The market for cannabis beverages is on the verge of skyrocketing. Recently, Correlation Brands announced its injection of $4 billion into Canopy Growth Corporation’s foray into the legal Canadian market, an investment it hopes would launch its new cannabis drinks range. With Corona Beer now firmly entrenched in the marijuana industry, comes Coca Cola’s decision to join the pioneering fray.
In a statement on Monday, Coke claimed to be “closely watching” the exploding growth of cannabidiol, or CBD, the non-psychoactive cannabinoid found in cannabis plants. It is considering making it a primary ingredient in what it calls its “functional wellness” beverages. “The space is evolving quickly,” Coke said simply. “No decisions have been made at this time.”
Think CBD-Infused Soda
If Coke were to market cannabis drinks, profits would be lucrative indeed. The CBD industry is erupting into one of the biggest markets of all time. CBD is a wondrous compound. It cannot make consumers stoned, and science shows it with many very valuable medicinal properties. People are using it successfully to treat a myriad of ailments from mild to severe, including pain, inflammation, and more.
Bloomberg was the first to report Coke’s interest in CBD. It told of the company’s talks with Aurora Cannabis, another Canadian-based company of huge influence. Aurora has been expressing a desire to involve itself in cannabis beverages, but neither was willing to discuss any potential deal. The subject has been a bit hush, but with Aurora collaborating strategically with global giants, it was no surprise.
“There is so much happening in this area right now and we think it has incredible potential,” Heather MacGregor, spokesperson for Aurora, said back then. “Stories like this are further validation of the massive global potential of the cannabis industry.” That may sound like a borderline confession and there is always truth somewhere in rumor. Seems such whispers are fast becoming reality.
Market for Cannabis Drinks
Coke is not alone. It is not even the first company to consider the idea. Some are already doing it. Constellation Brands, the maker of Casa Noble tequila, Svedka vodka, and Corona beer, made public its plan to invest a further $4 billion in Canopy Growth Corporation, one of Canada’s biggest cannabis products. Several Canadian pot companies trade on U.S. stock exchanges.
Some, including MedMen Enterprises and Cronos, now have American companies as stakeholders. Additionally, Lagunitas, one of brewing giant Heineken’s craft beer labels, already has a THC-infused drink available at marijuanan dispensaries in California. It contains tetrahydrocannabinol, or THC, which is the psychoactive cannabinoid in marijuana plants that makes consumers stoned.
Legalities of CBD
In the United States, CBD is still illegal under federal law. Since cannabis remains a banned substance, so are its cannabinoids. This, despite several states, has legalized marijuana. However, enforcement of federal prohibition of marijuana is lax at best, as third-party sellers can easily offer CBD-based items on Amazon, as just one example.
Still, it does not seem probable that a huge company like Coca-Cola would sell products illegal under federal law, at least not until federal law reforms, which some experts say is likely inside of three years. Despite this, Kris Krane, president of 4Front, a company advising businesses on marijuana law, believes that Coke will first develop the product for sale in Canada, readying it for when it is legal in America.
“I cannot imagine they are doing it just for the 35 million people in Canada,” Krane said. “They clearly have an eye on the U.S. market.” According to Bonnie Herzog, a Wells Fargo analyst, if the United States were to legalize CBD and other marijuana products, Coke would be in an ideal position to capture the market share. In a note to clients on Monday, Herzog says that Coke is strategizing its position for the long-term.
It only makes sense for giant food and beverage companies to hop on the cannabis bandwagon. Herzog estimates that cannabis beverages alone could grow into an annual market of $50 billion just in the United States. That is almost half of the current $117 billion U.S. beer industry. Coke, even its rival PepsiCo, have been expanding away from traditional soft drinks, as soda becomes a major health issue.
Just a week ago, Coke announced a deal it made to buy Costa Coffee for $5 billion. Canada is about to open its legal market for recreational cannabis on October 17. Currently, it is in the process of drafting regulations and setting the industry up accordingly. Although some states have legalized marijuana, with many others having decriminalized it, the federal government still considers it illegal.
This is changing, however. Subtle and more obvious signs abound. The National Cancer Institute recently changed its website to note the healing potential of cannabis for cancer patients. The U.S. Food and Drug Administration recently approved Epidiolex, the first CBD-based drug approved for treating epilepsy in the United States. If experts are correct, federal legalization is fast approaching.