Two of the biggest trends in the food and beverage space today are clean label and cannabis.
Sproutly, a Canadian company, has unlocked the secret to both with its water soluble cannabis extract, which the firm is hopeful will eventually be used in beverages and food.
CEO Keith Dolo told Food Dive that Sproutly's process, which naturally removes a water soluable cannabis solution from the plant, is unique. Most other companies extract oils from the plant and break them down through chemical processes of emulsification or encapsulation. The heavy processing could turn off consumers who are interested in a clean label cannabis product, he said.
"(Our process) creates a truly natural solution that doesn't need any either chemical modifiers or (the)... kind of chemicals required in the actual extraction process," Dolo said. "We have a very differentiated product. ... Almost from a health and wellness space, how can we cater to an industry and a market that is looking for cannabis products, but truly wants them in their most natural and healthy form?"
Even though there are no Sproutly products on shelves yet — the company is focusing on Canada first and edible cannabis will not be legal there until October at the latest — there is a lot of excitement for what the company can do. Last month, Sproutly entered into a joint venture with legacy Canadian brewer Moosehead to develop, produce and market nonalcoholic cannabis-infused beverages. Sproutly also has developed and formulated three different functional cannabis-infused beverages that provide focused energy, stress relief and relaxation, and restful sleep support.
Once the products are legal in Canada, Dolo said Sproutly will be ready for consumers.
"We've already created formulations. We've got a product catalog of multitudes and multitudes of beverages that are already complete," Dolo said. "Now we're just waiting on the regulations and then determining distribution, branding, marketing and everything like that."
'Like wine varietals'
Sproutly's extraction process was developed by Arup Sen, its chief science officer. He started the research with another company, Infusion Biosciences, which Sproutly acquired last year.
"We don't take oils extracted from the cannabis plant and try to make them water compatible," Dolo said. "Dr. Sen has discovered — and that's kind of the groundbreaking discovery — that there is a naturally water soluble cannabis solution that exists within the cannabis plant."
Because the extract is not an oil, Dolo said the body breaks down the cannabinoids differently than conventional edibles, which can take hours to kick in. With Sproutly's extract, consumers can feel effects within five minutes. The cannabis can start wearing off in 60 to 90 minutes.
The extract also pulls all of the cannabinoids, terpenes and phytochemicals out of the plant to give the consumer the total experience. This means the extract has the full smell, feel and taste of the plant it came from, Dolo said.
"Almost from a health and wellness space, how can we cater to an industry and a market that is looking for cannabis products, but truly wants them in their most natural and healthy form?"
"For the first time, we're almost looking at it more like wine varietals," Dolo said.
Sproutly is working to formulate its beverages based on the individual marijuana and plant variety. So far, they've been playing with the fruitier and earthier flavors. Dolo said that through the joint venture with Moosehead, the brewery's product development team may come up with new ideas. He said Sproutly is the 152-year-old brewer's first joint venture, and Moosehead has a long history of being on the cutting edge of what consumers want.
Dolo said the company plans to eventually use its extracts in food, though the initial focus is on beverages. Sproutly is talking with food companies interested in entering the edible cannabis space for potential partnerships, which allows them to be on that side of the business without becoming a food company, he said.
"We can rely upon multiple generations of a company and all the hardships that they've gone through: distribution, marketing, branding, food formulations," Dolo said. "It allows us to get to market quicker with better quality products out there, rather than figuring it out ourselves. We'll do what we do best, which is grow very unique cannabis strains and extract them."
Regardless of what products are developed, Dolo said they are unlikely to come to the United States until there is full federal legalization. The company is looking at markets outside of Canada, but only ones where federal law governs the industry.
Cannabis companies as CPGs
Aside from its unique extract, Sproutly has meaningful differences from other cannabis companies. Its c-suite has several executives from outside of the industry. Before Sproutly, Dolo worked with staffing and recruiting company Robert Half and financial firm PricewaterhouseCoopers. He was recruited for the cannabis company, and joined because of the opportunity it presented.
In December, he brought two CPG veterans on board. Bryan Semkuley — with experience at Kimberly-Clark, AB InBev and Labatt — joined as the company's president. Melise Panetta — who has worked for SC Johnson and PepsiCo — became Sproutly's vice president of sales and marketing.
Dolo said it is important for cannabis companies to transition from agricultural businesses to ones that think and act like CPGs. While a cannabis company can succeed today by creating a slew of different products and getting them on shelves, Dolo doesn't think that is a lasting strategy for success. If they want to succeed in the future on their own — and not just be thought of as ingredients suppliers — cannabis companies need to concentrate on factors such as branding, marketing and meeting consumer needs.
Having CPG veterans on board has helped Dolo look at Sproutly and its future through this kind of lens.
"(Working with existing companies) allows us to get to market quicker with better quality products out there, rather than figuring it out ourselves. We'll do what we do best, which is grow very unique cannabis strains and extract them."
"It's the next evolution of saying, 'Well, what products would work good with cannabis, and how do we get those products in front of the consumer, and how we can determine what consumers actually want to buy,' ... versus just putting it on the store shelf and hoping that the products sell themselves," Dolo said. "So it's almost taking a deeper dive look into what your consumers want and need first, and then creating products that cater to a specific crowd in a very focused frame."
One thing that he has become attuned to is the clean label trend. As consumers often scrutinize ingredient lists and manufacturing processes for many food and drink products, they are likely to start doing the same for cannabis products. And the cannabis in many of the edible products on the market now undergo lengthy processes in order to utilize the cannabinoids and get them into small enough particles, Dolo said. Sproutly's method is much cleaner and more straightforward, not requiring extra chemical intervention.
"Do we want to be just another cannabis producer — where we're putting chemicals into people's body — or do we want to be a cannabis producer that has the most natural extraction methodology, which should create the most natural oil or oil-based products out there?" Dolo asked.
He is hopeful that the clean label aspects of Sproutly's products will win over consumers, especially those who want cannabis for wellness reasons. A simpler and less chemically processed product seems like a better fit for health-concerned consumers.
In the near term, Dolo said cannabis companies should retrain their focus on quality products that consumers want.
"We'll really start to see what products, categories and what brands start to win out over the next four to five years," he said. "And so I think you'll see a lot of consolidation within the industry of the licensed producers, such as ourselves, that either need to band together to get mass scale, or you'll see ones that aren't able to capture that market share probably fade out or get bought out."