Keith Villa, the PhD brewmaster who created Blue Moon almost three decades ago for Coors Brewing, is credited with using that beer to help introduce scores of consumers to more flavorful craft brews. Blue Moon was a gateway brew for light beer drinkers who would eventually consume everything from IPAs to Saisons as craft beer went mainstream during 2000s. In recent years, Villa has been toiling away on his latest gateway project: cannabis- infused and alcohol-free beers. Villa’s company, Ceria Brewing, relaunched its beers with a new look this month after first introducing the brand in 2018. Villa uses a proprietary process to get Ceria’s beers to 0.0% ABV. Ceria’s lineup includes a Belgian-style white ale called Grainwave (Villa’s latest Blue Moon) and an IPA called Indiewave. Versions of these alcohol-free beers with psychoactive THC and non-psychoactive CBD are available at licensed marijuana dispensaries in Colorado and California, where the recreational use of cannabis is permitted. The beers have less than 100 calories per 12-oz can. A six-pack of Ceria’s alcohol- free beer sells for about $10. THC versions sell at regulated cannabis dispensaries for about $6 - $8 per can, plus taxes. Given the growing interest in low- and no-alcohol beers and cannabis-infused beverages, BD took the opportunity to discuss both segments with Villa, who runs the company with his wife Jodi Villa, who is CEO. The following has been edited for length and clarity.

BD: Indiewave has 10-mg of THC. Grainwave has 5-mg. Help me understand that a little bit as a consumer who isn’t a THC user?
KV: Most consumers have an almost built-in radar for how much alcohol they can have. Very few people, even those who have some cannabis experience, know how many milligrams of THC gets them buzzed or stoned. I’ve spoken to a lot of users who smoke joints. They don’t know how many milligrams are in that joint, or they don’t know how many milligrams their body can take. What we tried to do at Ceria is to emulate the experience that you get from the alcohol world, to make it a little easier for people to transition from alcohol to cannabis. With our Grainwave Belgian- style white ale we have five milligrams of THC, which for most people will give a slight buzz. Blue Moon comes in at 5.4% ABV and when people drink a glass of Blue Moon, they don’t fall over drunk. They feel relaxed. It takes the edge off. In a similar way, Grainwave can take the edge off and act like a 5% or 6% ABV beer, and again that’s with five milligrams of THC. The same with our Indiewave IPA, which has 10 milligrams of THC and 10 milligrams of CBD. When people drink a strong IPA, they know there’s going to be more flavor and more alcohol. Generally, people will get a buzz off a strong IPA and a lot of people know that, so it does just a little more than take the edge off. So our IPA is going to simulate that experience with 10 milligrams of THC. Then we added 10 milligrams of CBD to mellow out that THC buzz. THC is one of those compounds that can lead to a buzz or even people getting stoned if they take too much. It can also lead to just a little bit of an anxious feeling, so we put the CBD in there to tone that down, to make sure that it’s a nice mellow experience with our beer.

BD: You formulate your beers around terpenes as well, correct? Why does that matter?
KV: THC and CBD are cannabinoids, which are the compounds that exist naturally in the cannabis plant. The aromas in the beer are called terpenes, and they are physiologically active on the human body. When you mix terpenes with cannabinoids, you get certain effects. In Grainwave, you have two major terpenes. One is called limonene which comes from the orange peel. The other one is called linalool which comes from the coriander. Those two terpenes are pretty good at having an anti-inflammatory action on the body, and anti-stress, anti-anxiety. When you combine that with the THC in Grainwave, it really makes for a nice, chill, relaxed feeling versus getting stoned because our job is not to get people stoned. Our job is to provide a nice social experience for people just like the alcohol world. With the Indiewave, which is dry hopped, the big terpene you have is called myrcene and
the secondary one is humulene. The combination with THC and CBD results in a really nice anti- inflammatory and relaxed feel. Plus, the humulene leads to a satisfied appetite type of feeling, so you don’t get the munchies as bad as some people do if they’re just smoking a joint.

BD: So, if I drink the 10-mg beer, I’m not going to feel “stoned” in the classic sense?
KV: Right. What we recommend is for those who’ve never done it before to take it very slowly and start out with a Grainwave, five milligrams, and judge from that feeling. If you’re one of those people who are very sensitive to THC and you have a buzz then by all means, take it easy with the 10 milligram one. In fact, only have half of it and experience that feeling and then be very careful at having a full 10. But if you’re on the other side of the spectrum and you hardly feel any relaxation with five milligrams, then try the 10 milligrams all at once in one serving in one evening and see how you feel. With 10 milligrams, almost everybody will experience a buzz and a nice, relaxed feeling.

‘RUSHING IN TO BUY JOINTS’
BD: With alcoholic beer, people might get together and drink three, four, five bottles in an evening. With THC beers, are the consumption rates naturally lower and how does that change the business model from traditional beer?
KV: You’re right. As the market progresses and evolves, we’ll be putting more offerings out at even lower dose rates so that people can actually have several at a time responsibly during certain events, like watching your favorite basketball or football team at home with your friends. 

BD: So, would you say you are seeding the market for now?
KV: We’re up to 18 states with a legal recreational marijuana market, so we have a long way to go.

As each one opens, what we’re generally seeing is people rushing in to buy joints and to get stoned because they’re so fascinated with cannabis. We’re seeing some people have too much and they say that’s not for me. Other people walk away saying they enjoyed that. A lot of people are trying these high dose products, meaning a full joint or a 100-milligram product. After each new market settles down, that’s when we see people reach out for a Ceria to try that five-milligram product to see what happens. That’s where we see people start to experience what we want them to experience, which is the positive side of cannabis. 

‘DIFFICULT TO ACCOMPLISH’
BD: Do you simply add the THC to your 0% alcohol-free ABV beer?
KV: Yes. In this world of non-alcoholic beer and cannabis, you don’t want any alcohol, not even a trace. Quite a few people are in this category of non-alcoholic beer and even cannabis who want to get away from alcohol or take a break or their religion forbids alcohol. There are quite a few pregnant women who say that they can’t even have a trace of alcohol because their doctor told them, “No alcohol.” Here at Ceria, we decided to push it to the extreme. We don’t want to be just “NA,” or “non-alcoholic,” which is less than 0.5% ABV. When you get down to 0.00%, where you can’t detect any alcohol, you’re in a special classification called “AF”, or “alcohol free.” Modern technology and modern brewing methods make it very difficult to get down to 0.00% alcohol.

BD: Is alcohol-free beer taxed differently?
KV: Everything above 0.5% is taxed as beer. Everything below 0.5% down to zero doesn’t pay Federal excise tax. You see other craft brewers getting into alcohol free because of that tax break, but also that’s one of the few areas in beer that’s growing. Craft beer sales are softening so they’re looking for any opportunity to make some income. Non-alcoholic beer is that bright spot. Unfortunately, it is difficult to make, so you have to take more care. It should be pasteurized to protect the end user.

BD: How do you remove the alcohol?
KV: In the first iteration of how we went to market, we had a fully fermented beer and we removed the alcohol. What we realized is we needed to scale quickly, which is hard to do when large capital purchases are required. So, I developed an alternative way of brewing 0.00% alcohol beer that does not require specialized equipment. It took us a while for the TTB to give us permission to start saying “alcohol free.” It’s difficult to accomplish.

BD: Are there other processes out there in the world that produce 0.00% alcohol?
KV: There are two other ways to do it. One is vacuum distillation where you go through a
full fermentation process and then you remove the alcohol at the very end. It turns out that method is not 100% consistent. The other way is to just make a really watery product and flavor it with some malts. Never let it ferment. It tastes almost like colored water. It took us a while for the TTB [Alcohol and Tobacco Tax and Trade Bureau] to give us permission to start saying “alcohol free.” It’s difficult to do.

‘GETTING ALL THE RED TAPE TAKEN CARE OF’

BD: Where are your products sold?
KV: With the cannabis products, we’re in Colorado and California. With the alcohol-free non-cannabis products, we’re in 20 states plus Puerto Rico. We did the same strategy as I followed for Blue Moon. Started on the East Coast and worked our way west. Nationally we’re available through Total Wine & More. We recently got into Texas, so we’re in select H-E-B stores. We’re also being tested in Target stores in six states. Finally, you can purchase Ceria’s alcohol-free beers online through our website.

BD: When it comes to the THC-infused beer, how quickly can you expand to the 18 states that allow the recreational use of marijuana?
KV: Right now, we’re looking more at the bigger opportunity states. There are some out there that are small and have just a handful of dispensaries. The interest and sales probably aren’t there because in the world of THC it’s Federally illegal, so you have to go to each state and set up shop or find a very reliable co-packer to work with you in that state. Once the beer is infused with THC in a state, you cannot cross state lines. For the smaller players like us it is difficult to set up shop in each of these states and actually be profitable, so that’s why it’s better to get into the bigger states at first, and when it becomes federally legal, then we could just open the floodgates and get our products out there.

BD: Colorado and California are the two biggest opportunity states. Are there others?
KV: There are a couple of others that are real promising. Illinois just because of the number of people there and it’s a big market. New York, New Jersey, those are two really good markets. Even Michigan. There are a few states out east that are new to it. We’ve been out there talking to folks, and we would love to open up shop as soon as possible, but it does take time.

BD: Takes time because you have to get permits, or is it setting up a profitable distribution network with those dispensaries?
KV: All of the above. As well as getting your labels approved and getting all the red tape taken care of. There’s a lot of leg work you have to do in every state, which again makes it so difficult in the recreational market. We’re the infancy of this whole market right now.

‘DISTRIBUTION POWERHOUSES BOUND TO HAPPEN’
BD: How broadly can non-alcoholic beer scale?
KV: Right now, the non-alcoholic beer market in the United States is estimated to be roughly 0.5% of the beer market, so it is very small right now. Now, look in Europe where non-alcoholic beer has been around for quite a while and it’s become part of the culture. Spain, Germany, you’re seeing non-alcoholic beer getting to as much as 8% or 13% of the beer market, so if it gets to 10% in the US, that’s a huge slice. That’s as big as craft beer. Most people think of non-alcoholic beer in terms of the past when O’Doul’s and those products ruled. Those products served a purpose. In my opinion, they seemed to be more of a corporate responsibility play than a flavor play. Now you’re seeing IPAs, Belgian Whites, Ambers, light beers – all kinds of flavors that taste pretty good. I think non-alcoholic beer easily can get to somewhere between 8% and 11% of the market.

BD: Is your non-alcoholic product distributed primarily through traditional beer wholesalers?
KV: Being non-alcoholic, we do have the option of doing whatever we want. But for me, coming from the beer world, it was a lot easier to get out there and talk to beer distributors. They know the market best.

BD: Do you see a time when non-alcoholic beers are distributed through the Coke and Pepsi systems?
KV: At this point in time, no, because beer distributors know how to get into a liquor store and stock their products. Coke and Pepsi, soft drink distributors, they don’t know how to do that. They know how to go into a supermarket and stock. But there is a lot of convergence going on. We’re seeing Pepsi developing their own alcohol distribution network. My guess is we will see the convergence of distribution. You’ll have trucks filled with soft drinks and alcoholic products going in and out of liquor stores and supermarkets, in five to 10 years, you’re probably
going to see distribution powerhouses that have massive amounts of alcoholic products and soft drinks. In other countries you are seeing that. It’s bound to happen here just because of efficiencies.

BD: Do you think the grocery and convenience store channels will become more meaningful for non- alcoholic beer?
KV: Definitely, because those grocery chains -- I don’t care if you’re talking H-E-B, Kroger, Publix, Meijer – are going to be critical in getting non-alcoholic products out there and really making everything available to their customer base.