- CBD-infused sparkling water brand Sweet Reason raised $2.5 million in funding led by capital firm Lerer Hippeau, Food Navigator reported. Other investors included RiverPark Ventures, Max Ventures and Subversive Capital.
- The investment will allow the company to expand its sales team and increase its branding efforts, founder Hilary McCain told the website.
- Sweet Reason's products contain carbonated water, natural flavor and CBD. The company claims its technology enhances how well the hemp extract is absorbed in the body.
CBD has become increasingly popular in the food and beverage space in the past two years, a Rabobank report found in May. Despite the ingredient still being illegal for use in food and beverages on a national level, CBD-infused products are infiltrating the market. It is being included in everything from beer, brownies and tea to ice cream and candy.
Consumers, especially baby boomers and the younger health-conscious generation, use CBD to help with conditions such as chronic pain and insomnia. The U.S. Food and Drug Administration, which held a 10-hour hearing on cannabis and CBD in June, has yet to establish a legal path to market for food and beverages with these controversial ingredients.
While many small companies such as Sweet Reason are working on products with the substance, Big Food has been largely watching from a distance until more legal clarity is provided. Earlier this year, the founder of Jelly Belly jelly beans created a spin-off company called Spectrum Confections for CBD-infused jelly beans. It sold out just after the launch. Ben and Jerry’s, which is owned by Unilever, confirmed the production of CBD products once regulations pass.
Mondelez, the maker of Oreo and Triscuit, told CNBC in May it's considering adding CBD as an ingredient. But first the snacks maker is checking into health claims associated with CBD. Beverage giant Coca-Cola has looked into the space but so far hasn't shown signs of making a move.
McCain with Sweet Reason told Food Navigator that while some companies are awaiting FDA guidance, others are “definitely” going to be carrying CBD food and beverages well before then.
As a growing number of young upstarts position themselves in the fledgling space, having an extra $2.5 million in its coffers to expand the company's sales team and increase its branding efforts could give Sweet Reason a big advantage against other competitors. With more companies entering CBD despite the broader uncertainty, a company that has built up momentum now could find itself ideally positioned for long-term success if legal clarity is eventually established.
For Sweet Reason, it not only has CBD to attract consumers, but sparkling water — a beverage segment that is popular with consumers who still want bubbles in their drink but at the same time want to distance themselves from the sugar and other ingredients found in soda. These characteristics could be invaluable to Sweet Reason as it tries to compete with other CBD products on the market.
A Brightfield Group report projected that by 2023, the total U.S. CBD market could reach a valuation of $23.7 billion. The report found the primary cause of market growth is big-name players on the scene. CVS, Walgreens, Rite Aid and Kroger all announced they will carry CBD products, though none are in food and drink.
While a lot of retailers have opted to join the CBD game while it’s hot, it remains unclear when FDA regulations will surface. In the meantime, brands must toe the line according to state laws on a case-by-case basis.
“We see so much potential in this market and the entire hemp and cannabis market, that we think it’s well worth the risk,” McCain told Food Navigator.