Mirth Provisions, the maker of marijuana-infused Legal sparkling tonics, has secured distribution for its new non-intoxicating CBD-infused cider called Otto’s. The bottled drink is available in Oregon and Washington, and shipments are on the way to Colorado, Kansas and Georgia, according to founder and CEO Adam Stites. Negotiations are underway with alcohol beverage distributors in about 10 other states, he said. The company’s goal is to reach 15 states by year-end. Otto’s is a non-alcoholic, non-THC beverage infused with CBD, a nonpsychoactive cannabinoid found in hemp. A sparkling cider, Otto’s is made with organic Washington apples and hops. A 12-ounce bottle retails for between $3.99 and $4.99.

Perspective. While small, Otto’s illustrates the growing opportunity for CBD beverages in the US despite a stillmurky regulatory environment. Even companies that have led with marijuana-based beverages, such as Mirth Provisions, are now eyeing CBD as a potentially larger opportunity as regulations catch up to consumer acceptance and demand. THC, on the other hand, is likely to remain heavily regulated for years. 

Market Opportunity. Stites said Otto’s non-alcoholic profile opens doors for the company. In Oregon, for example, available retailers for the company’s Legal sparkling cannabis drinks is about 350 regulated sites. Otto’s has access to 4,000 locations, including groceries and convenience stores. Inside one location cited by Stites, placements for Otto’s include the deli cold case, an end cap centered on CBDinfused products, and a shelf featuring high-end cold brew coffees. Stites is targeting bars and restaurants, as well, whose millennial patrons are increasingly demanding substantial alcohol alternatives. While some beverage companies have resorted to using the term “hemp” on labels to avoid the regulatory uncertainty over using CBD in food and drink, Stites said he is comfortable putting “CBD” on Otto’s label. “The flood gates are open,” he said. “There’s consumer demand for this and there’s enough ambiguity in the law. It’s just a matter of time.” He added: “This is the opportunity. We can make a great product while corporate guys are sitting on the sidelines.” That said, Mirth has deemed California off limits because state regulators have explicitly ruled that CBD can be sold through regulated dispensaries only, Stites said. He said a change of heart by California regulators is “a matter of time.”

Mirth. Washington-based Mirth Provisions’ most visible product to date has been its provocatively named Legal line of sparkling tonics. Stites, 39, founded an e-commerce business selling paintball equipment when he was a 15-year-old high school sophomore. He later rolled up two other e-commerce businesses — one that sold joke items, and another that sold training and gifts, such as service pins, to public safety officials. He sold the combined business in 2013. Stites founded Mirth the next year with two other partners and got initial product guidance from a former Tazo Tea formulator. Mirth is on pace to clear $6 million in sales by the end of 2019, Stites said. Sales are fairly evenly divided between Legal and a cannabis-infused shot called Giant. Stites said he expects Otto’s to make up a third of the company’s sales by year-end.