Rumors recently surfaced that The Coca-Cola Company (NYSE:KO) is interested in making functional wellness beverages infused with cannabidiol, a.k.a. CBD. While it was mentioned that there have been talks between Coke and Aurora Cannabis Inc. (TSX:ACB) (OTC:ACBFF), Tuesday’s announcement from the Canadian licensed producer said there’s “no agreement, understanding or arrangement with respect to any partnership with a beverage company.”
Assuming that Coca-Cola gets involved in the cannabis industry the same way that other major beverage and alcohol companies have, that will mean they need a partner.
Whether Coke follows a joint venture partnership structure similar to the one between the Canadian unit of Molson Coors (NYSE:TAP) and HEXO Corp. (TSX:HEXO) (OTC:HYYDF), or just makes a strategic investment like Constellation Brands Inc. (NYSE:STZ) (NYSE:STZ.B) did in Canopy Growth Corp. (NYSE:CGC) (TSX:WEED), the company that is given the honor of working closer with Coca-Cola is almost automatically a guaranteed success in the cannabis infused beverage space.
Narrowing Down Potential Coca-Cola Partners
Whatever these potential pot beverages look like, there is one thing we can assume for sure. The Coca-Cola Company is not going to do anything that is federally illegal, which means they’re probably looking outside of the United States until the feds clear up confusions surrounding CBD’s legality and more.
Since Coca-Cola has not been in the medicine business since the 19th century when it marketed its original pharmacist-formulated syrup using medical claims, we can probably guess that the company won’t be entering a strict medical-only market like Germany.
When it comes to countries that have legalized recreational cannabis on a federal level, you’re looking at one country and one country only (until Canadian adult-use legalization kicks off on October 17th).
The country I’m referring to is Uruguay, which passed a bill that made the South American nation the first country in the world to legalize and regulate a countrywide cannabis industry.
As mentioned above, Canada becomes another viable market for these beverages come October 17th, 2018 when Canadian adult-use cannabis sales kick off.
To be clear though, a strategic investment like the one Constellation Brands made in Canopy Growth becomes very expensive when most major Canadian licensed producers are currently trading at insane valuations. That being said, Coke has deep enough pockets to pay the high valuations.
Coca-Cola’s Potential Public Pot Partners
Here’s a handful of educated guesses for cannabis-related public companies that Coca-Cola could have in their crosshairs, and why (in alphabetical order):
Although there is currently a pending deal for Aurora Cannabis to acquire all of the issued and outstanding common shares of ICC in an all-stock deal valued at approximately $290 million CAD, it is worth mentioning this company given its 70% market share in Uruguay. It just so happens that The Coca-Cola Company recently sold Montevideo Refrescos S.R.L., the exclusive manufacturer and distributor of the entire Coca-Cola beverage portfolio in Uruguay, to its 37% controlled subsidiary Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) for over $250 million in cash. Coca-Cola has had a history of buying and selling its various bottling companies, but there’s also a chance that the parent company did this to further remove itself on paper from a potential deal in the cannabis space.
Low-cost cannabis producer Khiron Life Sciences has its core operations in Colombia where it is fully licensed in the country for the cultivation, production, domestic distribution, and international export of both THC and CBD medical cannabis. While this Latin American cannabis leader does not immediately stand out as a possible partner for Coca-Cola, it is worth noting that Vicente Fox joined the Khiron board of directors back in July. For those who are not familiar with Mr. Fox, he was the Chief Executive Officer of Coca Cola Latin America prior to becoming the 55th President of Mexico. At the very least, that could be Khiron’s foot in the door.
Although not the most likely cannabis company to be picked due to its operations in the United States, Tinley Beverage Co. manufactures a line of liquor-inspired, alcohol-free, cannabis-infused beverages for use in California. Tinley also manufactures the “Hemplify” and “Tinley Tonics” line of products, which are available in 100+ retail locations in California and online throughout the United States.
Coca-Cola’s Potential Private Pot Partners
While cannabis investors love to speculate as to which of their portfolio’s holdings might be chosen as a partner in these sorts of scenarios, there is always a high chance that Coca-Cola would do a deal with a privately held company.
Here’s a handful of educated guesses for cannabis-related private companies that Coca-Cola could have in their crosshairs, and why (in alphabetical order):
HighTimes Holding Corp.
Similarly to Khiron Life Sciences Corp., Vicente Fox is on the board of HighTimes. While the company’s cornerstone holding is the popular marijuana magazine High Times, the company’s investor landing page specifically says that the company is expanding their brand through licensing. This would be a pretty outlandish partner for Coca-Cola, although a few days ago I would’ve said it was outlandish to think that Coca-Cola would be entering the cannabis industry any time soon. Even if the High Times Reg. A offering has only raised $5 million out of the $50 million it was hoping for due to a “balance sheet mired in debt,” a partnership between the most recognized beverage company in the world and the most recognized cannabis brand in the world would be epic to say the least.
Province Brands of Canada
Province Brands is a pre-public, Toronto-based, highly disruptive premium adult beverage company founded by veteran entrepreneurs with extensive experience in the premium alcohol and legal medical and recreational cannabis industries. Province Brands’ patent-pending process has created the world’s first beers brewed from cannabis while utilizing parts of the cannabis plant which would otherwise have no commercial value. Alcohol-free yet intoxicating, and with a dose-response curve similar to that of alcohol, Province Brands’ cannabis-powered beers and spirits will challenge the alcohol industry by offering a safer and healthier alternative that is also gluten free and low in calories and sugar.
Coca-Cola’s Long-Shot Pot Partners
To provide even more guesses (and therefore minimize my chances of being wrong), I also figured it is worth including a few moon-shots. I don’t know that Coca-Cola would seriously consider a deal with any of the following companies, but if it does you heard it here first.
David Giardino, the recently appointed Chief Operating Officer of Namaste Technologies began his career at Coca-Cola Enterprises managing a group of analysts responsible for driving warehouse, distribution, and delivery efficiencies. That being said, I think it is safe to assume that the alleged illegal practices that took place at a recent Namaste shareholder party would scare off Coca-Cola the same way it scared off Tilray, Inc. (NASDAQ:TLRY).
Rocky Mountain High offers a hemp-infused drink line that includes energy drinks, lemonade, and more. Rocky Mountain’s energy drink is pitched as a healthier alternative to commonly known brands like Red Bull. Containing hemp, ginseng, guarana, and other natural ingredients, these beverages taste great (we’ve tried them), and come in a variety of flavors. As with Hemplify’s products, Rocky Mountain High’s drinks are available across the country given that they’re infused with hemp rather than cannabis. With a market capitalization of less than $20 million though, Rock Mountain High may be too small for Coca-Cola to take seriously.
To be clear, the cannabis companies mentioned above are mere guesses as to who Coca-Cola’s potential pot partner may be. We’ll be monitoring the situation closely to provide readers with any updates as they become available. If anyone from Coca-Cola’s internal cannabis team is reading this, I’d be happy to help you narrow down the list 😜.
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