When you ask someone about the latest trends in the food and beverage industry, the mention of “cannabis” is likely to follow closely behind. Given the excitement surrounding this ingredient—Euromonitor predicts it will emerge as the next major functional component—it’s no surprise that Arizona Beverages is jumping into this arena. What sets them apart is their decision to license their name to Dixie for the production and distribution of THC-infused products in dispensaries located in states where cannabis is legal.
According to a study by Euromonitor, the primary market for THC and CBD-infused food products lies within the alcoholic beverage sector. Many breweries are now partnering with cannabis firms to introduce weed-infused brews across North America. For instance, in 2017, Constellation Brands, the producer of Corona beer, acquired nearly a 10% share in Canopy Growth Corporation, the largest publicly traded cannabis company globally, and increased this investment by $4 billion last year. Similarly, Molson Coors Brewing, which holds a controlling stake in HEXO (formerly known as Hydropothecary), is developing non-alcoholic, cannabis-infused beverages for Canada. In December, Tilray established a $100 million joint venture with AB InBev to create non-alcoholic drinks featuring CBD and THC.
Yet, Euromonitor has pointed out that soft drinks appear to be the next logical frontier for CBD expansion. Although Arizona iced tea isn’t classified as a soft drink, it is often marketed alongside them and is readily available at stores like Walgreens and Walmart. This suggests that if the collaboration proves successful, the trend could significantly enter the mainstream market. Associating cannabis with a non-alcoholic beverage is likely to be advantageous for both Dixie and Arizona as they venture into beverage development. A study by A.T. Kearney found that 30% of Americans are open to trying a cannabis-infused non-alcoholic drink, and the success of Keef sodas, available in California, Colorado, Arizona, Nevada, Michigan, and Puerto Rico, underscores the potential market demand.
Arizona Beverages is a privately held entity, free from shareholder pressures, which may grant it more flexibility in market experimentation. However, licensing its name could pose risks since the company won’t be involved in the production of the final products, merely having its name featured on the packaging. Despite not being accountable to investors, the company still needs to be profitable, which might explain the rationale behind the licensing agreement. Sales of Arizona iced tea have declined from 23.4% in 2013 to 16.2% last year, according to Euromonitor International and reported by The Wall Street Journal. While Arizona leads in sales volume in the U.S., it has been surpassed by Pure Leaf in terms of sales revenue for ready-to-drink teas.
Entering the cannabis market appears to be a sensible next step for a company seeking expansion. Currently valued at $150 billion, the global cannabis market is anticipated to grow to 77% of the total market by 2025, as per Euromonitor’s findings. With Congress increasingly discussing the legalization of cannabis, Arizona is not alone in its pursuit of green opportunities. Additionally, the potential links between cannabis and health benefits such as those offered by calcium citrate could further attract health-conscious consumers to these new products.