Aug. 30, 2018, 7:52 a.m. EDT

Weed beer is near, and it’s gonna get weird

Maze of laws involving pot and alcohol isn’t stopping big deals between cannabis and booze companies

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By Max A. Cherney

MarketWatch photo illustration/iStockphoto
Beer makers are looking to put weed into brews, but it isn’t that easy.

Would you drink marijuana-infused beer? Beer companies think so, but they are going to have to navigate a hazy path of rules and regulations to find out.

Two Roots Brewing Co. has spent millions of dollars clearing that path, and shows just how convoluted it can be. To get its weed beer to the masses, the San Diego, Calif., startup had to engineer a new way for marijuana to enter a drinker’s blood stream, remove the alcohol from the beer altogether, and develop a multi-state production system that only infuses the pot into the drink when it has reached the state where it is sold. All of those efforts have led to sales in just California and Nevada, though at least residents of those two states now have nonalcoholic beer that can get them high.

As giants of the alcohol industry buy into the concept of potent pot potables, they will have to confront the same issues: A confusing maze of laws dealing with pot and beer, even in states such as Colorado that have allowed adult recreational marijuana usage for several years, as well as simple human biology.

Giants in the beverage industry such as Molson Coors Brewing Co. /zigman2/quotes/205165133/composite TAP -6.11%  and Constellation Brands Inc. /zigman2/quotes/207737284/composite STZ -5.54%  are making bold bets on weed beer as beer sales continue to drop across the U.S. , and more are expected to jump on the bandwagon, even though the concept of weed beer has not yet proved to be popular. Beverage sales of $1.8 million accounted for just 0.7% of marijuana sold in June in California — the largest single market in North America — while the vast majority of pot sales, $175.7 million, was for products meant to smoke or vape, according to data from BDS Analytics, a business intelligence firm focused on cannabis.

Opinion: How to potentially become a marijuana millionaire, albeit carefully

“Right now, drinkables make up a very small portion of the cannabis market,” said Troy Dayton, chief executive of Arcview, which conducts research into cannabis markets and connects investors to early-stage companies. “Many big companies are looking at the intersection between functional beverages [infused with cannabis] and beer. Those are coming together to create a big hotspot.”

That hotspot is fraught with regulatory issues, however. Alcohol rules can vary from state to state and have caused headaches for the alcohol industry even before introducing marijuana into the mix. Cannabis consumption is legal in only a few U.S. states, though a large potential market will open when legalization takes hold throughout Canada in October.

Beyond just the complex and changing legal landscape, there are issues with consumer knowledge of the differences between drinking a beer and a drink laced with cannabis extracts. Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC -5.09%  Chief Executive Bruce Linton, who sold a $4 billion stake in the Canadian cannabis business to Corona beer-maker Constellation last week, told MarketWatch that beverage sales will remain a fraction of the overall market because the doses are too strong and the effects are wildly variable.

“The common problem with the current format of beverages is that you drink too much of it and you’re too crushed,” Linton said. “Rather than being a seven- to 12-minute onset period, it’s ‘who knows,’ and if you eat a cheeseburger too, it may be less time — it can be 20 to 50 minutes. So there’s a very weak feedback loop.”

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Two Roots, which is owned by Lighthouse Strategies LLC, says it has tackled that issue. Though the company wouldn’t go into much detail about the precise nature of its weed-infusion process, CEO Michael Hayford said the company’s beer products have a five- to 10-minute onset time and the effects dissipate after about 90 minutes.

“If you can bypass the liver then you can get rapid onset, but also rapid dissipation because it’s not going through your metabolism. And that’s what we’ve done,” he said.

See also: Here’s exactly how much alcohol you can drink and still be healthy

One method Two Roots may be employing to achieve its effects is through nano-emulsion, said NanoGen Labs founder Harold Han, who has a PhD in emulsion chemistry and has been working in the field for more than a decade. Han said that by making the cannabis oil containing the main psychoactive component — Tetrahydrocannabinol, commonly referred to as THC — small enough, it would be possible to achieve the effects Hayford talked about.

“The technology exists to do so now, but you would have to customize it for large production,” he said.

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