Less than a month away from the official launch of legalized recreational marijuana in Canada, some of the biggest names in beverages are scrambling to get on board, as drink gives way to smoke and future profits promise to quench the big thirst.
First, it was the maker of Corona, then the maker of Johnny Walker and Smirnoff—and now, Coca-Cola (NYSE:KO) has revealed it’s thinking about getting into cannabis-infused drinks.
On Monday, Coca-Cola issued a statement saying it is “closely watching” the growth of CBD—a non-psychoactive component in marijuana that could be a key ingredient in “functional wellness beverages” that could ease symptoms of inflammation, pain and nausea.
Almost like the run on bitcoin last year, the cannabis space is evolving at breakneck speed, and while Coca-Cola hasn’t made any official decisions yet, Bloomberg reported that it was in talks with Canada’s Aurora Cannabis, which has also expressed an interest in cannabis drinks.
"There is so much happening in this area right now and we think it has incredible potential," Bloomberg quoted Aurora spokesperson Heather MacGregor as saying. "Stories like this are further validation of the massive global potential of the cannabis industry." Related: Capital Churn, Avocado Toast And The Gold Standard
Coke wouldn’t be the first, either. Heineken is ahead of this game, already producing a THC-infused drink through its Lagunitas craft beer label. Because it contains the active ingredient in marijuana, it can only be purchased, for the time being, in medical marijuana dispensaries in California.
A number of Canadian cannabis companies, including Cronos (CRON) and MedMen Enterprises(MMNFF), now trade on US stock exchanges, and some American companies have taken stakes.
For Coca-Cola, the trip would be an easier one because it is only talking about infusing drinks with CBD, which is illegal in the U.S. but has far less pushback and is much less strictly enforced.
Some say that Coke is not likely to make any major decision until we see a change in federal laws in the U.S. But Canada could end up being the staging ground where Coke could try out its new product and prepare it for market, as CNN Money reported.
In a note to clients carried by CNN Money, Wells Fargo analyst Bonnie Herzog said Coca-Cola was positioning itself long-term, estimating that cannabis-infused drinks could end up being a $50-billion market annually in the U.S. That’s a massive figure when you consider that the entire U.S. beer market sees $117 billion in sales.
In the meantime, this market is rampaging.
First, Constellation, the maker of Corona Beer, threw $4 billion into Canopy Growth, bumping its stake up from 9.9 percent to 38 percent. Then, Diageo PLC, the maker of Johnnie Walker and Smirnoff, started talks with three Canadian pot companies for a stake. They want in, badly.
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The Coke teasers are yet another boost to Aurora …
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And for the cannabis industry as a whole.
While the alcohol-maker deals are very different and much more ‘hands-on’ with the cannabis industry, there is some sentiment that Coke deal would lend an enormous amount of credibility to the new sector. Such a deal would also be likely to start a chain reaction among non-alcoholic beverage makers, leading to some very big partnerships.
By Charles Benavidez for Safehaven.com
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