If you are a major beverage company right now, it is almost expected that your board of directors is eyeballing the cannabis industry for opportunities to increase profits. Several of the biggest drink-slinging companies in the world have already dropped substantial sums of money on the development of cannabis-infused beverages, with rumors of more joining soon. It’s to the point where eager investors are waiting on bended knee for news of the latest development in the clash between dank and drinks.
So it should not come as a surprise to learn that when PepsiCo Chief Financial Officer Hugh Johnston told CNBC on Tuesday that “we’ll look at [the cannabis industry] critically,” the investment community went into an initial frenzy, setting its sights on the company.
The situation is very similar to when Pepsi’s primary competitor, Coca-Cola, recently revealed that it was in “serious talks” with a Canadian cannabis company about manufacturing a line of CBD “wellness beverages.” Although no deal was solidified, the idea of a cannabis-related Coke product seems thrilling to those Wall Street hounds looking to capitalize on the unique entry into a market that remains mostly illegal.
And if Pepsi were to move forward with a similar plan, even though there is no plan, there would likely be no end to the amount of money that stands to be made by marketing such a product.
Some of the latest estimates show the CBD market could be worth in upwards of $2 billion within the next few years. And these predictions were made long before either Coke or Pepsi began discussing the possibility of throwing a little weight around.
There is a reason to believe that both companies have yet to enter into an agreement because they are focused on hashing out the legal aspect of such a deal. In fact, Johnson told CNBC that while Pepsi would “turn over every stone to look for growth,” it was still concerned about pot’s place in the eyes of the federal government.
But here’s the rub — where the merger of bud and beverages could get interesting. Although marijuana remains illegal at the federal level, the two mainstream refreshment companies are purportedly considering getting into drinks made exclusively from the non-intoxicating CBD compound.
While not many details are available surrounding the exact design of the proposed products, the word on the street is that the drinks could be derived from a hemp-based version of the chemical, which has been branded with a sort of grey legality in the United States. This could be where these popular brands of cannabis beverages, most of which have yet to come to fruition, could swell into a mainstream monstrosity that rivals the creation of sliced bread. Well, that is if these drinks taste good and the consumer goes nuts over them. But that’s a whole other story for another time.
Similar to the rumored Coca-Cola deal, it remains to be seen whether Pepsi will actually jump into the cannabis trade. A report from Bloomberg shows the company’s stock took a bit of a hit yesterday after Johnston failed to provide any definitive plans to go in that direction. “I’m not prepared to share any plans that we may have in the space right now,” he said.
It is conceivable that both Coke and Pepsi will wait and see just how well the market pans out when Canada launches its recreational marijuana market in the coming months. Still, experts have little faith that either of these soda companies has any interest in selling cannabis or hemp products solely in the northern nation. They are likely searching for the advantage in both the United States and Canada.
Interestingly, right after Coca-Cola disclosed that it might get into the business of marijuana, Wall Street analyst Vivien Azer of Cowen told investors that she wouldn’t be surprised to see PepsiCo sniffing around the cannabis market looking to mark its territory.
But for the time being, although the dogs are sniffing around the tree, or, in this case, the plant, we’re still waiting for one of them to get a leg up.
TELL US, would you buy a CBD beverage from PepsiCo?