Amid slowing revenues from soda-based drinks, beverage companies are exploring new streams of revenue. With Canada legalizing recreational use of the cannabis drinks, the Coca Cola Co. (KO) is exploring an entry into marijuana-infused beverages market, according to BNN Bloomberg. As the nascent industry continues to evolve with high interest, the Atlanta-based beverage giant is in discussions with Canadian marijuana producer Aurora Cannabis, Canada’s third-largest pot company, to develop the beverages. There is no guarantee that the deal will go through.
Beverage Makers Buzzing on Cannabis
Cannabis drinks use cannabidiol (CBD) as an ingredient for wellness drinks. It is the non-psychoactive chemical component of marijuana used for medicinal purpose which doesn’t produce the high that usually comes from tetrahydrocannabinol (THC).
"If you think about versus beverage alcohol, if you can have a drink that has zero calories, that has no risk of hangovers, easier on your system, on your liver for consumption, all of a sudden you’re making life better," said Brian Athaide, CEO of The Green Organic Dutchman Holdings (TGOD), while speaking at the Green Market Summit on Friday.
That makes such drinks a great opportunity for beverage makers to diversify their product lines and many have already begun to do so. The biggest deal so far is the $4 billion investment by Corona-maker Constellation Brands (STZ) into Ontario-based cannabis company, Canopy Growth Corporation (CGC). In a June 2018 earnings call, Canopy's CEO Bruce Linton spoke about getting ready with packaging solutions for beverages by next year. "I think we're on track to be very ready for all of the formats in 2019," he said.
Bloomberg BNN also reported in June 2018 about Molson Coors exploring an infused-beverage partnership with a number of cannabis companies.
(See Also: Top Marijuana Stocks to Watch.)
Why it Makes Sense For Coca-Cola
While recent events have seen adult-beverage makers jump into the infused-beverages space, some believe the non-alcoholic infused-beverage markets may hold the key.
"If you think about other functional beverages like vitamin waters, think of the Gatorades, Monster kind of drinks, I mean there’s a lot of functional beverages pre-workout, post-workout that aren’t about getting high. So there’s a lot of focus on beverage alcohol, there’s a huge huge market, but if you see the other infused drinks it could be a much bigger," Athaide said.
If that's the case, then its advantage Coca-Cola. The company has been for years trying to diversify its product lines beyond the traditional cola-based drinks and into products like tea, coffee and bottled water. This push for product diversification is perhaps also what could give the company an edge in the cannabis-infused beverages business. The addition of a trendy line of infused-drink(s) could see Coca Cola leverage its existing products to help it gain new stream of revenue.
(See also, 10 Canadian Marijuana Stocks for Your Portfolio.)