Local cannabis-infused beer company navigates tricky legal barriers

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SAN DIEGO — High Style Brewing had big expansion plans for its cannabis business. But it hit a major snag: Its name wasn’t legal in Nevada.

Instead of spending the past year expanding, the San Diego crafter of cannabis-infused, non-alcoholic beers underwent a rebrand and a major extension of its product line. The brewery relaunched this month as Outbound Brewing.

Outbound’s overhaul reflects the lengths cannabis companies go to establish brand recognition amid a patchwork of state laws and no interstate commerce.

“We figured we would be running into this [type of] issue with more and more states,” said Lyden Henderson, the brewery’s chief operating officer and co-founder. “We did not want to fracture our brand.”

This time last year, High Style had a good plan mapped out for the business. The company landed distribution deals across California to put its Coastal Haze on dispensary store shelves, focused on proof-of-concept efforts in local markets, and started chatting with licensed operators in other cannabis-legal and beer-savy states including Colorado and Oregon.

Henderson and co-founders Marty Reed and Greg Haap figured more states would follow in short order.

They worked for more than a year on research and development to dial in a proprietary process to craft a good-tasting, non-alcoholic beer that then is infused with a dash of THC, the psychoactive cannabis compound, to result in a drink that mimics the early onset effects of drinking a beer. The crew then spent several months ensuring those brews passed muster with California cannabis and alcohol regulators.

Nevada was a logical next step because it, like California, had a recreational cannabis program in place, and in close enough in proximity to test a potential operational strategy of working with contract brewers and cannabis licensees in that state to replicate the recipes and processes for the brews.

But crossing state lines is tricky: Nevada’s cannabis regulations were different from California’s and included a provision that prohibited the use of cannabis slang like “bud,” “pot,” “420,” “weed” … and “high.”

So High Style spent a good chunk of 2019 brainstorming brand names. The brewery relaunched this month as Outbound Brewing and concurrently released a slate of non-alcoholic, non-infused beers and a line of CBD-infused, non-alcoholic beers that will allow the brewery to both latch onto growing consumer trends and potentially achieve a nationwide reach that’s often elusive for cannabis companies.

Navigating a tangled web of laws

“There are ways to get around this through strategies,” said Olivia Mannix, co-founder of Cannabrand, a cannabis-centric branding and marketing agency founded in 2014 in Denver. “But it’s still not a walk in the park to reach a broader demographic. It’s something that is tricky.”

A common practice has been the licensing of brand names and intellectual property to regulated manufacturers outside of their home states. Other firms with deeper pockets — such as MedMen, Acreage Holdings and Harvest — went on a land grab, buying up licenses in newly legal states to then erect vertically integrated operations there.

The United States is witnessing federalism in action as states across the nation establish programs to regulate the cultivation, possession and sale of federally illegal cannabis. Each of those states operate in a silo and boast a unique slate of laws that often are subject to frequent tweaks as officials learn on the fly in creating first-of-their-kind regulations.

“We are straddling two very different segments of products,” said Charlie Reed, the brewery’s director of impact and business development. “At this point, there will not be something that works in every single recreationally legal state.”

Creating a new brand

In California, developing a product that plays in two heavily regulated industries of alcohol and cannabis created some interesting challenges. The labels couldn’t be too colorful or cartoonish, so as not to appeal to children. But Outbound also couldn’t call its concoctions “beers” or identify them using any common beer styles, such as IPA, pale ale, or sour. So Outbound’s labels instead say “craft malt beverage.”

States like Colorado have labeling rules that require information such as potency and contaminant testing statements and a specific THC symbol. Illinois requires Surgeon General-esque health warning statements. In Washington state, cannabis products can’t mimic alcohol products including using phrases like “0% ABV” and “not a beer.”

“We’d like to remain as consistent as we can be state to state,” Henderson said. “I’d love to see the same brand in different states and see something familiar, so I know there’s consistency there.”

Outbound’s rebranding process and new product extension took eight months and included closely reviewing each state’s alcohol and cannabis laws in addition to scouring trademarks in the crowded craft beer landscape.

“There were a couple ones that just totally broke our hearts when we found a tiny brewery in the middle of nowhere,” Reed said.

The beverages are breaking convention, and the Outbound name and imagery are meant to reflect that, said Kyle Merwin, co-founder of Born & Bred, the San Francisco-based branding agency behind the Outbound redesign.

“Regulation should never limit creativity; it should only inspire it,” Merwin said.

And even if the the beverage can’t be called a beer, there are clever ways of pulling in familiar language such as “flavor profile,” “hoppy,” “malty,” and “earthy,” he said.

“They’re going to feel it before they necessarily read it,” he said.

The rebranding efforts continued in the background as the company still had to continue business as usual, including exhibiting the brews under the High Style name at the inaugural Cannabis Drinks Expo that took place July 2019 in San Francisco.

“We’re trying to find our spot in cannabis; we’re trying to find our spot in craft beer,” Reed told CNN Business two weeks before the event.

As Reed poured samples of the non-infused, no-alcohol beer bases for the Grapefruit Haze, Pale Haze and Blood Orange Haze, she said she wasn’t breathing a word of the rebrand to any who approached the booth.

Now Outbound is shouting it from the rooftops, and the brewery’s officials are finding a silver lining in a major roadblock to national expansion.

“I’m grateful for that initial conversation with Nevada, so we’re diving into this sooner rather than later,” she said. “Of course, this would have been great to start as Outbound.”

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