Why Coca-Cola Is Exploring Cannabis (And Other Brands Should Too)

Jack and Coke? How about cannabis and Coke?

Coca-Cola is in talks with Canadian company Aurora Cannabis to create marijuana-infused beverages. The drinks would include the non-psychoactive ingredient cannabidiol (CBD), which treats pain without the high. Some experts believe CBD produces medicinal benefits, ranging from improving sleep to treating anxiety.

Several beverage giants - including Coors, Corona and Guinness - have started discussions with marijuana producers about potential partnerships. Heineken’s craft beer line, Lagunitas, recently launched Hi-Fi Hops, which is infused with marijuana.

The legality of cannabis-derived CBD varies by state. Currently, CBD beverages are typically sold in stores that specialise in CBD products; however, experts believe growth will come from traditional retailers as marijuana legalisation and CBD acceptance becomes more widespread.

In 2018, California juice bar chain Project Juice beat beverage manufacturers to the punch by offering CBD oil as an ingredient in juice or smoothies. However, Coca-Cola would become the first large manufacturer to produce nonalcoholic cannabis drinks.

“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,” Coca-Cola said in a statement to BNN Bloomberg. “The space is evolving quickly.”

Trend: beverages with benefits

Coke believes that cannabis-infused drinks will tap into the rising interest in ingredients with functional benefits. The CBD drink would provide benefits like easing inflammation, pain and cramping.

Eighty percent of Americans say they use food to help with medical conditions and wellness, according to Nielsen. More consumers are seeking out products with adaptogenic ingredients, such as ginseng, turmeric and aloe vera.

According to research by Mintel, CBD juice may appeal to a wide range of consumers who want a drink that helps them relax but do not want the psychoactive effects of tetrahydrocannabinol (THC). Experts believe that the properties of CBD could also work as a sports recovery drink, according to Reuters.

Trend: the post-soda world

Coke’s interest in new products is also being driven by the decline in soda consumption. More consumers are aware of the negative consequence of diets high in sugar, which include many soda products. (For example, one 12-ounce can of Coke contains 39 grams of sugar.)

Almost half (40%) of shoppers already have decreased their sugar intake during the past two years, and a growing number (32%) have increased their negative perception of sugar from the previous year, according to Nielsen research. Other popular lifestyle diets — such as paleo, keto and Whole30 — are growing and steering consumers away from sugar.

The soda industry has faced negative publicity as some US cities, including Philadelphia, have passed new taxes or bans on large soda containers to help curb consumption.

In the past decade, Coke has aggressively diversified into non-soda categories, including juices, energy drinks and bottled water. In September 2018, Coca-Cola made the largest brand acquisition in its history by paying $5.1 billion for British coffee shop chain Costa.

Trend: pot planet

In the US, recreational marijuana is currently legal in nine states and Washington, DC. US sales of recreational cannabis is estimated to reach $6.7 billion in 2018, according to Mintel research. More than 20 percent of Americans now live in states where recreational weed is legal. Cannabis has moved from a “new” industry to consumer specialisation in record time.

Articles in The New Yorker highlight foodies as the target audience for pot. Edibles have been undergoing a particularly marked revolution: Dispensaries in Boulder, Colorado, sell everything from cannabis-infused desserts to candy, while also offering breath sprays, spritzers and savoury foods, from bacon to smoked salmon. In Los Angeles, thrill-seekers are paying as much as $500 a head to have a cannabis chef cater multi-course meals, pairing different cannabis strains with their culinary complements. Other restaurants in the city, such as Altered Plates, offer an equivalent multi-course spread infused with CBD.

“I naturally like exploring taste beyond the cultural palate that people are used to and get really excited by pungent, ‘dirty,’ bitter flavors,” said Gerardo Gonzalez, chef at Lalito. “Maybe that's the new umami?”

Laurie Wolf, food writer and author of several CBD-centric cookbooks sees the industry at a crossroads. Down one path is a future that resembles the wine business or the farm-to-table movement: Boutique pot growers turning out harvests that reflect local climates and customs. Down the other path is Big Weed and industrial farming.

Canada is more likely than the US to see the widespread rise of marijuana food & beverage products. The recreational use of marijuana will become legal across Canada in October 2018. Business experts believe that manufacturers like Coca-Cola will use Canada as a testing ground.

“Entry into a legalised Canadian market allows them to develop and build a brand while not breaking any laws,” marijuana investor Bruce Campbell told Reuters.

What’s next: marketing cannabis products

There are significant challenges to marketing marijuana products in the United States. While acceptance of marijuana is growing, only 61 percent of Americans said the use of marijuana should be legalised, according to a Pew Research Center survey in 2018. Brands need to consider the impact of aligning with a plant with historical baggage that is not yet legal in many states.

Some brands choose to invest their advertising in countering consumers’ assumptions. MedMen, the largest marijuana retailer in Southern California, spent over $2 million dollars on its 'Faces' and 'Forget Stoner' campaigns, designed to bust the stereotypes surrounding cannabis and cannabis users. The campaigns showcase a breadth of modern marijuana customers, such as police officers and the elderly.

Another challenge is the limited number of platforms that allow the promotion of marijuana products. Facebook, Instagram and Google have cracked down on marijuana brands running advertising - even in states where pot is legal - according to Adweek. Print ads are an option - for a price.

“You have a handful of websites. You have print ads, which are abnormally popular. Dispensaries spend more on a cost-per-impression basis than a Super Bowl commercial to get into a local print publication,” Baker Technologies CEO and co-founder Joel Milton told Adweek. “We put iPads in-store to capture customer information, (like) cell phone number, contact info and product preferences.”

In states where marijuana is legal, the rapid spread of products has made it difficult to create brand loyalty. Consumers are gravitating toward niche interests, similar to what has happened in the craft beer industry.