Soft drink giant Coca-Cola is making marijuana news again, this time saying that it has absolutely no intention of getting involved with the cannabis industry – at least not at this time. Rumors that the company was on the verge of a major development deal with the Canadian pot firm Aurora cannabis to create a line of CBD-infused beverages have been circulating ever since sources told Bloomberg last month that the two companies were in “serious talks” about working together.
However, Coke CEO James Quincey has denounced the gossip, according to the latest Wall Street transcripts.
On Tuesday, during a call to investors, Quincey said, “we don’t have any plans at this stage to get into the space” when asked by Cowen & Company analyst Vivien Azer about whether the company was planning to create a CBD product. “So that’s kind of where we are,” he added, leaving the subject flat.
There is so much speculation happening right now concerning the cannabis-infused beverages market, it can be difficult for investors to determine what is real and what is just wishful thinking. Ever since Constellation Brands and Molson Coors officially signed deals to produce pot beverages for the Canadian cannabis market, it almost seems that every other week another unconfirmed report from an anonymous source is being published suggesting the possibility of another major beverage company joining in. But so far, there has been a lot of talk and not much action. No definitive contacts have been signed by any other major beverage firms other than the two mentioned above.
In the case of Coca-Cola, the company essentially told everyone last month not to get too excited about seeing a Coke of cannabis anytime soon. “We have no interest in marijuana or cannabis,” the company said in a statement released in September. “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. The space is evolving quickly. No decisions have been made at this time.”
What is true is that soft drink companies are struggling to find new revenue streams to attract health-conscious consumers who have given up sugary beverages. For the past couple of decades, soda sales have dropped more than 25 percent since their heyday between the 1960s and 1990s, reports the New York Times. This decline is expected to continue as more people adopt a healthy lifestyle.
Considering the popularity of CBD, which is often touted for its therapeutic benefits, this sector should be a no-brainer for soda companies. But they are likely holding out, according to financial experts, because they can. Simply put: Soda companies do not have to be nearly as competitive in the cannabis space as those selling booze.
“Unlike the beer, wine and spirits sector, cannabis or CBD-infused beverages are not an imminent threat to non-alcoholic beverages sales, so it makes sense that a large, multinational, non-alcoholic beverage manufacturer like Coca-Cola would to take a wait-and-see approach,” Jason Wilson, president of Budding Equity Asset Management and a partner in the ETFMG Alternative Harvest ETF, told Market Watch. “In contrast, the sales of alcoholic beverage producers and distributors are under more immediate threat of cannibalization, which is why we have seen companies like Constellation Brands and Molson Coors… enter the cannabis space.”