With marijuana edibles and beverages becoming legal to sell in Canada this week, major pot producers and their beer-brewing backers are readying their lineup of CBD-infused drinks to hit store shelves.
Canopy Growth (CGC 20.65%), HEXO (HEXO), and Tilray (TLRY) have all announced they're prepared for the launch, though each of them is approaching the market slightly differently.
- Canopy, with help from its partner Constellation Brands (STZ 0.53%), will introduce a lineup of 13 cannabis-based drinks using its patented Distilled Cannabis process.
- HEXO's Truss Beverage joint venture with Molson Coors (TAP 0.54%) will offer six different brands, with the first being its CBD-infused spring water brand Flow Glow.
- Tilray and Anheuser-Busch InBev (BUD 0.96%) are making available a mix of CBD-infused flavored teas through their Fluent Beverage venture.
Unlike the starts and stalls the legal dry-flower weed business has gone through since marijuana was legalized in Canada, it looks as if beverages and edibles will see a smoother launch that could help the stocks of the pot producers recover the ground they lost this year. It could even make them profitable.
Image source: Getty Images.
No highs for pot stocks
The regulatory hassles in Canada have exacerbated Canopy Growth's problems in becoming profitable on an adjusted EBITDA basis by 2021. The glacial pace at which the government is moving to clear up the backlog of pending licenses to open dispensaries has created supply shortages in many provinces and hurt revenue, as have the pot grower's own global expansion plans.
And having only garnered a license to start producing beverages just before the end of November, Canopy is racing to have its drinks ready to launch. Its shares have lost 50% of their value over the last six months and are down more than 60% from their high. HEXO and Tilray have been similarly slammed, losing 75% and 80%, respectively, of their value from their all-time highs.
The markets have not seen fit to restore their confidence in pot stocks until they begin to deliver on their profit potential. CBD drinks and their sister beverages infused with THC, or tetrahydrocannabinol, the psychoactive compound in marijuana, could do just that.
A cannabis drink for every palate
To create its Distilled Cannabis, Canopy distills whole-flower cannabis into a clear liquid, which can then be added to products as an active ingredient. In addition to its 11 ready-to-drink beverages, Canopy will also be offering cannabis-infused chocolate and vape cartridges and pens as part of its Cannabis 2.0 portfolio.
The marijuana producer has five lines of CBD and THC drinks:
- Tweed RTD contains 2 mg of THC.
- Its Houseplant line of drinks, created with Seth Rogen and Evan Goldberg, contains 2.5 mg of THC.
- A wellness-focused line called Quatreau, several of which will contain 20 mg of CBD while others will have a mix of 2 mg CBD and 2 mg of THC per can. that offer 2 mg of CBD and THC each.
- A carbonated beverage called Deep Space contains 10 mg of THC per serving, the maximum allowed under Canadian law.
- Drink mixers under the Tweed Distilled Cannabis brand can be mixed with any nonalcoholic beverage or by itself neat or on the rocks.
Truss Beverages also plans on offering a mix of CBD and THC drinks through the Flow Glow Beverages business, though only the spring water version has been announced so far. The first two flavors to hit the shelves will be goji-grapefruit and raspberry-lemon, and they will have 10 mg of CBD in them. It's promised, though, that 80% of its drinks will have low- to mid-level dosages, offering "safe, consistent and unique beverages for every adult consumer and a full range of occasions."
Taking a go-slow approach
Only Fluent Beverages has said it won't be offering any THC-infused drinks yet, believing they need more study before they're brought to market. Of course, Anheuser-Busch's CEO Carlos Brito had said as recently as last year that the megabrewer had no intention of entering the marijuana space.
However, it will have its Everie brand of flavored teas ready to distribute through its Labatt Breweries in partnership with Tilray's High Park. The teas will contain 98% pure CBD and only a hint of THC, 0.05 mg.
As Anheuser-Busch and other brewers continuously look beyond beer for growth opportunities, Labatt's president Kyle Norrington told Bloomberg the brewer's "beyond beer" portfolio could end up displacing as much as 10% of its beer production within five years. With beer consumption in decline, it might not take that long to do so.
Ready for what comes next
This next phase of marijuana legalization up north could be the more exciting portion of the rollout, as it gives people an additional, more accessible means of consuming CBD and THC. That alone could be what drives pot companies to profits and brewers to production growth.
