BIG BRANDS CAPITALIZE ON CANNABIS

Ever thought about ordering a cannabis-infused beer? Or going into a store to buy a cannabis face mask from Estee Lauder? The legalization of cannabis has created limitless opportunity for big brands looking to cash out. With cannabis sales predicted to skyrocket from $6 billion in 2016 to $75 billion within the next 12 years, big brands from all industries—tech to cosmetics—are dipping their toes in the cannabis market.

 Here are some of the biggest brands entering the cannabis market. 

Origins Cosmetics

Origins, a cosmetic line owned by Estee Lauder (NYSE: EL), plans to hold their stake in the burgeoning cannabis beauty market with the launch of an organic green face mask made from cannabis Sativa oil from hemp.

While this may seem like a novel idea, using cannabis in beauty products is not new to the cannabis industry. The key ingredient in these beauty products, CBD, is known to be topically an anti-inflammatory, which can help with skin issues such as acne, eczema, psoriasis, and rosacea. And because it is entirely non-psychotropic it offers a relaxing effect to the skin without the “stoned” effect. For years, small cosmetic brands and DIYers have been infusing CBD into skin products. And within the last two years, big brands like Origins have caught on to the trend.

However, don’t go rushing to the grocery shelf for your face mask. Origin’s green face mask is made with hemp seed oil and according to Chris Bunka, CEO of Lexaria Bioscience, “there is very little cannabidiol in seed oil; almost none. This is why seed oil is allowable to sell in grocery stores as cooking oil.” In fact, it’s still difficult to legally access and monetize the use of CBD on a significant scale. This is because CBD is mainly found in the flower, not the hemp. Hence, the quality and efficacy of Origins’ facemask are questionable.

Hewlett-Packard

It seems unlikely that a tech company would find opportunity in the cannabis industry.  But think twice! This year Hewlett Packard (NYSE: HPE) sold hardware to Flow Hub, a software firm launching a cash register specifically designed for the cannabis industry. The software will equip dispensaries with the basics of business management and transaction processing tools. But will also assist in creating a compliance solution to the changing regulatory and reporting rules that challenge many owners in the cannabis industry. 

So why is HP getting into the green rush at a time when there is still federal opposition and when many banks still refuse to open accounts to those in the industry?

The risk could be worth the reward. According to Business Insider Flow Hub’s point-of-sales system could change the way retailers sell cannabis, becoming the leading inventory management tool for dispensaries.

With beer consumption on the decline, big beer companies, Constellation Brands (NYSE: STZ) and Heineken, are creating cannabis-infused beer to carry on the legacy. According to WSJ, in 2006, 65% of alcohol consumed by 21-to 27-year olds was beer, which dropped to 43% by 2016. Meanwhile, cannabis is increasing popularity amongst this same demographic, which is why Constellation and Heineken are switching gears to THC & CBD infused drinks.

Constellation Brands, the makers of Modelo and Corona, have high stakes in bringing cannabis-infused drinks to the marketplace. In 2017, Constellations took a 10 percent stake in Canopy to help create nonalcoholic cannabis-infused drinks. And this year Constellation announced that it had invested $4 billion in Canopy Growth, showing really how far Constellation is willing to bet on cannabis.

Heineken-owned Lagunitas has just introduced the innovative “IPA inspired, THC-infused sparkling water”. Leading the way, they are the first company to introduce psychoactive drinks to the US marketplace. The two versions of the drink can be found in California dispensaries—one with 10 mg of THC and another with 5 mg of THC.

CEO Maria Stipp suggests that Lagunitas is moving away from their brewing roots to greener pastures, “being a part of a no-calorie beverage infused with cannabis seemed like a perfect next step in our product innovation, and a natural way to marry our past with our future.” 

Pepsi and Coca-Cola

 Pepsi (NSDQ: PEP), Chief Financial Officer, Hugh Johnston, of the soda and snacks giant, acknowledged the company’s interest in cannabis during an interview with CNBC.

“We will look at it very critically,” Johnston said of cannabis on an interview with CNBC.

“But I am not prepared to share any plans that we may have in the space right now.”

Johnston noted that cannabis is still illegal under federal law throughout the United States, even though some states have legalized it. But he said the company would “turn over every stone to look for growth.” Johnston’s comments come two weeks after PepsiCo’s archrival Coca-Cola (NYSE: KO) said it was studying “wellness beverages” that could include cannabidiol, or CBD, a non-psychoactive component in cannabis that is sold in a growing variety of consumer packaged goods.  Cannabis-infused drinks have been seen as a potential growth area for soda often criticized by sugar and additive levels.

What’s Next?

Big brands are anticipating large growth in the cannabis market and, thus, dipping their toes where they can. The large investments in product innovation show us the potential of the green revolution. And the commitment these brands have to diverge from their roots is just a glimpse of what is to come. Who knows what’s next?

Grown Rogue’s seed to experience model aligns well with these consumer brand giants. As Grown Rogue develops partnerships with leaders in edibles like chocolates, beverages, and fitness snacks, keep track of our public listing announcements by including your email here: www.grownrogue.com/investor