Why Are Beverage Companies So Interested in Cannabis?

SEATTLE, Aug. 28, 2018 (GLOBE NEWSWIRE) — There has been a lot of speculation about whether the legal cannabis industry could cannibalize alcohol sales as consumers become more comfortable with the idea of cannabis-infused beverages. Additionally, the high-growth functional foods/nutraceutical space offers lucrative potential for more health-oriented cannabis concoctions. Over the past couple of years, these dynamics have translated into billions of dollars worth of concrete investments by leading beverage giants into cannabis companies. The arms race shows little signs of slowing, which could open the door for investors in the space.

For example, The Green Organic Dutchman Holdings Ltd., one of the most popular Canadian licensed producers, plans to become a leader in the cannabis beverage space with the establishment of its Beverage Science and Research Division.

Beverage Giants Build a Stake

Constellation Brands Inc. purchased a 9.9 percent stake in Canopy Growth Corp. in late 2017 to develop and market cannabis-infused beverages. The company increased its stake to 38 percent in August 2018 with a US$3.88 billion investment and the right to invest another US$3.4 billion to acquire a controlling stake—significant numbers given Canopy Growth’s modest US~$60 million in revenue.

At the same time, Molson Coors Brewing Co. announced a joint venture with The Hydropothecary Corporation to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization. Under the terms of the agreement, Molson Coors Canada, the company’s Canadian arm, will have a 57.5 percent controlling interest in the joint venture with HEXO controlling the remainder.

Several other beverage companies have started creating their own cannabis-related products without such deals in place. For example, Lagunitas Brewing Company introduced an IPA-inspired sparkling water infused with tetrahydrocannabinol (THC) and/or cannabidiol (CBD)—called Hi-Fi Hops. Province Brands is even brewing the entire cannabis plant—stalks, stems, and everything—in a way that’s better tasting than a traditional beer.

While some of these companies are worried about cannabis cannibalizing beer sales, others are simply focused on entering a related market. Both beer and cannabis are highly regulated products and there are a lot of potential synergies between the two businesses—perhaps more so than the tobacco industry. And, that could spur further investment in the cannabis beverage space in the form of both M&A and organic investment.

The Green Organic Dutchman is a Leader

The Green Organic Dutchman Holdings Ltd., one of the most popular Canadian licensed producers, plans to become a leader in the cannabis beverage space with the establishment of its Beverage Science and Research Division. With 40,000 kilograms of dried cannabis dedicated for beverage products each year, and the appointment of Prem Virmani as the division chair, the company’s beverage platform is second to none.

As TGOD CEO Brian Athaide said in a letter to shareholders published on July 9, 2018:

“We are focused on becoming the Whole Foods of the cannabis industry and recognized as pioneers in the THC/CBD infused beverage industry.

Our team has over 125 years executive experience in consumer-packaged goods, beverage, and beverage alcohol, more than any other company in the industry.”

Prem Virmani, who leads the company’s beverage division, is the former senior vice president of global science and research for Cott Beverage Inc., a division of Cott Corp. Other members of the company’s leadership team have worked for Procter & Gamble Co., Weight Watchers International Inc., and other global companies involved in the food and beverage space.

The company is also unique in that it only produces premium organic cannabis and works closely in partnership with Aurora Cannabis Inc. After completing the largest IPO in cannabis industry, raising $123.1 million, the company became the single largest holding in the only cannabis-focused exchange-traded funds and has over 170,000 kilograms per year of funded capacity for the potential for 195,000 kilograms per year in the near future.

Significant International Distribution

The Green Organic Dutchman is not limiting its plans to Canada, or even North America for that matter. TGOD recently acquired HemPoland, a leading European manufacturer and marketer of premium organic CBD products. In terms of international expansion, HemPoland’s established distribution network throughout Europe is a key to the deal. Buying the distribution (over 700 locations) and the ecommerce platform helps TGOD set the stage for future introductions of products to the European market, including those products developed by the Beverage Science and Research Division.

Looking Ahead

There’s no doubt that the cannabis beverage industry is poised for expansion and The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (OTCQX: TGODF) is in prime position to capitalize. Investors interested in the space may want to take a closer look at the company as it builds out its well-capitalized beverage division, while also keeping an eye on larger beverage companies that could make strategic acquisitions in the space.

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Photo courtesy of High Times.

Article courtesy of CFN Media