Low or no-alcohol beverages have seen a boom in recent years as consumers look for ways to socialize and imbibe free from negative side effects like hangovers and poor sleep. Advances in infusion technology empower brands to design products with this goal in mind without sacrificing taste or experience. Vertosa Chief Innovation Office, Austin Stevenson, sat down with MXXN founder, Darnell Smith, to dig into cocktail culture’s influence on cannabis, the product innovation process and the persistent friction brand founder’s face in the space.
[Austin] I’ve been looking forward to digging into your background and industry point of view since we met in-person at the Black CannaCon in New Orleans in 2021. Our teams were already collaborating at that point and your panel appearance highlighted your commitment to excellence alongside a thoughtful approach to the products you create and people you serve.
[Darnell] I appreciate you saying that! The panel at Black CannaCon was a blast and showcased your push for innovation and partnership in everything you do. You’ve certainly helped build Vertosa into a innovation-forward organization and the cannabis industry as a whole benefits from the cannabinoid delivery advances the company is making - a true example of creating change to lift all boats.
[Austin] Thank you! That’s high praise from someone like you actively innovating in the space. You seem to have a very clear image driving your brand, but MXXN isn’t alone in trying to provide a true cannabis analogue for the everyday spirits consumer who wants to stop drinking alcohol. What do you feel makes your products unique in the evolving category of cannabis beverages?
[Darnell] MXXN is the first cannabis beverage created to be a 1:1 replacement for alcohol. Our essences recall tequila, gin, and bourbon and are meant to take the place of a spirit in your favorite cocktail. As it is powered by Vertosa’s nanoemulsion technology, MXXN’s buzz is extremely predictable in onset and enhances the mood you are looking to achieve. Over the course of my nearly two decades in the spirits industry, I recognized the opportunity for a new kind of beverage to bridge the cocktail and cannabis industries.
[Austin] Your drive to create something new and yet familiar feels spot on for today’s consumer. Cannabis may be an unknown for some and presenting it in an approachable format with flavors people know and love has the potential to drive adoption across a wide range of audiences. It seems you gave yourself permission to wonder, “What if I made a cannabis beverage taste like Gin, Rum, Whiskey, or Tequila?” and then leveraged your experience in spirits and alcohol to execute on that dream. What did the product development process look like?
[Darnell] MXXN’s roots are in my work over several years innovating in the non-alcoholic/alcohol alternative space. We set out to create a non-alcoholic spirit that would taste, feel, and be experienced like your favorite spirit in a cocktail. We experimented with different blends of distilled essences, extracts and rare ingredients to deliver a recognizable spirits experience to consumers with none of the alcohol. After three years of research, development, and product obsession, we had built the base and began to work on cannabis infusion. Vertosa was an invaluable partner in innovating our product to include cannabis emulsion.
[Austin] I’m grateful to hear that! To your credit, your team had done its homework and came to the table with an existing knowledge of the key challenges involved in adding an active ingredient like cannabis to a beverage formula. If I recall correctly, you had already tried emulsions from our competitors that literally left a bad taste in the mouth of taste-testers. How was working with Vertosa in comparison?
[Darnell] Vertosa’s incredible subject matter expertise on cannabis emulsion helped bring MXXN to life. A key challenge with most THC-infused beverages is the overpowering taste that cannabis can impart. We worked closely with the Vertosa team to find the perfect infusion to enhance our product and retain the taste, clarity, and viscosity we had achieved in our base product. All of the buzz and none of the booze.
[Austin] Now that’s a tagline! You touched on an excellent example of why we have a “one size does NOT fit all’ approach to infused ingredients. Your team had already spent countless hours developing a flavor system that tasted like alcohol, without any alcohol. Our team stepped in to understand the unique ingredients and attributes of MXXN’s spirit analogues, and complete compatibility studies to identify the best performing emulsion system for your products. After compatibility, we moved on to the fun part - sensory evaluation - and dug into questions like:
- Does the product taste good?
- How does it make you feel?
- What cannabinoids will be in the beverage and how much?
Thankfully, you had a strong understanding of the MXXN audience and use case to help answer these questions and drive towards an ideal infusion. It seems your prior experience in the spirits industry helped you recognize an unmet need and navigate the product development process, although I’ve seen a number of people with mainstream CPG experience assume cannabis is a cake-walk and receive a rude awakening when they join the industry. What missteps do you see people make when transitioning from mainstream CPG to cannabis?
[Darnell] I think underestimating the complexity of an industry that is not yet federally legal and how that affects every facet of a business. From varying regulations within a state, to completely different regulations state to state, it’s a never-ending maze. That doesn’t even take into account the marketing and distribution challenges that it presents vs. mainstream industry. Throw in 280E issues and it’s easy to see why many making the transition from mainstream industry to cannabis have a moment of “what have I gotten myself into?”
[Austin] You hit the nail on the head! The cannabis industry is riddled with regulatory and financing hurdles that create more friction across the supply-chain than exists in traditional CPG. Lack of inter-state commerce, for example, means you cannot ship cannabis products across state lines which limits your addressable market and hamstrings your ability to reach economies of scale in production.
On the finance side, many traditional CPG companies (especially brands) are propped up on Purchase Order (PO) Financing. If a Brand lands a deal with Target or Kroegers to buy X number of units, they can take that PO to the bank and get a loan or line of credit to build and distribute the product. That form of lending is not available for cannabis brands. As a result, even if you’re a HOT brand in cannabis and get a large PO from an MSO with retail locations all over North America, you have to use your cash on hand to produce the product and given you can’t ship across state lines, you have to use more cash to build that product in multiple states. Then you have to WAIT to get paid from the retailer before you can re-invest your margin to grow and do it all again.
And yet, it seems we both believe in the industry! Despite the challenges, what unique opportunities do you feel cannabis presents to innovate on business models or CPG products?
[Darnell] I think we have a unique opportunity as an industry to educate and advocate. While many people have had some experience with cannabis in their lifetime, the reality is the vast majority of CPG products are in categories people have spent their whole lives using - thus developing deep brand loyalty. We have lots of work to do in cannabis to reach this level. I believe the market opportunity is much larger than we can currently imagine which will provide ample opportunity to evolve and innovate on business models and products.
[Austin] I couldn’t agree more! Although cannabis feels commonplace to some, many consumers are just learning about the various use occasions or experiences the plant can serve and engaging with innovative new products like infused beverages. The amount of education and advocacy we still need to do can seem daunting at times. Founders like you who are investing in innovation, engagement and intentional growth give me confidence we’ll close that gap and successfully navigate existing roadblocks to drive adoption.
So, what’s next for MXXN? Expansion into other states? Innovating with minor-cannabinoids? Perhaps a retail location, consumption lounge or bar experience?
[Darnell] Exciting times ahead! The balance of this year is all about getting liquid to lips in California. MXXN is a product you need to taste to fully grasp, so we are going to make sure we give consumers ample opportunity to experience the brand. Consumption lounges represent an amazing opportunity and we’ve had strong interest from the small, but growing number of lounges currently open in the state. In parallel, we have aggressive expansion plans into other states with a robust innovation pipeline that will provide options for the canna-curious and experienced consumer alike.
Learn more about MXXN’s lineup of cannabis-infused spirit replacements for your next cocktail at enjoymxxn.com and follow them on Instagram to stay up-to-date on the latest product releases and restocks. You can purchase MXXN online or at select retailers in California knowing a portion of the proceeds from the sale of MXXN go to organizations working to pass federal marijuana reform that acknowledges the disproportionate harm faced by low-income, Black, Latinx communities, and works toward repairing this harm.