Soft drink gargantuan Coca-Cola, a company that used to put traces of cocaine in their popular brand, is now the latest of the beverages sector to consider jumping into the business of marijuana.
Earlier this week, sources close to Coke told Bloomberg that the company is in “serious talks” with Canadian pot firm Aurora Cannabis for creating a line of cannabis-infused drinks. It is a development that could further legitimatize the global cannabis market and make the business of growing and selling weed one of the largest business sectors in the world.
But unlike similar deals that have gone down over the past year, Coca-Cola is not interested in marketing a beverage that gets the user high. Instead, the company hopes to devise a beverage infused with the non-intoxicating portion of the plant known as cannabidiol (CBD).
Reports indicate that Coke’s offering to the cannabis scene will more likely be marketed for its therapeutic benefits rather than its ability to wreck the consumer. Other beverage firms like Constellation Brands (maker of Corona) and Molson Coors are on a mission to create non-alcoholic cannabis variations of that more closely resemble beer and hard liquor.
But of course, CBD has become infamous at this juncture for its ability to take the edge of anxiety, ease chronic pain, and control seizures in epilepsy patients. Some of the latest reports show that the CBD market could hit more than $2 billion by 2020. What could make this deal so lucrative for Coke is the fact that no other major beverage company has thought to go after that consumer base with no interest in getting high.
Although Coca-Cola has refused to comments to the specifics behind the purported deal, a spokesperson for the company said on Monday that, “along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world.” While “the space is evolving quickly, no decisions have been made at this time,” the company added in its statement.
Aurora Cannabis, whose stock rose by more than 15 percent following the initial report, has also declined to elaborate on the potential partnership. The company would only say that it has a “specific interest in the infused beverage space and we intend to enter that market.”
The reality of the Big Beverage industry getting into the cannabis industry became a reality last year when Constellation Brands joined forces with Canopy Growth to bring to life the concept of “going into a bar and having a tweed and tonic.” Although the companies initial investment in the space was modest, it has since raised the stakes to the tune of $4 billion.
Soon after, Molson Coors, the second largest brewer in the world, announced that it, too, was joining the cannabis-infused beverage trend in hopes of testing a product on the Canadian market.
Nearly all of the major alcohol beverage companies have since come forward to say they are “monitoring” the cannabis space. Insiders say that Diageo Plc, makers of Crown Royal Whisky and Guinness Beer, and Anheuser-Busch InBev, holder of the Budweiser beer brand, will be some of the next beverage companies to jump in. These beverage giants understand that it is better to join forces with weed than to operate in a state of disruption.
It should come as no shock that Coca-Cola would look to cannabis as a potential market expansion. A recent report finds that U.S. cannabis sales alone could nearly out pace the carbonated soft drink market by 2030. And with some of the latest data showing that consumers are searching for healthier alternatives to sugary drinks, the cannabis market is a perfect fit for the company.
What’s more is Coca-Cola’s entry into the cannabis scene could be one of the most substantial out of the infused beverage scene. Until the United States ends marijuana prohibition at the national level, all of the companies looking to distribute THC-infused drinks are going to be limited to only the Canadian market. But hemp-based CBD products are considered mostly legal in the U.S, making it distinctly possible for Coke to bring their “recovery drink” to market without any change to federal law. This development could definitely hit the ground running without any issue whatsoever if Congress passes a bill this year that aims to legalize industrial hemp production nationwide.
“I can’t imagine they’re doing it just for the 35 million people in Canada, they clearly have an eye on the US market,” said Kris Krane, president of 4Front, a firm that advises companies on the legalities of cannabis, in an interview with CNN Money.
Wall Street analysts say deals between traditional beverage companies and the cannabis industry will not stop. Cowen’s Vivien Azer told investors that she “would not be surprised” if PepsiCo entered into a similar deal to create a CBD-infused version of its popular sports drink Gatorade.
TELL US, would you buy CBD from Coca-Cola?