The Cannabis Beverage Revolution: How THC Drinks Are Disrupting Big Alcohol (And Why Tennessee Shut Them Down)

THC-infused beverages are rapidly replacing alcohol for many consumers—triggering a coordinated backlash from the alcohol industry
that culminated in Tennessee’s 2025 hemp crackdown.

The Cannabis Beverage Revolution: How THC Drinks Are Disrupting Big Alcohol (And Why Tennessee Shut Them Down)

A Deep Dive Into the Fastest-Growing Segment of the Cannabis Industry—And the Billion-Dollar Threat That Triggered Tennessee's Crackdown

When Tennessee transferred hemp regulation to the Tennessee Alcoholic Beverage Commission on January 1, 2026, most people assumed it was about public safety or protecting children. But the real story is far more revealing: it's about protecting the alcohol industry from a rapidly emerging competitor that threatens billions in revenue.

That competitor? Cannabis-infused beverages.

THC drinks are the fastest-growing segment of the legal cannabis market, projected to reach nearly $4 billion globally by 2030. They're showing up in liquor stores, convenience stores, and major retailers like Total Wine and Target. Young consumers are choosing them over beer and cocktails. And the alcohol industry is terrified.

To understand why Tennessee really cracked down on hemp—and specifically why the alcohol lobby successfully took over regulation—we need to understand the cannabis beverage revolution that's quietly reshaping how Americans get their buzz.

The Market Explosion: From Niche to Mainstream

The Numbers Tell the Story

The cannabis beverage market has experienced explosive growth that few predicted:

Global Market Size:

2024: $1.05 billion to $1.45 billion (depending on source)
2025: Projected $851 million to $1.05 billion in U.S. alone
2030: Projected $3.86 billion to $5.9 billion globally
Growth rate: 15-20% CAGR (Compound Annual Growth Rate)

For context, that 15-20% annual growth rate is occurring while overall cannabis sales growth has slowed. Cannabis beverages are the bright spot in the industry.

U.S. Market Performance (2024-2025):

Q1 2025: $54.6 million in sales, up 15% year-over-year
Beverages now make up 6% of total edibles sales
Fourth-largest edible category behind candy, chocolates, and pills
Growth accelerating in emerging markets while mature markets plateau

State-Level Growth (Q1 2025 vs. Q1 2024):

Michigan: +112% (more than doubled)
Ohio: +79%
Illinois: +47%
Maryland: +35%

These aren't marginal increases. These are market-disrupting growth rates.

What's Driving the Boom?

1. The "Sober Curious" Movement

Nearly half of Americans (47%) are trying to drink less alcohol in 2025, with the trend especially pronounced among younger generations. According to NCSolutions, interest in sober-curious lifestyles has increased 44% in the past two years alone.

A quarter of American adults reported drinking no alcohol in 2024—the highest rate in decades.

Why the shift?

Health and wellness priorities
Desire to avoid hangovers and dehydration
Mental clarity and productivity concerns
Economic pressures (cannabis drinks often cost less than premium cocktails)
Growing awareness of alcohol's health risks (cancer, liver disease, cardiovascular issues)

2. Technology: Nanoemulsion Changes Everything

Early cannabis edibles had a major problem: unpredictable onset time and effects. You'd eat a brownie and wait 90 minutes, not knowing if you'd taken too much until it was too late.

Nanoemulsion technology solved this.

How it works:

Cannabinoids are broken down into tiny particles (nanoemulsified)
These particles dissolve in water and absorb rapidly
Effects begin in 15-30 minutes instead of 60-120 minutes
More predictable, consistent experience

This makes cannabis drinks feel like alcohol—you know within 20 minutes how it's affecting you, allowing for better dose control.

3. Product Innovation and Variety

The market has evolved far beyond basic "weed soda." Current offerings include:

Low-Dose Seltzers (2-5mg THC)

Similar to having a beer or glass of wine
Brands: Cann, Pamos, Recess

Cocktail Alternatives (5-10mg THC)

Mimic traditional cocktails without alcohol
Brands: Artet (THC Spritz line), Dazed Lounge
Flavors: Chamomile-Lemon, Mango-Ginger, Grapefruit-Rosemary

Functional Beverages (THC + CBD + Adaptogens)

Target specific needs: sleep, focus, recovery
Combine cannabinoids with vitamins, electrolytes, nootropics
Brands: XMG Plus (energy), various wellness-focused lines

Shots and Concentrates

Higher doses (10-25mg+) in small format
Fastest-growing subsegment (doubled from 2023 to 2024)
For experienced users or mixing into other beverages

4. Retail Access Expansion

This is critical: THC drinks aren't just sold in dispensaries anymore.

Thanks to the 2018 Farm Bill's hemp loophole, hemp-derived THC beverages became legal in states without recreational cannabis programs. This opened distribution channels that transformed the market:

Where you can find THC drinks (in legal states):

Total Wine & More (nationwide where legal)
Target stores (select locations, like Minnesota)
ABC Fine Wine & Spirits (Florida)
Spec's Wine, Spirits & Finer Foods (Texas)
Convenience stores
Grocery stores
Gas stations
Liquor stores
Bars and restaurants

This is the alcohol industry's nightmare: cannabis drinks sitting next to beer and wine, competing for the same consumer dollar, in the same retail channels.

As Cann CEO Jake Bullock explains: "THC-infused drinks are meeting consumers where they are: in the alcohol aisle of their local store. Cann is now sold alongside beer, wine, and spirits in retailers across the U.S. This is a significant change from when THC beverages were only available to consumers at a small number of marijuana dispensaries."

The Alcohol Industry Threat: Real Data, Real Declines

Alcohol Sales Are Falling

The alcohol industry isn't just concerned about potential future competition—they're seeing real declines now.

National Trends:

2023: Total beverage alcohol volumes in the U.S. decreased by 3%
2024: Wine consumption fell by 5.8%
2024: Global wine consumption hit its lowest level since 1961
2025: Volume sales across all alcohol segments continue to erode

Major Companies Reporting Declines:

Constellation Brands (maker of Corona, Modelo) projects significant beer and liquor sales declines
Major wine producers reporting slumping sales
Spirits industry seeing slower growth or outright declines

Demographic Shift:

According to Gallup:

2022: 67% of Americans reported using alcohol
2025: Only 54% of Americans reported using alcohol

That's a 13-percentage-point drop in just three years.

Cannabis as Substitution: The Survey Data

Multiple surveys confirm that cannabis users are replacing alcohol consumption:

Canada (where cannabis is fully legal since 2018):

22.8% of people who use both cannabis and alcohol reported drinking less alcohol (2024)
That's a +7.5% increase from 2020, when only 15.3% reported drinking less
Trend is accelerating, not plateauing

United States:

36% of cannabis users who drink reported that they now drink less (Numerator, 2024)
47% of respondents reported "replacing some of their alcohol consumption" with cannabis (New Frontier, 2021)

Bloomberg Intelligence Analysis:

A 2024 report called cannabis a "significant threat" to the alcohol industry, projecting that slumping sales of wine and spirits "may extend indefinitely," driven largely by increased consumer access to legal cannabis and alternative products.

"The use of cannabis among consumers is on the rise, and we believe it's being substituted for alcoholic beverages," Bloomberg analysts wrote.

Canadian Research:

A study found that cannabis legalization in Canada was "associated with a decline in beer sales," suggesting a direct substitution effect.

Who's Switching?

Millennials and Gen Z are leading the trend:
- 45% of Millennials now demand no-alcohol products
- Young consumers prioritize wellness, mental clarity, and avoiding hangovers
- Cannabis drinks offer social engagement without alcohol's negative effects
- "Sober curious" lifestyle spreading rapidly among younger demographics
The daily/near-daily user shift:
- Far more people drink alcohol than use cannabis overall
- However, there are now more daily or near-daily cannabis users than alcohol users
- Per-capita rate of daily/near-daily cannabis use increased 15-fold from 1992 to 2022

Big Alcohol's Response: If You Can't Beat Them, Regulate Them

Industry Investments and Partnerships

Major alcohol companies initially tried to join the cannabis beverage market:

Constellation Brands (Corona, Modelo, Svedka):
- Invested $4 billion in Canopy Growth, the world's largest cannabis company
- Partnership focused on developing cannabis-infused beverages
- Recognized the threat early and tried to hedge
Lagunitas (Heineken):
- Launched "Hi-Fi Hops," cannabis-based beverage with CBD and THC
- Zero calories, zero carbs
- Attempt to capture wellness-oriented consumers
The Boston Beer Company (Sam Adams, Truly, Twisted Tea):
- Launched "TeaPot" cannabis-infused iced teas in Canada (2022)
- Testing market before U.S. expansion
Tilray (major cannabis company):
- May 2024: Launched XMG Plus and XMG Zero cannabis beverage lines
- February 2024: Introduced XMG Plus energy drink (CBD + THC)
- Aggressively expanding beverage portfolio

When Investment Didn't Work: Regulatory Warfare

When major alcohol companies realized they couldn't dominate the cannabis beverage market through investment alone—especially the hemp-derived THC segment they couldn't control—they turned to lobbying.

National Lobbying Efforts:

A coalition of alcohol lobbies asked Congress to "immediately remove hemp-derived THC products from the marketplace."

Major alcohol companies and trade associations lobbying on hemp issues include:

Anheuser-Busch
Bacardi
Diageo
Distilled Spirits Council
Moët Hennessy
Molson Coors
Beer Institute
National Beer Wholesalers Association
Wine and Spirits Wholesalers of America (WSWA)

The Beer Institute's Demands (November 2024):

The Beer Institute released "guiding principles" to address "the proliferation of largely unregulated intoxicating hemp and cannabis products," calling for:

Federal excise tax on both hemp and cannabis products
Tax rate set HIGHER than the highest rate for any beverage alcohol product
Stricter regulation of hemp-derived products
Removal of hemp-derived THC from non-dispensary retail channels

Notice what they're asking for: not safety regulation, but taxation and market restriction designed to eliminate competition.

WSWA's Position:

The Wine and Spirits Wholesalers of America called on Congress to create a regulatory framework for hemp-based intoxicating cannabinoids, advocating for:

Clear federal rules defining intoxicating hemp compounds
State authority to regulate these products
(Unstated: ensuring wholesaler involvement, i.e., three-tier system)

Tennessee's Response: The Alcohol Industry Takeover

How Tennessee Became Ground Zero

Tennessee's 2025 hemp law (HB 1376) didn't happen in a vacuum. It happened because:

Hemp-derived THC beverages were exploding in Tennessee
They were sold in the same retail channels as alcohol
The alcohol wholesaler lobby saw the threat
Tennessee gave them exactly what they wanted

What the Alcohol Industry Got

Transfer to TABC:
The Tennessee Alcoholic Beverage Commission—an agency created to serve the alcohol industry—now regulates hemp.
Mandatory Three-Tier Distribution:
Just like alcohol, hemp products must now go through wholesalers. Producers cannot sell directly to retailers or consumers.
Wholesaler License Requirements:
Minimum $750,000 in documented cash, bond, or line of credit.
As legal analysis notes: "Only the well-heeled – read between the lines - existing liquor and beer wholesalers – need apply."
Effective THCa Ban:
The new total THC calculation eliminates intoxicating hemp beverages, removing the competition entirely.
Online Sales Ban:
All sales must be face-to-face at licensed brick-and-mortar locations—exactly how alcohol is sold.
Age Restrictions:
21+ only, eliminating sales in grocery stores, convenience stores, gas stations—the exact channels where THC drinks were competing with alcohol.

The Tennessee Growers Coalition's Take

"This maneuver is also brought by the liquor industry as a greedy attempt to make up for lost revenue lost by the onset of popular legal hemp products. This is not about protecting consumers like proponents say; it's about capitalizing on the hemp industry to offset losses in alcohol sales."

The Product Reality: How Cannabis Drinks Actually Work

Understanding THC Beverages

Common Dosages:
- Microdose (2.5mg): Very mild effect, good for beginners
- Low dose (5mg): Similar to one beer or glass of wine
- Moderate dose (10mg): More noticeable effects, experienced users
- High dose (20mg+): Strong effects, only for regular consumers
Onset Time:
- Traditional edibles: 60-120 minutes
- Nanoemulsified beverages: 15-30 minutes
- Allows for better dose control and social pacing
Duration:
- Beverages: 2-4 hours typically
- Shorter than traditional edibles (4-8 hours)
- More similar to alcohol's duration
Effects:
- Relaxation and stress relief
- Mild euphoria
- Creativity and focus (lower doses)
- Social lubrication without alcohol's depressant effects
- No hangover

Consumer Preferences

According to BDSA Consumer Insights:

42% of edible consumers in adult-use states prefer 10mg or less of THC per occasion
Most preferred dosage: 2.5-5mg (17% of consumers)
Low-dose products dominating sales growth

What This Means:
Most consumers aren't looking to get extremely high. They want the same mild buzz they'd get from a beer or two—just without the calories, hangovers, or health risks.

The Social Experience

Cannabis beverage companies emphasize that their products create a social experience comparable to alcohol:

From Artet's CEO:
"We wanted to create a more sessionable and social product. For our category, it's about product channel fit, and the channel has really evolved from when we first started."

From Wicked Dispensary's GM:
"The cannabis drinks are like our number one seller in the shop. I think people, maybe you like to have something in their hand to open something like that. And, you know, whereas traditionally, folks like to spend time in bars and breweries and things like that. I think that folks can come here and get, you know, a cannabis beverage. And they still are able to have that physical product in their hand."

The ritual matters: cracking open a cold can, pouring a drink, having something in your hand at a social gathering. Cannabis beverages provide that without requiring smoking, vaping, or waiting an hour for an edible to kick in.

Health Comparison: Cannabis vs. Alcohol

Why Consumers Are Switching

The health considerations driving the shift from alcohol to cannabis are significant:

Alcohol's Well-Documented Harms:

Liver disease (cirrhosis, fatty liver)
Cardiovascular issues (high blood pressure, heart disease, stroke)
Increased cancer risk (mouth, throat, esophagus, liver, breast, colon)
Impaired cognitive function
Addiction potential (14.5 million Americans with alcohol use disorder)
Calories and weight gain
Dehydration
Hangovers
Alcohol poisoning potential (can be fatal)

Cannabis Beverage Profile:

Zero calories (most products)
No hangover
Cannot cause fatal overdose
Less addictive than alcohol (though dependency can develop)
Interacts with endocannabinoid system rather than acting as central nervous system depressant
No direct link to cancer (when consumed via beverages, avoiding combustion)
No liver toxicity at normal doses

The Wellness Angle:

As one dispensary manager noted:
"There's a big push towards, like, health and wellness, you know, and I think that you know, cannabis is a plant, and I think, you know, people are really into sustainability of the planet too."

Whether scientifically accurate or not, consumers perceive cannabis beverages as healthier than alcohol—and perception drives behavior.

The Market Reality: Who's Winning

Leading Brands

Cann:
- Low-dose cannabis seltzers (2mg-5mg THC)
- Sold at over 3,000 retail stores
- Distribution in traditional alcohol retailers
- Positioned as "social tonic"
Artet:
- THC Spritz cocktails (5mg THC + 5mg CBD)
- Premium positioning ($19 for 4-pack)
- Flagship Aperitif in 750ml format ($40)
- Distribution in six markets with online sales
Pamos:
- Delta-9 THC hemp-derived beverages
- Launched through retail collaborations in South Carolina, Georgia, Florida
- Positioned as alcohol alternative
Pure Shenandoah:
- Virginia-based THC and hemp company
- Distribution deal with Total Wine
- Revenue doubling month-over-month
- Production capacity is the bottleneck, not demand
Major Cannabis Companies Entering:
- Tilray (XMG brand family)
- Canopy Growth (sparkling waters with B12 and electrolytes)
- Aurora Cannabis (ready-to-drink THC/CBD/CBG blends)

Retail Integration

Total Wine & More: Sells THC beverages nationwide where legal, with in-store signage recommending beginners start with 2-4mg doses.
Target: Started selling THC drinks in Minnesota stores.
Regional Chains:
- ABC Fine Wine & Spirits (Florida)
- Spec's Wine, Spirits & Finer Foods (Texas)
- Numerous independent liquor stores nationwide
On-Premise: Bars and restaurants in legal states now offering THC drinks alongside or instead of cocktails.

The Federal Complication: Hemp's Uncertain Future

The 2018 Farm Bill Loophole

Hemp is defined as cannabis with less than 0.3% Delta-9 THC by dry weight
This opened the door for products with hemp-derived Delta-8, Delta-10, THCa, and other cannabinoids
Federal law didn't clearly prohibit these, creating a gray market
Products flooded retail channels in states without recreational cannabis

This created what one expert called "a massive, unregulated industry for non-alcoholic, hemp-derived beverages."

The 2025 Federal Hemp Bill

In late 2025, Congress passed federal legislation (signed November 12, 2025) that:

Redefines hemp to include the THCa conversion formula
Sets a one-year deadline (November 2026) for new restrictions
Threatens the broader hemp market estimated at tens of billions of dollars

What this means:

Hemp-derived intoxicating products will face new restrictions starting November 2026
States can still regulate more strictly (like Tennessee already has)
The cannabis beverage market will shift more toward state-regulated recreational markets
National brands may struggle without clear federal framework

Tennessee's Position: Economic Sacrifice for Industry Protection

What Tennessee Gave Up

Forgo Tax Revenue:
- Cannabis beverages are among the highest-margin products in cannabis
- Tennessee could have taxed hemp beverages sold in-state
- Revenue flowing instead to Illinois, Missouri, and other bordering states
Eliminate Jobs:
- Hemp beverage producers and distributors
- Retail jobs in independent stores that sold these products
- Testing labs, compliance companies, marketing firms
Restrict Consumer Choice:
- Tennesseans seeking cannabis beverage alternatives must cross state lines or use illegal products
- Medical patients who found relief in low-dose beverages lose legal access
Protect Alcohol Revenue:
- Tennessee collects significant tax revenue from alcohol sales
- TABC's budget depends on alcohol industry health
- Alcohol wholesalers are major political contributors

The Trade-Off

Tennessee chose protecting the alcohol industry over:

Hemp farmer opportunities
Small business development
Consumer freedom
Tax revenue diversification
Economic innovation

Why?

Because the alcohol wholesaler lobby delivered campaign contributions and employed powerful lobbyists, while hemp farmers and small businesses couldn't compete politically.

The Future: Where Cannabis Beverages Go From Here

Despite Restrictions, Growth Continues

Even with Tennessee-style crackdowns in some states, the national cannabis beverage market continues explosive growth:

Market Projections:
- 2028: $2.8 billion (conservative estimate)
- 2030: $3.86 billion to $5.9 billion
- 2033: $7.65 billion to $13.8 billion
- 2035: $4.3 billion (cannabis infused) + additional CBD beverage market

Why Growth Will Continue:

More states legalizing recreational cannabis
Each new state creates regulated beverage market, dispensaries carry wider selection, quality improves with regulation.
Product innovation
Functional beverages (sleep, focus, recovery), better flavors and formulations, alcohol-cannabis hybrid products (where legal), powdered mixes and concentrates.
Distribution expansion
More retailers adding cannabis beverages, bars and restaurants creating cannabis drink menus, delivery services in legal markets.
Demographic shift
Younger generations prefer cannabis to alcohol, "sober curious" movement growing, wellness culture driving demand.
Technology improvements
Better bioavailability, more consistent effects, new delivery mechanisms.

Big Alcohol's Dilemma

The alcohol industry faces a strategic choice:

Option A: Fight Cannabis Through Regulation
Lobby for bans and restrictions, try to eliminate competition, protect existing business model.
Option B: Join the Cannabis Market
Partner with or acquire cannabis companies, develop own cannabis beverage lines, diversify revenue streams.

Current Strategy:
Most alcohol companies are doing both—investing in cannabis while simultaneously lobbying against hemp-derived products they don't control.

The Problem:
Cannabis is federally illegal (Schedule I, pending DEA rescheduling to Schedule III). Alcohol companies cannot fully enter the market without federal legalization or rescheduling.

So they're stuck: they can't dominate cannabis beverages, and they can't eliminate the competition. The best they can do is slow the growth through state-level restrictions.

What Tennessee Could Have Done

Tennessee had a choice with hemp regulation. Instead of the TABC takeover, the state could have:

Implemented Smart Regulation:
- Age restrictions (21+)
- Product testing and labeling requirements
- Dosage limits for beverages
- Retail licensing for responsible sellers
- Tax structure generating state revenue
Supported Tennessee Hemp Farmers:
- Allowed in-state hemp beverage production
- Created licensing pathway for small businesses
- Developed Tennessee hemp beverage industry
Generated Tax Revenue:
- 10-15% excise tax on hemp beverages
- Sales tax on retail transactions
- Licensing fees
Protected Consumers:
- Required lab testing for contaminants
- Banned untested or unsafe products
- Clear labeling with dosage information
- Public education about responsible use

Instead, Tennessee chose:

TABC control benefiting alcohol wholesalers
Three-tier system eliminating small business participation
Effective ban on intoxicating products
Zero tax revenue from hemp beverages
Consumers turning to black market or crossing state lines

Conclusion: The Billion-Dollar Battle Tennessee Lost

The cannabis beverage revolution isn't coming—it's here.

With market projections reaching nearly $14 billion by 2033 and growth rates exceeding 15% annually, cannabis drinks represent one of the fastest-growing beverage categories in the world. Young consumers are choosing them over alcohol. Major retailers are stocking them. Technology is making them better, faster-acting, and more consistent.

And the alcohol industry is terrified.

Tennessee's 2025 hemp law wasn't about public safety. It was about the alcohol wholesaler lobby protecting billions in revenue from a disruptive competitor. By handing hemp regulation to the TABC, mandating three-tier distribution, and effectively banning intoxicating products, Tennessee chose industry protection over economic opportunity.

The result?

Hemp farmers lost a market for their crops
Small businesses lost opportunities to innovate
Consumers lost access to legal cannabis beverages
Tennessee lost tax revenue
The alcohol industry won

Meanwhile, across the border:

Illinois generated nearly $500 million in cannabis tax revenue in 2024, much of it from beverages and edibles.
Missouri's cannabis beverage market is growing 47% year-over-year.
Virginia, despite its complicated legal status, is watching billions in hemp-derived beverage sales occur without collecting tax revenue.

Tennessee watched this happen and chose prohibition.

The Questions Going Forward:

How long can Tennessee maintain this position while neighboring states profit from cannabis beverages?
How many Tennesseans will cross state lines to buy THC drinks sold legally just miles away?
How much tax revenue will the state forgo to protect alcohol industry profits?
And when Tennessee eventually legalizes—because history shows prohibition always ends—will the alcohol wholesalers who killed the hemp beverage industry today be the ones controlling the cannabis beverage market tomorrow?

That's the real story of Tennessee's hemp law.

Not protecting children. Not ensuring safety. Not serving the public interest.

Protecting the alcohol industry from competition.

The cannabis beverage revolution is happening. Tennessee just chose to sit it out—while the alcohol lobby counts its winnings.

For Tennessee consumers, the message is clear: The THC drinks that were legally sold in your state for years weren't banned because they were dangerous. They were banned because they were working—and threatening the wrong people's profits.

Sources:

BDSA (cannabis market research)
Grand View Research market analysis
CoBank Knowledge Exchange
Bloomberg Intelligence reports
Brewbound industry reporting
Marijuana Moment
Legal analysis from Reason Foundation, Bass Berry & Sims
Tennessee General Assembly records
U.S. Hemp Roundtable
Tennessee Growers Coalition
Market Watch Magazine
OPB reporting
Various cannabis industry trade publications

Tennessee Cannabiz