Today, cannabis is making inroads into various sectors of the food and beverage industry. However, a decade ago, it was viewed as a dangerous narcotic. Its presence in edibles and beverages resembled homemade pot brownies more than the polished products now appearing on store shelves.
In 2009, Erik Knutson, along with his brother Kelly and Andrew Veron, found themselves struggling in the construction industry due to the Great Recession, which devastated the housing market. Hailing from Boulder, Colorado—a city known for its progressive stance on cannabis—they began brainstorming business ideas to introduce cannabis to a broader audience. This led to the creation of Keef Brands, one of the pioneering companies to infuse cannabis into soda.
Keef has since diversified its offerings to include sparkling water, energy shots, healthy juice blends, and oils. The company is collaborating with Ceria Brewing Company, founded by former Blue Moon brewmaster Keith Villa, to produce and distribute a nonalcoholic THC-infused beer called Grainwave. Keef’s products are available in retail locations across California, Colorado, Arizona, Nevada, Michigan, and Puerto Rico, with some also sold in Jamaica. Knutson plans to expand into Massachusetts, Oklahoma, Oregon, and Washington this year, and sales are thriving. Last year, Keef sold its one-millionth product in the U.S. and now sells approximately 50,000 items monthly.
While the edible cannabis market has become increasingly competitive, Keef was instrumental in establishing the category and continues to innovate in response to consumer demands. Knutson discussed with Food Dive how he helped shape the drinkable cannabis segment and his vision for its future.
ERIK KNUTSON: We were brainstorming and analyzing the market. I realized that two of the most accepted forms of social adult interaction are drinking and smoking, and most people were already on the smoking side. We identified a significant market need for a beverage that offered a genuinely social way to enjoy cannabis. Most people don’t just sit around eating brownies; they also enjoy beverages. Throughout history, drinks have served as a social lubricant, so it made perfect sense.
KNUTSON: The initial beverages we produced were in clear glass bottles, emphasizing a natural look while still resembling soda. We committed to using pure cane sugar, agave, or monk fruit, avoiding high fructose corn syrup and artificial sweeteners. In terms of color, some consumers prefer visually appealing drinks, so our early products included vibrant sodas, such as super blue blue raspberry and purple flavors.
By mid-2010, we launched Keef Boosts, a product inspired by energy shots, which we formulated entirely in-house. The first flavor was called Flo, designed as an energy booster with added B vitamins and vitamin C, crafted with agave for a clean profile, free of artificial coloring. We successfully manufactured and distributed these until 2015 when packaging regulations changed, prompting us to pivot our strategy.
KNUTSON: We have developed multiple product lines within our brand. Currently, we offer Keef Life, a clean-label, non-sparkling, low-calorie beverage, along with our Keef sodas and colas. We also have a sparkling water product, which we believe is the healthiest edible option on the market, containing just sparkling water with THC and a touch of monk fruit sweetener. We have aimed to produce products that cater to a broad segment of the market, and it seems to be resonating well.
KNUTSON: Our target consumer is anyone who uses cannabis and seeks a social product to share at gatherings. We refer to it as “after-recreation medication.” As a beverage, it’s both hydrating and enjoyable. We strive to create products, whether sparkling water or sodas, that appeal to various demographics within the cannabis market. We recently launched a product called Ceria in collaboration with Keith Villa, the master brewer behind Blue Moon. This non-alcoholic beer, containing only five milligrams of THC, aims to attract new consumers to cannabis who might not have otherwise tried it.
KNUTSON: We had been exploring this concept for a while, thanks to my brother’s business focused on hops extracts for beer. The opportunity to partner with Keith arose through connections with cannabis research firm ebbu. As the leading beverage manufacturer in Colorado, it was a natural fit. We quickly established a rapport and recognized the synergy between our businesses.
KNUTSON: The reception has been overwhelmingly positive. We sold out our initial batch within a week, both wholesale and at retail. Our product is unique and tastes excellent. It offers an authentic beer experience without the alcohol. There are only a handful of companies nationwide that have achieved a similar flavor profile. With someone of Keith’s caliber involved—one of only three Ph.D. brewologists in the world—we are confident in the quality of our offering. While many cannabis companies produce high-quality products, most edibles on the market do not meet the standards set by traditional consumer goods, largely due to high tax burdens making it challenging to maintain quality.
KNUTSON: I believe that the legalization of any form of cannabis—be it hemp, THC, or CBD—benefits everyone. It brings significant revenue into the industry, and our hemp-focused company, which we started in 2012, has witnessed this firsthand. Every new deal creates fresh opportunities for generating income that were previously unavailable.
KNUTSON: We have consulted with various CBD companies on beverage products and are currently launching a tea product in collaboration with a partner for the X Games. We are actively engaging with large traditional consumer packaged goods companies to develop CBD beverages and plan to introduce a Keef CBD drink in the near future. While our focus is primarily on THC products, we are certainly keeping CBD on our radar.
KNUTSON: Innovation is crucial. Being a first mover is advantageous, but it doesn’t guarantee success, as companies like Blockbuster have discovered. Continuous innovation and exploring new opportunities are essential. Our consulting side has significantly aided our R&D efforts. We are actively developing new products, including non-alcoholic, cannabis-infused wines in partnership with local wineries in northern California, aiming to disrupt the adult beverage market. This presents a viable alternative for many people, allowing them to feel included in social gatherings without consuming alcohol.
KNUTSON: From a pricing perspective, we were the first to offer a 10 mg cannabis drink in Colorado, effectively setting the market standard at $5-$6 for sodas and $8-$10 for beers. We invested in attractive packaging early on, which has contributed to our strong shelf appeal, elevating the entire industry.
KNUTSON: Our focus is on expansion. I am currently spending considerable time in California, a vast and largely untapped market. The number of retailers is expected to double in the next year, with similar trends emerging across the country. New Jersey is poised to pass recreational adult-use legislation soon, offering a gateway to the New York market. With federal legalization on the horizon, significant changes are anticipated in the industry within the next 12 to 36 months. The market is estimated to be worth between $50 billion and $80 billion, primarily from the black market, and traditional companies are quickly moving into this space.
KNUTSON: Choose your partners wisely. Like any emerging industry, cannabis has its challenges. Treat it like any business venture; it’s not a guaranteed cash cow. Many early entrants mistakenly thought they could make quick profits and exit. The cannabis business often involves more complexity, including high taxes, compared to traditional industries. While it’s challenging, it’s also rewarding and offers substantial opportunities.
I also recommend not overextending yourself. Focus on what you do best. Companies that attempt to diversify too quickly often struggle. Prioritize creating exceptional products, and you will likely succeed.
KNUTSON: We will continue to expand, forming new partnerships and producing third-party lines. We have completed formulations for our new Keef gummies, called Keef Caps, which will mimic the flavors of our sodas. This is a natural product extension, and we are also working on vape pen lines and tea formulations, which we expect to finalize soon. Additionally, we are considering incorporating calcium and citrate into some of our products to enhance their health benefits.