An Attempt to Declaw White Claw2020 was a sort of breakout year for cannabis. Dispensaries were deemed "essential businesses" during the pandemic. This sparked new highs in sales and shares. On top of that, five U.S. states expanded or launched legal markets last year. And those numbers will keep expanding this year as the "green revolution" gains ground. But the pandemic did force some innovations in the sector to take a back seat... namely cannabis-infused beverages. Cannabis-infused beverages are in competition with traditional alcohol beverages, including hard seltzers - like White Claw and Truly. The upside here is that cannabis isn't a depressant, like alcohol, and responsible doses per drink are designed to mimic the strength of a glass of wine or light beer. With the pandemic subsiding, these are now poised to be the hottest trend of this summer. Already, cannabis beverages are doubling the growth we're seeing from almost every other product category. In the first quarter, cannabis beverage sales in California, Colorado, Nevada, Oregon and Washington saw the highest growth at 68.4% year over year. And this is likely just the beginning. There Are Nugs in My SudsThe trend of companies launching cannabis-infused beverages is gaining steam. In an effort to snag a first-mover advantage, Pabst Labs launched its Pabst Blue Ribbon cannabis-infused seltzer in California. Plus, one of the largest acquisitions in the industry in 2020 was all about beverages. Canadian cannabis giant Aphria - now Tilray (Nasdaq: TLRY) - bought one of the largest independent craft brewers in the U.S., SweetWater Brewing Company, for $300 million last November. The brewer already offers a 420 Strain G13 IPA, which is its second-bestselling beer. And just in time for the cannabis holiday 4/20, Green Thumb Industries (OTC: GTBIF) announced the launch of three new flavors of Cann, a cannabis-infused beverage brand. Cann beverages contain 4 milligrams of CBD and 2 milligrams of THC each, which is an ideal amount for even first-time consumers of the products. Cann and Green Thumb are partnering to launch beverages in Illinois and in New Jersey. And then they plan to expand to additional markets. Of course, the granddaddy of all cannabis-infused beverage deals was when massive alcohol giant Constellation Brands (NYSE: STZ) invested $4 billion in Canopy Growth Corp. (Nasdaq: CGC). Canopy and its U.S. counterpart, Acreage Holdings (OTC: ACRHF), are launching THC-infused beverages in California and Illinois this summer. Infused beverages are seen as a game changer for the U.S. market. And the segment offers the highest growth potential not only in 2021 but in the years ahead. Now, cannabis-infused beverages are still in the early stages. For example, in the first quarter of 2021, sales for this category totaled $31.3 million. That's a fraction of the $1.1 billion the dried flower brought in. But this is one of the product launches we've been waiting a couple of years for. Not everyone is going to smoke a joint or ingest an edible. But beverages are designed to go toe-to-toe with traditional beer and other alcohol with responsible dosage amounts. So this is an entirely different story. More importantly, this is cannabis's first inroad to disrupt another sector completely. And it's the blockbuster trend - which likely got a boost this Memorial Day weekend - all investors should be watching this summer. Here's to high returns, Matthew |
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