Cannabis Beverage Industry Could be $600 Million Market by 2022

Ice cubes in cola beverage, close up IStock / artisteer

Cannabis analytical company Canaccord Genuity predicts that the pot-infused beverages could generate over $600 million over the next four years, representing twenty percent of the edibles market by 2022.  According to the analysts, CBD-infused beverages could bring in $260 million while THC beverages could amass $340 million in revenue.

A Different Way To Consume

Though cannabis has been used as medicine for thousands of years, we have finally arrived at a moment in history when the international community is collectively coming to that consensus in politically significant ways.

But one of the more medically challenging questions surrounding cannabis is the way it should be consumed. Smoking weed can lead to the inhalation of combustion-related carcinogens as well as pulmonary irritation. Eating cannabis can taste… a little grassy. The tendency is to mask that flavor with lots of sugar. Solid edibles can also take a while to come into effect since absorption through the digestive system is a slow process. 

Cannabis tea with marijuana branch and lemon

iStock / Creative-Family

Drinking cannabis, on the other hand, solves a lot of these problems. The beverage industry has already figured out how to create drinks that have zero calories or carbs. Additionally, liquid edibles can, in part, be absorbed sublingually (under the tongue). They also move through the digestive tract much more quickly than solid edibles do.

CBD beverages offer the market a non-psychoactive way to enjoy the therapeutic attributes of cannabis through a relatively healthy consumption method. Non-alcoholic THC beverages provide the market with a recreational substance with a far superior health profile than alcohol. It’s no wonder that the biggest companies in the beverage industry are looking into weed.

A Review on Cannabinoids

Tetrahydrocannabinol (THC), weed’s most abundant cannabinoid, is the compound responsible for creating the psychoactive high most pot consumers are seeking. In addition to that recreational effect, THC’s therapeutic capacity includes its ability to elevate mood, stimulate appetite, reduce nausea and vomiting, relieve pain, and induce relaxation and sleep.

Cannabidiol, the plant’s second most abundant cannabinoid, does not produce any psychoactive effect. In fact, research shows that CBD tempers the adverse psychoactive effects of THC. However, CBD has captured the medical and scientific community’s attention because of its versatile range of therapeutic applications and its tiny side-effect profile. CBD may be useful in the treatment of addiction, inflammation, neurodegenerative conditions, pain, insomnia, and even cancer.

Whether it’s Coke or Pepsi, the Answer Will Probably be Weed.

In mid-September, Coca-Cola made public what anyone paying attention to cannabis already knew—that the soda giant is “closely watching” the development of CBD-infused drinks.

“Along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world,” Coca-Cola said in a statement responding to reports about the company’s involvement in “serious talks” with Canada’s Aurora Cannabis. 

Jew a few weeks after Coca-Cola made this statement, the company’s biggest competitor, PepsiCo, made a similar announcement regarding its interest in cannabis-infused beverages.

New York - Sep 2017: Landmark of classic Pepsi-Cola Sign and modern apartment buildings in Quinees, New York City

iStock / Ivan Chertok

In a televised comment with CNBC’s Squawk on the Street, Chief Financial Officer Hugh Johnston said, “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.” 

While both companies are being extremely cautious about revealing specific plans for cannabis, their statements are strong signals that all of this potential is likely to go kinetic in the near future.

That’s especially true given the plans other big beverage companies have already set into motion.

Smoke more pot, drink less beer?

If you can’t beat them, join them. That’s the mentality several brands in the alcohol industry have taken in response to the decline in beer sales that have followed cannabis legalization.

A 2018 study used retail scanner data to investigate the link between the implementation of medical marijuana laws and alcohol consumption. The results of the study showed that, on average, counties with medical cannabis laws saw a reduction in alcohol sales by 15 percent. Additionally, these declines persisted up to 24 months after medical cannabis laws were passed. Beer and wine saw the most significant reductions.

The study also found that the cannabis and alcohol industries share a lot of the same customers. The alcohol industry has been keenly aware of the competition cannabis legalization presents to its growth. Take a look at the 10-K filings for any big alcohol brand, and legal weed is probably going to come up as a potential threat to the company’s growth. Rather than running away from or trying to sabotage legal weed—an industry that has demonstrated explosive growth and popularity in the past few years—these companies are looking for a way in. This explains the rising interest both industries have shown in cannabis-infused beverages.

Last year, Corona’s parent company Constellation Brands partnered with Canopy Growth Corporation in an effort to develop cannabis beverages in states where cannabis is legal.

In late July of this year, Heineken launched Hi-Fi Hops under its Lagunitas brand. The sparkling beverage contains no alcohol, calories, or carbs but is infused with either five or ten grams of THC from AbsoluteXtracts, a California weed producer and processor.

Like other alcohol companies, Molson Coors Brewing Co. identified the burgeoning cannabis industry as a risk to its own sales in its 2018 10-K filing. Unlike the pharmaceutical companies that did the same thing, Molson decided to jump on the skunk-scented bandwagon. The company announced a joint venture in early August with Canadian cannabis producer, The Hydropothecary Corporation. The venture is currently structured as a stand-alone start-up that will develop non-alcoholic, cannabis-infused beverages.

It’s likely that Big Beer will continue to move in this direction because of the sheer force of demand coming from a market that loves legal pot. Chris Burggraeve, the former chief marketing officer for Anheuser-Busch InBev NV, put it simply back in 2017 when explaining his transition from beer to weed and the rapidity of the cannabis industry’s growth.

“This is one of the fastest-growing categories globally,” he said. “Why? Because people want it. When consumers want something, you ignore it at your peril.” 

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