CannabisNewsWire
Editorial Coverage: Drinks infused with cannabis-derived
cannabidiol (CBD) are in a prime position to bring disruption to
the beverage sector.
- The growing consumer interest in hemp-derived CBD as a health
supplement along with the recent passing of the Farm Bill has
spawned a growing interest in CBD-infused drinks.
- The ever-increasing global trend to legalizing cannabis is also
creating demand for “harder” beverages derived from marijuana
- Big alcohol companies have taken a particular interest in
investing in cannabis producers.
- The relationship is also working in an inverse direction, with
CBD producers recruiting experienced beverage executives to help
launch new products.
Corporate interest in building a cannabis-infused beverage
profile demonstrates the level of potential growth for such an
industry, with key developments being made across multiple
channels. To address the needs of the wellness-oriented consumer,
Phivida Holdings Inc. (CSE: VIDA) (OTCQX: PHVAF)
(PHVAF
Profile) has created a line of active
hemp extract (CBD)-infused drinks that are just starting to hit
store shelves and is expected to be distributed to a thousand
retail outlets in Q2. In the adult beverage sector,
Constellation Brands Inc. (NYSE: STZ) has made a
$4 billion investment in Canopy Growth Corp. (NYSE: CGC)
(TSX: WEED), fueling research into cannabis drinks which
suggests a proactive approach to addressing the potential sales
impact in markets where consumer use of marijuana is legal. The
Canadian business unit of Molson Coors Brewing Company
(NYSE: TAP) has also made a deal with a cannabis producer
to create beverages for that market. In the health supplements
sector, Charlotte’s Web Holdings Inc. (OTCQX: CWBHF) (CSE:
CWEB), which markets hemp-derived CBD oil, has recruited a
former Coca-Cola executive to bring beverage sector expertise into
the company.
To view an infographic of this editorial, click here.
The Changing Beverage Space
Beverages are among the most trend-driven of all food industry
products with continuing innovations in packaging, flavors and
formulations being made to drive consumer interest. Decades ago,
store shelves consisted of a few cola and fruit-flavored drinks.
Since then, there have been introductions of enhanced fruit juices,
bottled iced teas and more recently energy drinks, which created an
entirely new drink category. Consumer tastes have grown
considerably as well, especially when considering the popularity of
the fermented tea drink kombucha.
Now a fresh wave of innovation is on the cusp of altering the
beverage industry. The growing interest in hemp-derived CBD as a
health supplement along with the legalization of marijuana for
medical and recreational use in several jurisdictions has led
manufacturers to explore new products and expand their consumer
base. This has led to the creation of a new product category —
CBD-infused beverages.
The Rise of CBD Beverages
Few companies currently have a strong focus on CBD drinks.
However, among those looking to take advantage of this market is
Phivida
Holdings Inc. (CSE: VIDA) (OTC: PHVAF). Through its
Oki brand of active-hemp, extract-infused waters and iced teas,
Phivida is targeting health-conscious consumers who are looking for
newer ways to enhance their well-being. Backed by its own market
research, Phivida expects that introducing an attractive beverage
formulated with the flavors and features most desired by this
segment will have strong market acceptance.
Driving the growth of this new segment is the rocketing
popularity of CBD as a health supplement. One of the many active
ingredients in cannabis, CBD doesn’t produce a high in users,
unlike cannabis’ more famous constituent, THC. While research into
CBD is in its early stages, consumers are increasingly looking for
products containing CBD to address a variety of health issues such
as anxiety, pain, and immune health. This has been aided by the
passing of the Farm Bill in December 2018 which legalized hemp —
defined as a variety of the cannabis plant that contains less than
0.3 percent THC — and allows its production and sale in all 50
states. For companies such as Phivida, which process the hemp plant
into their products, this has provided them with a significantly
large market to grow into.
Launching into the CBD-infused Drink Market
Chances are that, within a decade, every store may have a
CBD-infused drinks section. But currently, companies are entering
new territory and strategizing the best steps that will lead to
success.
A critical step some are taking is to reach into the established
beverage industry to tap into seasoned expertise and leverage
previous success. For example, hemp-derived CBD supplement producer
Charlotte’s Web Holdings Inc. (OTCQX: CWBHF) (CSE:
CWEB) recently recruited former
Coca-Cola executive Eugenio Mendez as its chief growth officer.
The company has stated its strategy is to expand into new segments,
and Mendez could provide vital experience for a move into
beverages.
For Phivida, that process also started with finding the right
people to manage the project. Last March, Jim Bailey and Mike
Cornwell stepped in as new
management at the company. Veteran executives from Red Bull,
they brought with them large beverage company expertise in product
formulation, package design, product distribution and marketing.
Coming from the last company to truly innovate and trigger a
widespread disruption in the beverage industry, the two executives
look well-equipped to repeat that achievement at Phivida.
Another key step is designing a beverage that will have the most
consumer appeal. To align with the sentiments of their target
consumers, Phivida’s Oki brand flavored waters and iced teas
contain non-GMO, natural and organic ingredients; are plant based
and vegan friendly; and are packaged in sleek 100 percent
recyclable glass containers. The flavor line-up, which includes
Watermelon Relax and Lemon Ginger Harmony, are aligned with the
current preferences of the health-conscious consumer. Phivida’s
surveys have resulted in product testing scores as high as 80
percent from its sample group of 1,200 individuals for its OKI beverage.
The new leadership team has also put in significant effort to
ensure that Oki has the distribution channels necessary to reach
consumers. Company officials have been working with one of the
nation’s largest grocery distributors and meeting with both
national and regional chains to secure retail contracts. Several
retail contracts are in development, and Phivida expects Oki to be
available in more than 1,000 outlets by the second quarter of this
year.
Beer Makes Its Cannabis Move
So far, one of the most significant moves by the beverage
industry into cannabis has been made by Constellation
Brands Inc. (NYSE: STZ). The company behind brands such as
Corona beer and Svedka vodka has taken an active interest in the
cannabis sector. Through two rounds of investment over the past two
years, Constellation has provided $4 billion to Canopy
Growth Corp. (NYSE: CGC) (TSX: WEED), one of Canada’s
largest and most successful cannabis companies. This investment
provides Constellation with one-third ownership of Canopy Growth
and the potential to take that investment further.
Unsurprisingly, there has been a lot of speculation about how
this money will be spent. Canopy Growth has been using its
increased financial clout to expand its business from Canada into
the United States. Canopy is
establishing a production facility in New York State that, for
now at least, will produce industrial hemp from which CBD can be
extracted.
In another team-up between a brewer and a Canadian cannabis
company, Molson Coors Brewing Company (NYSE: TAP)
announced last summer that its Canadian arm would be working with
the Hydropothecary Corporation on a joint
partnership to produce cannabis-infused drinks in anticipation
of the expansion of that country’s cannabis legalization. Cannabis
beverages and edibles are expected to be made available by October
2019, and Molson will be positioned to serve that new sector once
it is made legal.
The market for both CBD- and THC-based cannabis drinks has
barely begun to take shape, but given the dramatic growth in the
popularity of cannabis, it could become a major disruptor for the
beverage industry over the next few years.
For more information on Phivida Holdings, visit Phivida Holdings
Inc. (CSE: VIDA) (OTCQX: PHVAF)
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