Arjun Bhargava, chief executive of "cannabis-inspired" soft drink company Grassene, talks about the upcoming cannabis referendum and opportunities that will open up if Kiwis vote in favour of recreational cannabis use.
What does your business do?
Grassene was founded at the end of January, we create a soft drink called Good Herb Soda targeted at adults, which is inspired by cannabis. It has the functional aspects of cannabis without the high, for example, like aromatherapy that makes you relax.
Our drinks are made using a combination of plant terpenes. Terpenes are organic compounds produced by a variety of plants, they are the compounds that give each flower, herb and fruit its own unique scent and flavour. Our drink contains cannabis strain-specific terpenes derived from natural plant sources.
One of the other co-founders, Arjun Narayanan, was a friend of mine from way back and we'd been thinking of getting into the cannabis industry and a way to get out of our corporate jobs. Arjun said there was another guy, Faisal Attayee, who was also interested (they studied together) and then all three of us got together and decided to start the business.
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We worked our way through a few conferences in Australia, got some government support through Callaghan Innovation and FoodBowl and got a food technologist on board to work on product formulations in mid-July. It took us a few months to get the recipe right for the drink and we began selling our products last month.
What was the motivation for starting it?
We've been friends of cannabis for a really long time. We've seen the product used in different ways, we've used the product ourselves, we understand the good and the bad parts, and we realised that there is a particular way for people to experience cannabis that is very personalised, and that everybody's body reacts differently to cannabis, and we saw this as an opportunity. We did a lot of research on it and dived in.
Who is buying your product?
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We've recently being trying to get the drink stocked in a few cafes and liquor stores. We've already sold product to one cafe in Auckland CBD and we have it stocked in Bottle-O in St Heliers. We also sell it through our own website, and have sent it to Whakamana, the cannabis museum, in Dunedin. We're trying to get into more places.
What's been the market response to the drink?
Our initial branding wasn't great, so over time we've refined that, and we've got a lot of people involved to help with the branding. I think we're at the stage now where people like both the drink and its look. We've also had a lot of interest from investors, and are in discussions with some.
How much have you invested to start Good Herb Soda?
Initially we got co-funding from Callaghan, we spent about $14,000 and got about $5000 back from Callaghan from their Getting Started Grant. We've also raised $35,000 from friends and family, and each of us have put in around $5000, so all up we've invested around $50,000.
How much potential is there in this emerging cannabis-FMCG space?
There's a global market worth about US$100 billion (NZ$150b), a combination of the cannabis and global beverage markets. New Zealand's cannabis market is projected to be about $1b and we're targeting about 53 per cent of that. New Zealand's non-alcoholic beverage market is estimated to be worth $3b. On the functional side, there are hemp products in the market, which could potentially branch out into other products, like us, but it is all based on the outcome of the referendum and regulations. I think there will be a lot of competition in this space. One part of the released draft legislation is around edibles. Edibles would have a lot more commercial value for the industry and there will be a lot of players if a recreational bill is passed.
What are your long-term plans for the business?
Based on how the cannabis referendum pans out next year and all going well, we will try to put CBD into the drinks. The current drinks are cannabis-inspired in a way, so I think we could potentially go down the CBD route in the future.
How heavily inspired have you been by similar products in international markets?
We've done a lot of research around international markets, particularly around California, Oregon and Colorado. Innovation in cannabis products is happening there because of where they are on the regulation journey compared to other countries. In California, there is Uber for cannabis. Those states are so far ahead in the game that there's a lot of learnings to be had from there.
What's the biggest challenge you face running this type of business?
Education is a big challenge. Trying to explain the product while selling it is not easy because there is a lot to explain. In places like California, the consumer already understands cannabis but to reach that level in New Zealand will take some time. New Zealand's understanding about cannabis is still limited, and that's where the challenge is.
What advice do you give to others wanting to start their own business?
Do a lot of research before you start.