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Why All Consumer Packaged Goods Companies Must Investigate Opportunities for Cannabis-Based Products

Updated: Dec 4, 2018

The Opportunity for Consumer Packaged Goods Companies

Cannabis is now the world’s fastest-growing industry. As the legalization of both cannabis and hemp spread globally, the opportunities for consumer packaged goods companies (CPGs) is clear. Existing CPGs can no longer sit on the sidelines.

This new industry has not gone unnoticed by large mainstream beverage players, who see it as an opportunity to inject growth into their product portfolio.

Companies including Coca-Cola, Constellation Brands, and Molson Coors are not content to wait. They are actively pursuing opportunities. Their objective? To be able to manufacture and sell, when legally possible, cannabis-based, hemp-based, or CBD-based drinks. This new beverage market is one that the Canadian broker, Canaccord Genuity, indicates will become a $600 million market in the U.S. alone in the next four years. By 2022, this will consist of a $260 million market for CBD beverages, and a 340 million market for THC-infused beverages.

Wellness drinks are becoming a necessity for beverage manufacturers in a crowded beverage marketplace. It’s clear that all beverage manufacturers, whether small micro-brewers, manufacturers of niche market need to research, develop and pursue their own cannabis-based drink strategy. But, the landscape has been likened to a minefield, both in the United States and globally. The complexities of the state, federal and local legal status are challenging and evolving.

Trying to second-guess the eventual competitive issues is also a challenge, with numerous small and large beverage manufacturers seeking to determine their own cannabis-drink strategy.

The solution? Phyto Intel’s team is positioned to enable your beverage company to evaluate opportunities, legal and regulatory hurdles, and likely competition, both in the U.S. market and globally. The objective of Phyto intel’s assistance - developing a viable cannabis-based drink strategy for your beverage company.

The Realities of the Market for Cannabis-Based Beverages

Cannabis is not only America’s fastest growing industry but the world's fastest growing. While most media attention has focused on the state-licensed marijuana industry in the United States, and Canada’s new federally-legal adult-use or recreational cannabis program, the cannabis industry has started generating attention in boardrooms of Packaged Goods Companies (CPGs).

One example is the CPG industry. The market for cannabis-infused beverages is estimated to reach $600 million by 2020, a short four years off. These beverages include those infused with the non-psychoactive Cannabidiol or CBD, which alone is projected to hit $260 million. The market for THC-infused beverages is projected to become a $340 million annual market.

Cannabidiol or CBD is a non-psychoactive cannabinoid or chemical compound that has therapeutic or wellness benefits. Recently the US federal government approved Epidiolex, a plant-derived CBD as a drug for children suffering from forms of pediatric epilepsy.

Tetrahydrocannabinol or THC is the cannabinoid responsible for the high associated with ingesting marijuana.

While CBD can be derived both from the marijuana plant and industrial hemp, THC is solely derived from the marijuana plant, with THC-based beverages being regulated as “marijuana” by federal, state, provincial and local governments.

Analysts from the Canadian broker, Canaccord have indicated that revenue from cannabis-infused beverages could easily double the demand for cannabis products in general, and also capture approximately 20 percent of the market for cannabis edibles.

In commenting on the impact on U.S. beverage companies, Canaccord stated, “While these trends represent a significant opportunity for U.S. cannabis companies, they have not gone unnoticed by large mainstream beverage players looking to inject growth into their product portfolio.”

The American investment bank Cowen indicated that the overall legal cannabis market is fast-becoming a larger industry than soda. Cowen has indicated that the cannabis industry has already resulted in a decrease in beer and alcohol sales in U.S. states that have legalized marijuana programs. This decrease in beer and alcohol sales has caused panic in many corporate boardrooms.

Major beverage companies have noticed this new industry and are not sitting on the sidelines. In August Constellation Brands, the North American distributor of Corona and Modelo, made a second investment in the Canadian licensed marijuana producer Canopy Growth and obtained approximately a 38% stake in the company.

Reports have indicated that Coca-Cola is seeking a direction or partner for a CBD-infused beverage. Lagunitas, Heineken’s popular brand developed a THC-infused sparkling beverage. Not content to sit on the sideline, Molson Coors entered into a joint venture with the publicly-traded grower Hexo to produce marijuana-infused products for the Canadian market.

What does all this mean not only to other beverage brands? It’s clear that with the declining sales of beer and other alcoholic beverages in states that have state-licensed marijuana programs, that all beverage brands must have a cannabis-drink strategy.

This White Paper was prepared by Phyto Intel LLC, a U.S.-based consultancy that assists packaged goods companies with the evaluation of pitfalls, strategies and opportunities in the fast-growing cannabis industry. This is your blog post. Blogs are a great way to connect with your audience and keep them coming back. They can also be a great way to position yourself as an authority in your field. To edit your content, click Manage Blog. From the Dashboard, you can edit posts and also add brand new posts with ease.

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