Coke in talks with Aurora over cannabis-infused drinks.
The Coca-Cola Co. expressed an interest Monday in the “wellness”-related use of a key cannabis compound, the latest indication of growing attention being paid to marijuana by major beverage producers.
Coke’s announcement came as BNN Bloomberg reported that the company was in “serious talks” about cannabis-infused drinks with Alberta-based marijuana producer Aurora Cannabis Inc.
In a statement that did not mention Aurora, Coke said it has no interest in marijuana or cannabis itself.
But the company did mention cannabidiol, or CBD, the non-intoxicating compound of cannabis that has also been studied “for its possible therapeutic uses,” according to the Canadian government.
“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,” Coke said. “The space is evolving quickly. No decisions have been made at this time.”
The potential health perks of CBD could pique the interest of others as well. Deepak Anand, vice-president of business development and government relations at consulting firm Cannabis Compliance Inc., said CBD might fit into “better-for-you positioning” plans.
“A lot of these companies are looking at the space from a CBD perspective,” he said.
“Because they know that the better-for-you beverages are kind of where the market is going, and that’s what people are interested in. And certainly, CBD beverages are where the interest is.”
Coke’s possible interest in CBD-infused drinks also fits with the trends pushing the beverage industry towards healthier alternatives.
The company has already diversified well beyond its namesake product, having brands such as Powerade, vitaminwater and Dasani tucked into its portfolio, in addition to its recently announced US$5.1-billion deal to buy U.K.-based coffee chain Costa Ltd.
Rivals have recently made health-focused plays as well. For example, PepsiCo Inc. struck an agreement in August to buy sparkling drinkmachine maker SodaStream International Ltd. for approximately US$3.2 billion.
The moves come amid headwinds for soft-drink sellers, including the changing tastes of healthconscious consumers and proposed “soda taxes” targeting sugary drinks.
Those are turning into real considerations for drinkmakers, with a recent Morgan Stanley note on Coke warning that “health/wellness concerns” could curb growth of the company’s carbonated soft drinks category.
Furthermore, Fitch Solutions said in August that the health and wellness trend “is resulting in consumers slowly shifting away from
sugar, and highly processed foods, targeting healthier snacks … and drinking less soft drinks.”
“Sugar reduction is now an important part of food and drink companies’ corporate strategies and Mars, Nestlé, PepsiCo, Kellogg’s, Unilever among others have plans in place to reduce sugar content in their products,” noted Fitch.
This could put CBD in a good spot. Thus far, though, the more psychoactive component of cannabis, THC, has yet to find the same sort of favour.
Anand noted that THC currently lacks “the hard health benefits directly that I think CBD has.”
“Because we know that unlike CBD, THC is certainly psychoactive and it’s certainly impairing as well,” he added.
While this angle might be more of interest to an alcohol or tobacco company — and there has been explicit and reported interest in the cannabis sector from firms
like Constellation Brands Inc., Molson Coors Brewing Co. and Diageo PLC — there is “a lot of uncertainty” around how the Government of Canada is going to move on regulating those sorts of products, Anand said.
Yet despite that uncertainty, beverage companies could still see cannabis as a hedge.
“I think this is an interest by a lot of these beverage makers to make sure that they are paying attention to a space when it does open up, if it does open up, that they are in there producing beverages as quickly as possible,” Anand said.
Meanwhile, Aurora said in a statement said that it does not discuss business development initiatives until they are finalized, “however we have a responsibility to our shareholders to give proper consideration to all relevant opportunities that are presented.”
“Aurora has expressed specific interest in the infused beverage space, and we intend to enter that market,” the statement added. “There is so much happening in this area right now and we think it has incredible potential.”