Your favorite beer may not be what it once was. It’s now a division of a worldwide beverage corporation. “Bud” of St Louis is now Anheuser-Busch InBev NV (AB InBev) of Anderlecht Belgium. Coors of Golden Colorado is now Molson Coors EH. In a series of complicated mergers and acquisitions their brands now include Coors, Molson, Miller Brewing and Sharps’s Brewery of Cornwall, U.K.
With fewer beer companies, how are global beverage brands doing? Fortune Magazine in a 2018 article had a storyline, “Big Brewers Take a Hit to the Gut as Americans Move Away from Beer.” By Q1 2018, AB InBev, Heineken and Molson Coors had all reported significant drops in beer volume in the U.S. According to The Wall Street Journal, AB InBev saw a 4.1% drop, Molson Coors a 3.8% drop and Heineken saw a “high-single-digit percentage” drop. Beer is not doing as well as it once did, especially among younger drinkers.
Global brands are attracted to the prospect of a new market and are making forays into the cannabis industry. Take a look:
- AriZona Beverages and Dixie Brands announced in August 2019 that they will partner on THC-infused drink production
- Constellation Brands, which owns the Corona and Modelo beers, made a cannabis play last year by acquiring a nearly 40% stake for $4 billion, in Canada’s largest cannabis producer Canopy Growth Corp.
- Heineken launched Hi-Fi Hops, which is available in medical marijuana dispensaries in California, through its American brand Lagunitas. The drink, which tastes like beer, contains THC, the psychoactive agent from cannabis.
- Molson Coors Brewing has partnered with Canada’s Hydropothecary brand. Both companies plan to develop non-alcoholic, cannabis-infused beverages for the Canadian market.
- AB InBev has joined with Tilray, a Canadian cannabis company. They will invest $50 million into researching alcohol-free beer with cannabis elements like THC or CBD.
- Atlanta based Coca-Cola is eyeing a possible entry into the cannabis industry by infusing cannabidiol/CBD into “functional wellness beverages around the world.”
Why are these giants of the beverage industry so interested in cannabis-based products? As beer sales slow, the growth of cannabis products has been explosive. According to the latest estimates from the Brightfield Group, the cannabis industry is expected to be worth $22 billion by 2022. Gaining even a fraction of that market could boost the bottom line for beverage makers, particularly in states where cannabis is legal.
Cannabis-infused beverages could also invigorate old products that might seem stale to millennials. According to Bloomberg, beer makers and beverage companies are worried about the “substitution affect” in which their customers exchange favorite drinks for a THC drink that provides them with a high — minus the calories.
Failing to sign up for the cannabis “high” can have a negative impact on business. After PepsiCo’s CFO told analysts at an earnings call that the company had no plans for cannabis, its shares took a hit. Cola-Cola took the opposite approach by announcing it was looking at the possibility of infusing CBD into wellness beverages. It seems cannabis has moved from the black market to the stock market and now appears to be on its way to the supermarket.
How will current cannabis brands fare once the big brands get in?
How will the original cannabis brands fare once the big guys get in? Think Snoop Dog, KIVA and Marley Natural? Can they hold market share? Let’s look at Hershey Co. How did they dominate for 125 years? They grew the cocoa beans in Latin America, owned the ships and railroads that brought the beans to Hershey, Pennsylvania, then produced the chocolate and packaged it in its iconic brown wrapper. Hershey is still at it today and that brown wrapper is still iconic.
Fast forward; Snoop Dogg promotes Leafs by Snoop in Canada. The packaging is also artfully designed. The brand has a solid following. But how will it fare against bigger players? Interestingly, Snoop launched the Leafs By Snoop brand through a smart partnership. He teamed with Canopy Growth Corp., one of Canada’s largest growers. The chain does not end there. Constellation Brands is now a 40% owner of Canopy Growth. So, Snoop Dogg may be in partnership with Constellation brands and therefore Corona and Modelo beers, now part of Constellation Brands. Not bad for a rapper!
How will world famous brands promote and package their cannabis products?
Brand marketers and packaging designers have some big questions to address. For instance, will Coke consumers feel comfortable buying products that can “make you high,” or will Coke focus entirely on the “wellness” factor? Somewhere in Coke’s Atlanta headquarters there are mock-ups of future bottles and packages. Will Coke go for a new product look or will their CBD-Infused product be sold in an iconic Coke bottle? One of the most recognized shapes in the world, it’s been described by noted designer, Raymond Loewy, as the “perfect liquid wrapper.” Will Coke be able to sing it from a mountaintop? All good questions.
The Miller 12-pack has a bold font that promotes Miller “High Life”. A Miller cannabis-infused beverage might just continue the tradition, or put a new spin on it. Heineken markets an “IPA-Inspired” zero-calorie/non-alcoholic hoppy sparkling water. The name Heineken does not appear on the splashy silver and purple-colored cans. The “sparkling water” comes in two versions; one that contains 5 or 10 milligrams of THC, and a 5 milligram non-intoxicating CBD option.
AB InBev has already announced that they will sell non-alcohol beverages containing THC and CBD through its subsidiary Labatt Breweries of Canada. Their partner Tilray will participate through its Canadian adult-use cannabis subsidiary High Park Company. Labatt’s Blue is a popular Canadian brand, and in the AB InBev announcement, a bottle of Labatt’s Blue is featured with the InBev and Tilray logos overlaying a large marijuana leaf.
Going forward all cannabis inspired beverages sold in the U.S. will have to conform to state regulations. For instance, Lagunitas Hi-Fi Hops is only sold in select dispensaries in California. Legacy brands, however, are making significant investments, and the will is strong. It’s only a matter of time. As new products are launched, most will happen in Canada based on their more lenient nationwide laws. Can it be long before Coke will be singing a new tune — “I’d like to buy the world a ...?”