Cannabis-infused sparkling water maker Sweet Reason has raised $2.5 million in a seed funding round led by venture capital firm Lerer Hippeau, the Toronto-based company announced today.
The round also includes investments from River Park, Max Ventures and cannabis investment firm Subversive Capital. Lerer Hippeau, an early stage investor in companies such as Warby Parker and Casper, will gain a seat on Sweet Reason’s board of directors.
Launched in December in New York, Sweet Reason makes a line of sparkling waters infused with 7 mg of full-spectrum hemp CBD and is currently sold in about 180 stores, according to the brand. The line includes three flavors — Cucumber + Mint, Strawberry + Lavender, and grapefruit — and retails for $5.99 per 12 oz. bottle.
Speaking with BevNET, Sweet Reason founder and CEO Hilary McCain said the round will help the brand grow its sales team and increase its marketing budget. McCain said the company will add several sales representatives to its seven-person team “right away” and is currently seeking a VP of sales.
“We have an unparalleled network of food, beverage, cannabis, and consumer expertise on our team between the team and the investors,” McCain said, noting that Lerer Hippeau “has some of the best consumer brands of our generation in their portfolio.”
McCain said River Park, which is an investor in sparkling water brand Spindrift, brings a robust background in the beverage industry, while Subversive Capital has “bleeding edge” experience in cannabis sales and regulation.
Founded in 2018 by McCain — whose food industry experience includes positions at Boston Consulting Group, Chobani, and Maple Leaf Foods — Sweet Reason was initially intended to launch in Canada. However, when Canada legalized the sale and use of recreational cannabis nationwide last year, the law included a temporary ban on food and beverage products containing THC and CBD, forcing Sweet Reason to pivot to a U.S.-focused strategy.
“All my competitors closed the doors and returned money to investors, so we decided to launch in the States,” McCain told BevNET. “Coincidentally within the same 24 hours [in December] that the ban was announced in Canada, the U.S. announced they were going to pass the Farm Bill [legalizing hemp-derived CBD]. So, we launched in New York in December and have had a great run so far.”
McCain said the brand is positioned to launch in Canada “very quickly” should lawmakers decide to create an exemption for hemp CBD. The country is expected to allow the sale of cannabis edibles starting in October.
Sweet Reason will also continue to focus on U.S. expansion, McCain said. While much of the focus will be on New York City, she expects the brand to be in “several major cities” by the end of the year.
Marketing efforts will include social media campaigns and in-store and event sampling, McCain said. However, she noted that the environment for digital marketing is “limited” as major tech platforms such as Google, Facebook and Instagram will not allow paid advertising from CBD companies.
Sweet Reason’s online sales have also been complicated by a change in payment processor policies that has blocked online payments for CBD products. The issue has resulted in some online retailers, including Thrive Market, discontinuing sales of CBD products. Sweet Reason, however, is still offering ecommerce and has directed consumers to email the company to place orders.
While Sweet Reason will continue to innovate within the CBD space, the brand is exploring a line of THC drinks “in the near future,” McCain said.
“Sweet Reason’s goal is to create innovative hemp and cannabis beverages that bring the health benefits of both plants to consumers in an accessible, healthy and delicious way,” she said. “We’re passionate about the role that beverages play in people’s lives — they are the basis of many of our social interactions and rituals.”
