Corporate America is using CBD and hemp oil in everything from lotions and pain balm to beverages. President Trump signed the 2018 Farm Bill into law. Even better, according to Arcview Market Researcher and BDS Analytics, global spending on cannabis is expected to rocket 38% this year to $16.9 billion up from $12.2 billion in 2018.
Even the beverage market has seen a substantial impact.
For example, Constellation Brands partnered with Canopy Growth Corporation. New Age Beverages is producing and distributing a new line of Marley+ CBD drinks, including Mellow Mood, a relaxation tea with CBD. Anheuser-Busch InBev announced a partnership with Tilray to research non-alcoholic beverages infused with THC and CBD. Heineken subsidiary Lagunitas even just partnered with cannabis company AbsoluteXtracts.
HEXO Corporation is currently working with Molson Coors to create non-alcoholic, cannabis-infused drinks. “Molson Coors Canada has a unique opportunity to participate in this exciting and rapidly expanding consumer segment,” said Frederic Landtmeters, president and CEO of Molson Coors Canada.
Beverage Market Could be Worth $1.4 Billion by 2024
The U.S. cannabis beverge market could be worth $1.4 billion by 2024 – a big jump from 2018 sales of $89 million, according to Zenith Global, a food and drink consulting firm. Canaccord says CBD drinks will become a $260 million market by 2022, while THC-infused drinks will be worth $340 million in the same year.
We must also consider that cannabis does pose a significant risk to the alcohol industry.
“Though not yet mainstream, cannabis adoption is certainly growing in states where it’s legal and does pose a risk to the beverage alcohol industry in the future,” said Brandy Rand, U.S. president of International Wine and Spirits Research (IWSR) U.S. president. “It’s important that alcohol brands pay attention to their consumers, recognizing that some occasions may result in a decrease in alcohol consumption in place of, or alongside, legal cannabis.”
While an increase in cannabis users won’t exactly derail the alcohol industry, it could decrease the amount of consumption.
In fact, in a recent Molson Coors’ annual shareholder report, the company listed legal cannabis among the biggest possible risks to its business. “The emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer.”
That’s just part of the reason why major alcohol companies, such as Constellation Brands and Molson Coors have been quick to take a stake in the cannabis industry. “Consumers will continue to look to cannabis products over alcohol for occasions when they are feeling creative, need to get motivated, or seeking health, medical or wellness benefits,” notes a recent study from ISWR and BDS Analytics, as noted by FoodBev Media.
In short, it’s likely we’ll see even more big deals as corporate America wakes up to the cannabis opportunity. In fact, we believe the following companies could be the next to make a move.
Diageo PLC (NYSE:DEO)
Diageo PLC, which produces both Smirnoff and Baileys has been actively watching the cannabis space in recent months and is expected to develop cannabis beverages sooner rather than later. At the moment, the company may be waiting to see how much consumer demand there is at this time. It may also be taking a wait and see approach to see if the U.S. FDA will move to legalize CBD in food and drinks.
Remember, the U.S. FDA will hold its first public meeting on May 31, 2019 regrading that.
“The goal of the hearing is to obtain additional scientific data and other information related to cannabis and cannabis-derived compounds, both from botanical and synthetic sources, to inform our regulatory oversight of these products,” the agency has noted. “FDA does not intend for this hearing to produce any decisions or new positions on specific regulatory questions, but this hearing is expected to be an important step in our continued evaluation of cannabis and cannabis-derived compounds in FDA-regulated products.”
A positive outcome could potentially lead a company like Diageo to act.
PepsiCo Inc. (NASDAQ:PEP)
In late 2018, the company became the latest to announce it is looking at the cannabis market.
“I think we’ll look at it critically, but I’m not prepared to share any plans that we may have in the space right now,” Chief Financial Officer Hugh Johnston told CNBC at the time.
Analysts at Piper Jaffray believe that a beverage company like PEP could benefit from cannabis growth, whether they focus on infused beverages or other products that promote wellness.
Mondelez International Inc. (NASDAQ:MDLZ)
Mondelez CEO Dirk Van de Put announced that the company had given serious though to adding CBD to some of its product lines, such as Chips Ahoy cookies, Cadbury chocolate, and Nutter Butter cookies. "Yes, we're getting ready [to develop CBD-infused snacks], but we obviously want to stay within what is legal and play it the right way,” according to CNBC.