Minnesota Alcohol Retailers Tap into Cannabis Sales

The rise of legal cannabis in recent years has been a mixed bag for beverage alcohol retailers. On one hand, fears that consumers would start swapping out alcohol for legal pot have proven correct. Especially among younger generations — Gen Z in particular — where alcohol consumption has dipped while THC usage is on the uptick.

On the other hand, as recreational cannabis moves into the mainstream and old stigmas fade, opportunities have emerged for perceptive retailers. One example is THC drinks. These are produced using a loophole in the 2018 Federal Farm Bill that allows for the extraction of small amounts of THC cannabinoids from hemp, which is then infused into canned and bottled beverages. The active psychotropic ingredient in these products range from a mild 2.5 mg to an eye-popping 50 mg or more.

Ask any beverage alcohol retailer nowadays and they’ll likely say that THC drinks are one of the trendiest sections in the store. Helping fuel this movement is a massive improvement in quality. Even just five years ago, most THC drinks still tasted too bitter, reflecting the unpleasant flavor of their cannabis component. To mask this flaw, many producers would dump sugar into the beverages. But this also turned away customers, who understandably did not want to consume a saccharine “sugar bomb” with high sugar content.

Thankfully, recent breakthroughs in the lab now allow adding flavoring in THC drinks without overly relying on sugar.

Convenience and form factor are two other important reasons why THC drinks have taken off. Simply opening and consuming a single-serve beverage is far more socially acceptable and inconspicuous than lighting a joint out in public. And we’re a drinking culture; whether alcohol or nonalc, people enjoy sipping on something while socializing.

Altogether, the result is a category that has exploded in the past few years. Many complications remain, however. Consumer education, overall, is low, meaning that the risk remains for overconsumption. And because these products exist in a legal gray area, there’s essentially no government oversight, meaning brands can reach retail shelves despite questionable contents.

Also: The loophole that allows for THC drinks can be closed by U.S. Congress at any point. Should federal legislators choose, and there’s usually at least a handful pushing for it, they can wipe out this fast-emerging industry by eliminating the unintended loophole from the 2018 Farm Bill.

It’s a tricky market to navigate. Some retailers stay out of THC entirely, while others pick and choose products, preferring those with the best transparency. One state in particular has established a progressive stance towards cannabis as a manageable profit center for liquor stores. 

Cannabis in Minnesota

Minnesota only legalized recreational cannabis in 2023. It’s hardly a pioneer in that regard. But where the North Star State shines is how quickly and innovatively beverage alcohol retailers have embraced THC as another source of revenue. Especially among members of the Minnesota Municipal Beverage Association (MMBA).

“My members are successfully selling THC in both on and off premises,” says MMBA Executive Director Paul Kaspszak. “Some member cities are also in the process of entering the full cannabis retail sector.”

THC drinks and recreational cannabis are trendy nationwide, of course, but Minnesota has rapidly gained a reputation among consumers for its progressive stance towards both. Licensed liquor stores in Minnesota can sell edibles and beverages containing hemp-derived cannabinoids, including CBD and THC. This movement has helped liquor stores in and around the city manage the ongoing downturn in the beverage alcohol industry.

“As wine and beer sales decline and spirits are generally holding their own, sales of [THC and CBD] products have grown,” says Kaspszak. “In addition, the market still allows a good profit margin. I predict in the next couple of years overall liquor store sales will drop, but profits will increase.”

In terms of SKU mix, MMBA stores sell THC/CBD products with the ratio of 70% beverages and 30% edibles.

“Most customers are middle to late age, looking for a product to help them sleep or relax,” Kaspszak reports.

Additionally, he sees a “consumer attitudinal change happening.” Kaspszak explains this meaningful shift as people increasingly thinking that:

 Drinking alcohol = bad; Drinking THC = good

 Smoking tobacco = bad; Smoking cannabis = good

 Dry January alcohol = bad; Dry January THC = good

 Alcohol sobriety = good

 THC Consumption = good   

Is Kaspszak concerned about the constant efforts in Washington D.C. to close to Farm Bill loophole?

“Anything can happen in Congress. However, I think intense legislative pressure from consumers around the country will prevent closing the loophole,” he says. “THC/low-dose hemp products are here to stay! The horse is out of the barn. It’s running down the road. All we can see is its tail now.”

Which is to say that legislators may have a hard time getting rid of a popular product among consumers. Particularly because that product has also proven profitable for numerous parts of the industry.

“Politicians and regulators need to pay attention to the voters who got them to the dance,” Kaspszak says. These voters “are vocal and politically active.”

Talk of recreational THC’s emergence into the mainstream is typically tempered by the reality of its legal challenges. Beyond the lingering loophole question, there’s also no scientifically consistent way to prove cannabis intoxication as there is with alcohol DUIs. And the products have come out faster than legislators and regulators can keep up in terms of creating and implementing proper regulation. Officials who make and enforce these laws have had to play catchup with critical issues like mandating branding and packaging that doesn’t attract children, advising correct dosage sizes, and consumer education in general.

Which is not to suggest that this is a dangerous industry, just one that’s still an emerging market that requires proper regulation. Thankfully, alcohol officials have much experience in that area, and remain the proper individuals to oversee the continued roll out of recreational cannabis.

“My father taught me, ‘We live in a world of cycles’, meaning what happened in the past will happen again. This is Prohibition all over again,” Kaspszak says. “Every jurisdiction is trying to figure it all out and like alcohol, there will be different systems of governance.”

“There are many discussions around the country about regulating these products like beer, like spirits, like wine,” he says. “There is another option: no three-tier system. While we in the industry recognize these are ‘controlled substances’, public attitudes are going a different way. For example, any talk of the three-tier system in Minnesota for these products has little to no chance of success.”

This industry certainly still has a ways to go, but will arrive there eventually.

“I predict in 10 to 15 years, we won’t be talking about these products as we are today,” Kaspszak says. “They will be as normal as alcohol.”

The First Government Ganjier

Helping shepherd the THC/CBD industry to that point that Kaspszak envisions is an extremely progressive government position recently created in the Minnesota market. That would be America’s first government ganjier, the cannabis equivalent of a sommelier. Filling this innovative, forward-looking position is Joe Audette, Alcohol Retail Operations Manager for the City of Elk River, a member of the MMBA.

“What makes me unique is that the city I work for saw an opportunity to educate me in cannabis, so that the city could control the cannabis retail in our city as well as the alcohol sales,” Audette said during a recent episode of On & Off, this magazine’s official podcast covering the on- and off-premise alcohol industry. “I believe that I can bridge the gap of government control and safety with ganja in the cannabis space, where that is not typically seen.”

In November of last year, Audette spent around 10-12 hours of online studying and taking tests through The Cannabis Sommelier Certification Program, accessible through Ganjier.com. He earned his Ganjier Product Specialist certification. The next level up, to become a certified Ganjier, requires around 60-70 hours, he said, plus a trip to the Emerald Triangle — America’s largest cannabis-producing region — in Northern California for onsite testing. The equivalent of training for one’s sommelier certification in Napa and Sonama.

This comes at a time of transition in the beverage alcohol industry.

“The impact of cannabis beverage is being felt nationally in the adult beverage space” Audette said. “In Elk River, where we already oversee two liquor stores and we’re going to onboard a cannabis retail, it’s felt like this bridge of the two industries coming together. I feel like as the nation moves forward into cannabis beverage, it will just naturally take some of the space of wine and the other alcohol beverages that are slowing down.”

In terms of educating the public about cannabis, Audette, like others, saw the current moment as similar to alcohol reentering the mainstream in the 1930s.

“Our main goal since launching has been to destigmatize and educate our consumers,” he says. “We’re just coming out of a Prohibition that’s very similar to the Prohibition that alcohol faced. We’re coming into a time where people are going to essentially rely on the other people in their lives that have educated themselves to guide them on which products to consume.”

“Our goal has always been to be a safe place for people to buy safe and regulated products,” he added. “In Minnesota, where we are, our big goal is to control the sale of alcohol, and then transfer profits back to the city. It’s going to be the same with cannabis. We need to make sure that we’re selling it to people who can legally consume. We need to make sure we’re selling to people who will consumer in a safe and controlled manner.”

Retailing Cannabis

Altogether, this focus on cannabis sales in MMBA has proven financially successful.

“The demand for THC/CBD liquids and edibles has been phenomenal,” reports Michael Larson, Liquor Operations Manager, City of St. Anthony Village, an MMBA member. “Our customers report that they enjoy the taste and multitude of flavors offered. Most are using the products as a way to relieve pain, anxiety and to achieve better sleep. Consumers also enjoy the low euphoric feeling THC/CBD product provides.”

“Based on conversations with our customers it has become clear that using THC/CBD liquids and edibles have become a replacement for consuming alcohol, especially during the workweek,” he adds. “THC/CBD products do not give the consumers hangovers, and have very little side effect after consumption when used properly, when compared to alcoholic beverages. This trend is becoming more and more prevalent across the country, as low- and no-alcohol product sales increase monthly.”

Who is the demo for these products?

“At our stores, the age group demographic is split 60/40, 60% under the age of 50 and 40% over the age of 50,” Larson says. “Women in the 25-to-40-year age group seem to be the most interested in the products.”

“Our stores now carry close to 400 labels of THC/CBD liquids and edibles,” he adds. “I have not heard of one operation that is reporting slow sales. Outstate Minnesota is also having success as residents of rural communities are enjoying the products also.”

As someone now managing the retail sales of cannabis products at the beverage alcohol retail level, what does Larsen see looking ahead?

“Many times I think of what it was like during Prohibition and finally the repeal of a law that lasted 13 years,” he says. “I can imagine that the repeal polarized many people with concerns about alcohol consumption. I believe we are experiencing some of that polarization currently with the legalization of cannabis. In many ways the two products have the same issues that, rightly so, make people uneasy about it. Much like alcohol, there is a use and demand for cannabis in our society when used properly and not abused. At this point in time, Pandora’s Box has been opened and it is up to good retailers to exercise control when selling cannabis products.”

Kyle Swartz is editor of Beverage Dynamics. Reach him at kswartz@epgacceleration.com. Read his recent piece, The State of U.S. Whiskey at Kentucky Bourbon Fest 2025.

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