Ian Monat, a San Francisco-based sommelier and bass player, immediately saw the potential in cannabis once California legalized adult use three years ago.
And through creating a job board for the cannabis industry, he saw the opportunity of including cannabidiol (CBD) in ready-to-drink beverages. In partnership with professional chef Craig Guenther-Lee and Martín Guerrero, startup investor and avid CBD user, Monat founded Rhythm CBD Seltzers last year.
Monat recently spoke to Cannabis Products about the genesis of the brand, what shifts in the alcohol market mean for CBD, and the challenges of launching a new brand during the COVID-19 pandemic.
CP: With a background in wine, why did you decide to launch a hemp beverage?
IM: I live in California, and when legal adult cannabis use started in January 2018, that’s all everybody in the wine industry was talking about. I wanted to participate in the cannabis industry somehow, so as a side hustle, I built a cannabis job board.
In July 2019, I was promoting the job board at cannabis trade shows when I attended the inaugural Cannabis Drinks Expo in San Francisco. I couldn’t believe what I saw with my own eyes – there was cannabis wine, beer, soda, sparkling water, root beer, lemonade, you name it. I knew right then that the wine industry was right to be scared about cannabis, but not for the reason they initially thought. It wasn’t that people were going to drink less wine because they would smoke more weed, people were going to drink less wine because they would start drinking weed.
I also noticed that many of the products did not taste very good. Some were very early concepts, minimally branded, and were not in the market yet. I thought to myself, “I bet I could create a cannabis drink that tastes better than most of the drinks I tasted today.” I didn’t start formally creating Rhythm CBD Seltzers until six months after the expo, but this was when the seed was planted and the entrepreneurial journey began.
CP: How would you describe Rhythm CBD seltzers?
IM: In three words: Fizzy. Flavor. Function.
We describe Rhythm as a flavor-forward seltzer that is enjoyable on its own or as a mixer. Many of our competitors “essence” their flavor, but it's not enough to mask the bitterness that an ingredient like CBD imparts on the liquid. So, we really leaned in on the flavor component of the drinks, as we didn't want any hemp flavor present.
We then took an additional step to differentiate Rhythm by adding other active ingredients to create functional formulas. We added organic, natural caffeine to create Rhythm Awake, melatonin to create Rhythm Dream, and ginger and turmeric to create Rhythm Recover. Rhythm was formulated for a consumer who is not just health conscious but is also attuned to his or her body, leaning on only natural ingredients to increase performance and productivity. Rhythm beverages are much like music — it's a force that can provide energy, help you sleep, or help heal you.
CP: Why include a variety of botanicals (such as rosemary, ginger and lavender)?
IM: When we set out to develop our flavors, we did our research. We looked at the competition and reviewed flavor research from beverage market research companies like FONA and Mintel. The savory, botanical and herbaceous flavors in beverages were a trend that emerged several years ago with no signs of slowing down.
I was also inspired by the craft gin renaissance happening in London after traveling there in October 2019. I found an amazing gin brand that I fell in love with called Old Curiosity. This brand’s unique colors and botanical flavors ended up being very influential in Rhythm's formulations.
CP: Why choose a seltzer versus another type of beverage?
IM: Coming from the wine industry, my first thought was to create a CBD wine. Unfortunately, CBD wines, beers and spirits face unique challenges that are quite prohibitive. The first is the TTB, or Alcohol, Tobacco, Tax and Trade Bureau. They govern what ingredients can be included in alcoholic beverages, and guess what isn't on their list of approved ingredients? CBD. You can't just make wine, add CBD to it, and bottle it.
What you can do to your wine is remove the alcohol and then infuse the remaining liquid with CBD, a process which causes its own problems, like flavor and mouthfeel reduction. Even if you end up with a great-tasting liquid, don't even think about calling it wine, because the TTB governs your label, too.
None of these regulatory or process issues are present when developing a CBD water, juice, or soda. Once we decided to pick one of these non-alcoholic beverage types to develop, we looked at the market size, consumption dayparts, and nutrition profile and landed on a naturally flavored seltzer as the optimal product type.
CP: How would you characterize the change in the alcohol market over the last few years? What opportunity does it present for CBD?
IM: CBD drinks are riding tailwinds from much bigger market forces that happen to be shifting at the same time the CBD category is emerging. The low-alcohol and non-alcoholic categories are exploding, and CBD drinks coincidentally fit right into this trend.
Innovation in non-alcoholic beverages has taken a sleepy category, once dominated by stale brands like O'Doul's, and completely disrupted it. The hippest brands with the best marketing out there are low to no alcohol brands. Just take a look at what Kin Euphorics, Seedlip, Haus, and Tost are doing, and you’ll be blown away. This is not just a direct-to-consumer trend, either. You've got some of the biggest brands, distributors and retailers discussing this shift at newly formed tradeshows dedicated to the topic, like the Low to No 2 Beverage Trade Show.
CBD drinks naturally tap into many other growing health and wellness trends, too, such as plant-based, gluten-free, vegan, and anti-inflammation. The nanotechnology that allows the CBD oil to be evenly distributed throughout the beverage became widely commercially available at just the right time, allowing CBD brands to emerge when consumers are looking for alcohol alternatives.
CP: Why go with hemp/CBD instead of THC?
IM: The Rhythm cofounders and I are big fans and avid users of CBD. I use CBD daily, and it was my CBD use as a gigging bass player that inspired the Rhythm brand name. Distributing a CBD beverage is also much easier than distributing a THC beverage, which can only be done in a dispensary for the most part.
In California, there are about 700 licensed dispensaries, some are quite small and most don't have coolers or storage for drinks. Now compare that to the number of grocery stores, liquor stores, convenience stores, restaurants, bars and hotels across all 50 states. All of these businesses can sell CBD drinks if they want to, although many choose not to, for now. The distribution potential for CBD-infused drinks relative to THC-infused drinks was too attractive for us, and that really pushed us down the CBD path.
CP: How has the response to Rhythm been?
IM: In general, the initial product/market fit has been good, and Rhythm has been well received in an increasingly crowded space. We are seeing reorders on both the D2C and the wholesale side of the business and our product reviews from customers and bloggers have been overwhelmingly positive. For example, we just got a 4.3 out of 5 in a product review from Drinkpreneur. Fortunately, when you're small, you can be nimble, and we've already made improvements to the formulas since our pilot run based on customer feedback. We won't stop improving on the flavor and function either, not until we have the best tasting, and most effective CBD drink formulas out there.
CP: What have you learned since launching Rhythm? Did the COVID-19 pandemic have an impact on your launch?
IM: We launched Rhythm during a very difficult time, both for businesses and consumers. We had to take our original business plan, which relied heavily on tradeshows and in-person sampling events, and throw it out the window. We immediately started ramping up digital operations and tried to grow our online footprint, which is difficult to do as most of the traditional ways to generate brand awareness, like paid Google and social media ads, are not available to CBD ingestible brands.
On the wholesale side, we shifted from selling to restaurants and bars that were struggling due to COVID restrictions and started focusing on businesses that were thriving in this environment, such as grocery, liquor and CBD/vape stores.