Is 2020 The Year Of THC Drinks?

Beverages may hold the most power to captivate new users to the cannabis industry, due to their "allure of 'experience and ceremony'" and smoke-free nature, Cantor Fitzgerald analyst Pablo Zuanic said in a note last week. 

On the other hand, both THC- and CBD-infused beverages are still niche products mostly sold via dispensaries or online, the analyst said. 

Canada A Test Market For THC-, CBD-Infused Drinks

Until cannabis becomes federally legal, big brewers will probably avoid entering the THC space in the U.S., and CDB drinks won't be popular until the FDA allows them, Zuanic said in a Dec. 23 note. (See his track record here.)

"Thus, for now, companies like Coca-Cola, via its stake in Iris Nova (Dirty Lemon), and New Age Beverages (Bob Marley drinks) have either pulled out or delayed CBD-infused beverage launches.”

Canada is acting as a fantastic test market for both THC- and CBD- infused beverages, the analyst said. 

Beverage Companies Await Legalization

Big cannabis companies like Tilray Inc TLRY and Hexo Corp HEXO will only offer CBD-infused drinks in the beginning, according to Cantor Fitzgerald. 

Canopy Growth Corp CGC will be the only cannabis company in Canada to distribute THC-infused beverages in January, Zuanic said. 

"But if Canopy’s THC drinks are successful and disruptive, we would expect the global brewers to accelerate development (like BUD and TAP) and others to enter the market."

If adult-use cannabis is legalized across countries, global beverage companies, especially in the alcohol space, will have to enter the industry, he said. 

“With STZ being landlocked, if it indeed is able to break the code for THC-infused drinks, then it could become an acquisition target. Net, on many fronts, 2020 could be rather interesting.”

Cantor has an Underweight rating on HEXO stock with a CA$2.20 ($1.69) price target.

Cantor has a Neutral rating on Tilray with a $26 price target.

Cantor has a Neutral rating on Canopy Growth with a CA$27 price target.

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