New avenues for earnings growth
Earlier in this series, we discussed a recent development in which Coca-Cola (KO) was reported to be in talks with Aurora Cannabis (ACB) (ACBFF) to develop a cannabis-infused drink (MJ). The planned legalization of recreational cannabis in Canada is presenting a new market for non-cannabis players to explore. Thus, it is no surprise to see that Canopy Growth (CGC) (WEED) and HEXO (HEXO) have both pursued deals with alcoholic beverage companies. Markets for companies such as Coca-Cola are in the mature stage, and the cannabis-infused market could provide a catalyst for such companies with a big wallet to grow earnings.
The beverage segment is just one avenue for non-cannabis companies to participate in the cannabis market. BNN Bloomberg cited Hemp Business Journal’s estimates of a $2.1 billion industry for the CBD (cannabidiol) market alone by 2020. CBD-infused beverages may only be a part of this estimate, as CBD is also used in other product formats including CBD oil and capsules, which have traditionally been used for medical purposes.
It appears that Coca-Cola’s cannabis-infused drink will target medical users with pain, inflammation, and cramping. This move may also help the company target markets outside of Canada where only medical cannabis is legal. However, if this drink is marketed as a recovery drink, it may still require recreational cannabis legalization in those countries to be sold without a prescription.
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