicked, they spent "eight hours a day, multiple days a week" in those dispensaries to "push as many of these products directly onto the occasional person that accidentally wandered in," Anderson says.
"It was like selling meat in a vegan grocery store," he adds. "[But] we didn't have anywhere else we could sell it. So that was really our only choice."
A new strategy to compete with the alcohol industry
Surprisingly, Anderson says, the guerrilla-style marketing worked. The word-of-mouth strategy reached celebrity customers, who posted about Cann on social media. The co-founders embraced a cheeky advertising strategy that prods drinkers to "give up the booze, not the buzz."
Still, looking ahead, Bullock and Anderson hope to grow beyond dispensaries across the 24 states that have legalized recreational cannabis, they say.
In Minnesota, for example, regulators passed new laws last year allowing the sale of low-dose, THC-infused food and drinks in liquor stores — provided the THC comes from hemp plants, not marijuana plants. If more states follow suit, Cann could expand into thousands of new locations.
"We really think we could be half the size of ... beer in five years [if that happens]," Bullock says.
Investors seem to agree. Cann has raised $32 million from firms including Imaginary Ventures, which also backs Skims and Glossier. Celebrity investors include Gwyneth Paltrow, Baron Davis and Rosario Dawson.
But taking on beer, a $100 billion annual business in the U.S., is a very tall order. Even hard seltzer, a closer comparison to cannabis beverages in terms of taste, is a $9 billion annual business. Top-selling brand High Noon moved 16 million cases, or about 64 million cans, last year.
In response to that challenge, Bullock notes that some of his younger friends think, in 20 years, people might view alcohol "the way we look at smoking today."
Such a shift could open the door for cannabis drinks, he says: "It could be very big."
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