At the Institute of Food Technologists conference in Chicago, attendees and presenters across the spectrum of food science, policy, regulation and manufacturing were buzzing about cannabis-based foods.
It's just another sign of the marijuana market's slow convergence with food — a blurring line that has spurred significant investment and acquisition in the beer space, as well as growing interest from mainstream consumers who have never used the substance before.
CEO Justin Singer founded Stillwater Brands in Colorado in 2014 to cater to this first-time consumer and fill what he believes to be a lucrative hole in the cannabis market for "microdose" food products.
In June 2016 Justin and his team launched a suite of powdered teas that contain THC and cannabidiol (CBD) levels ranging from 2.5 to 5 milligrams per serving, along with the motto "Smoke-free. Calorie-free. Judgment-free." In December that same year, the company introduced its Ripple dissolvable THC product line, which consumers can mix into recipes at home. The company also launched a powdered coffee product, Clockwork Coffee, in 2017.
After food manufacturers began reaching out about experimenting with the ingredient earlier this year, Singer launched the supplier arm of the company, Stillwater Ingredients. Today, the company has a run-rate of $3.5 million, partners with manufacturers across the country, sells its Ripple products in 225 Colorado dispensaries, and its CBD products are making inroads in natural grocery channels.
At IFT, Singer talked with Food Dive about Stillwater's growth, how his company embraced clean label to stand out from competitors, and how cannabinoids could become the next major functional food trend.
This Q&A has been edited for brevity.
FOOD DIVE: Where did the idea for this company come from and what opportunity did you see in this space?
JUSTIN SINGER: We started with Stillwater Brands, our CPG branded products made with THC, four years ago in the Colorado market. That company began because we were looking at this industry and we felt like there was a gap there for people who weren’t looking to get super stoned, they’re just looking to feel better. And that got crystallized when my grandmother asked me for a pot brownie. She’s in her 90s, she has diabetes, her husband has Parkinson's — they just wanted to sleep through the night and feel better.
What did you learn from that conversation?
SINGER: The only thing we could find for her was this 100 milligram brownie and that's way too much [THC]. That's a crazy amount. So I cut it into 20 individual pieces and then bagged each morsel and told her to eat half a morsel, wait two hours and then eat the other half. And it scared her. She never ended up touching it. It ended up in the back of her freezer.
So that's when we got onto this notion that there was [opportunity] for microdosed foods that weren’t designed to get people stoned, that were just designed for general wellness. We think cannabinoids are going to be a new category of functional ingredients, just like probiotics, omega-3s or flavonoids. CBD isn’t psychoactive and it’s got many wellness benefits — we see it being used a lot by elderly baby boomers and the athletes because it has good anti-inflammatory properties and neuroprotective properties. Giving [these consumers] a consistent product they can trust is going to work the same next month as it did this month has been really important.
"We think cannabinoids are going to be a new category of functional ingredients, just like probiotics, omega-3s or flavonoids."
CEO, Stillwater Ingredients
Would you say that fear of inconsistency and unpredictable experience is the biggest obstacle to capturing mainstream consumers?
SINGER: When it comes to THC, the biggest obstacle to getting the mainstream consumer is trying to explain to someone who’s never been high what it means to be high, and to do that without scaring the hell out of them. It’s very difficult. So offering them a nudge product, like our 2.5 milligram THC products, can help.
I think one of the big mistakes that states have made is that they’ve set the standard dose as 10 milligrams. That’s a heavy dose. It’s way too stoned for people. I think 2.5 milligrams is the perfect place to start. You want people to ask, “Am I stoned? I’m not sure.” That’s a much better experience than “This is horrible.” And then they can work up from there from a place of safety. When it comes to CBD, there is no max limit really… it’s like other nutraceuticals where you can find your own path of what works for you.
How do you overcome consumer fear and stigma around these ingredients?
SINGER: It's really important to put these ingredients into form factors that don't require people to self-identify as a drug user. You can't get somebody who's thought of marijuana as a drug their entire life and has identified themselves as not a drug user to smoke a joint. But when you put it in a tea format in a small dose that’s not going to get them stoned — with a relaxation effect to an equivalent degree of caffeine in a cup of coffee — people are more receptive. If you put it into a form factor like tea, where they're already drinking it for functional reasons, that doesn't make them feel like a drug user [to] try it. And suddenly that gets them over that mental hump and then it just becomes about, “Does this help me or not?” People are willing to drink things that have an effect on them.
How are your products different from what’s already out there?
SINGER: With water soluble technology… we were able to produce a standalone product called Ripple, our powdered packets of soluble cannabinoids. It’s soluble in water, odorless, flavorless, process stable… and it’s clean tasting and clean label. It has much faster uptake into the body, so you don’t have that old-school edible experience of waiting for two hours and then it’s like “Surprise!” If you drink a cup of our tea or a cup of our coffee, you’ll know how you feel before you finish the cup — initial onset is within 15 minutes, peak onset is 45 to 60 minutes and then you tail off after that. That’s the key thing: People need to feel like they’re in control, especially if they’re doing something to better their wellness.
"It's really important to put these ingredients into form factors that don't require people to self-identify as a drug user. "
CEO, Stillwater Ingredients
How did you find funding?
SINGER: Private wealth. My background is in venture capital, and I also taught entrepreneurship. Our early investors were friends and family, but a lot of guys who I had invested with when I was in venture or worked with, as well as people in the CPG food space. We believe that cannabis isn't its own sector — cannabinoids belong as a subsector of the food industry.
Have you considered launching ready-to-drink foods and beverages?
SINGER: I don’t see us doing ready-to drink in the current market environment for a few reasons. One, the [capital expenditure] of building aseptic manufacturing plants in Colorado is pretty extreme relative to the market.Two, dispensaries are just not a great sales channel [for food products]. You can’t guarantee refrigeration, you can’t guarantee merchandising. The refrigeration aspect is the one that I’m most concerned about. We are never going to do anything that we can’t guarantee the food safety of. The powder format is preferable because it’s shelf stable, and it’s ultra precise.
Where are your products sold?
SINGER: The THC products are only sold in [Colorado] dispensaries, which are not great. The other customers going in there are often heavy users, the bud tenders are [often] heavy users and they're always not super well trained. There's high turnover… and discovery is a problem with dispensaries because it's not like a grocery store where you've got a tea aisle. We launched tea into a dispensary and it was just sitting on the shelf next [to] gummies and a bunch of other stuff, so how is a consumer supposed to know that that’s tea? It’s very difficult.
That’s the case for our THC products, but our CBD products are starting to get a much larger uptake in much broader distribution. We sell CBD to one manufacturer that’s in distribution to all of the Equinox gyms now. …Natural foods grocers and coffee shops are also becoming interested. We’re also seeing some natural grocery chains bring it onto shelves, like Alfalfa’s in Colorado but also Lucky’s Market — they’re white labeling their own CBD brands.
Would you ever try selling your products online?
SINGER: Right now it’s possible, but I’m not really interested in doing it. We like to operate from a place with as much regulatory certainty as possible given the craziness of the market. Right now, online is a pain in the ass from a transaction processing standpoint and from a logistics standpoint. I also think in today’s market… because of all the restrictions on advertising, the only way to cut through is to have an over-the-top message, and we’re not over-the-top. We’re selling quality and consistency — we're not selling CBD as a miracle drug. I think to cut through the noise today, you have to sort of sell it as a miracle drug, and that’s just not a game that we’re interested in playing.
"You don’t have that old-school edible experience of waiting for two hours and then it’s like 'Surprise!' If you drink a cup of our tea or a cup of our coffee, you’ll know how you feel before you finish the cup."
CEO, Stillwater Ingredients
On the ingredients side of your company, what kinds of manufacturers are you supplying?
SINGER: We work with manufacturers across the country at this point, heavily in California. That's where I think CBD has had the most uptake so far, and beverage is the biggest [segment[ for us right now. We’re also working with companies that are developing bars. But people are really interested in CBD as a functional additive, so we think [CBD-infused] tea is going to be a huge market. Right now our [partners] are in the single digits, but by the end of the year I hope that number jumps up dramatically, and our pipeline is pretty good.
There’s been a lot of interest in cannabis-based ingredients in the beer space lately. Do you see that as a particularly promising segment?
SINGER: I don't know that I have a strong view on that segment. I do know that introducing those ingredients into fermented beverages is its own challenge, that I think so far a lot of people haven’t realized. And I think that THC is certainly a better intoxicant than alcohol from a perspective of pure harm reduction and a hangover standpoint, but whether [beer] is the form factor that's the best carrying agent for it, I don't really know.
As more states legalize recreational marijuana use, is the ingredient side of the industry becoming more competitive?
SINGER: It’s wholly untapped. I believe that the wellness side of cannabinoids is far larger than the intoxication side. It doesn’t mean that they’re not both interesting markets, but the wellness side of CBD now is big, and there are other cannabinoids in the pipeline that could prove to be very useful. On the nutraceutical side, we see the most interest in CBD from products that help with everyday aches and pains, almost like a natural aspirin replacement. People use it for sleep and anxiety reduction, and athletes use it for recovery.
What are the biggest challenges this industry faces?
SINGER: I think it suffers from a lack of professionalism ... and I think one of the biggest risks in the industry is people overpromising what CBD is capable of. People will say that it can cure cancer when it adamantly does not. There is promising science, and cannabinoids are a promising substance, but it’s being held back by years of [misconception]. …We obviously believe that the science is going to bear out in our favor, but the stronger the claims we make about it, the more frightened I get.