Cannabis-laced beer and dog treats excite big firms


A cannabis plant

Most growth is expected in Canada, the US, western Europe and parts of South America.

“Although the push for legalisation so far is less pronounced in western Europe and South America – where only Uruguay has legalised it – Canada legalised cannabis in certain forms in October 2018 and will also legalise edible cannabis,” the report said.

All but three US states have “okayed some form of medical cannabis use”, it added.

But for legal cannabis products to reach their full potential, consumers will have to “shy away from illicit products”.

The report estimates that the growth in legal cannabis will outpace other consumer goods sectors, such as packaged food, soft drinks, tobacco and alcohol in the coming years.

For instance, it says that in the cigarette sector – where Altria paid $1.8bn for a 45% stake in Cronos Group, a Canadian cannabis company – there could be expansion.

Sales of traditional cigarettes are expected to fall in the US by up to 4.5% annually as the new generation of products, such as e-cigarettes, becomes more popular.

While these products may be the target for growth for cigarette companies initially, the report expects more of a focus on products from the cannabis family.

In anticipation of changes in the beer and spirits market, Constellation Brands has taken a stake in Canopy, another Canadian cannabis producer, which S&P’s analysts say will provide growth opportunities for the company as beer and spirits sales slow.

Lawn and garden company Scotts Miracle Grow has invested $1bn buying companies that help users grow plants with little soil. “While hydroponics products are not solely dedicated to growing cannabis, we believe this is the primary purpose,” the S&P analysts say.

The also point to the revenue-sharing arrangement that Authentic Brands Group – owner of clothing company Aeropostale and Spyder ski brand – has with medical marijuana company Tilray to market consumer cannabis products.

“The early stages of wide cannabis use in consumer products is likely to produce many losers because of, to be blunt, the greed factor,” the report says.

“Cannabis is still in the start-up phase of the industry life-cycle, with growth, shakeout, maturity and eventual decline to follow,” it adds.

It gives the example of e-cigarettes where, they say, one of the first brands, blu, did not win because Juul developed a more appealing product.

Some companies are standing back at present, such as those in the soft drinks sector.

This is because they are finding scope for growth in areas such as flavoured and carbonated water and energy drinks.

The other issue at play is reputation risk. “Brand strength remains important to beverage giants like Coca-Cola and Pepsi and associating cannabis with a global brand could destroy brand equity if a negative social stigma were to attach to the core brands,” the report adds.

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June 2019