February 10th, 2019
There’s no question that cannabidiol-incused (CBD) beverages are becoming a hot area for investment. Last September, multiple sources told BNN Bloomberg that Coca-Cola Co. (NYSE: KO) was in “serious talks” with Aurora Cannabis Inc. (NYSE: ACB) to develop CBD-infused beverages. The beverage giant declined to comment on the story, but noted that it was closely watching the growth of CBD as an ingredient in functional wellness beverages.
Until recently, most CBD beverage companies were brand new startups with little brand recognition and only local distribution. The 2018 U.S. Farm Bill cleared the way for hemp production and removed cannabidiol (CBD) from Schedule I of the Controlled Substances Act, but many large companies continue to wait on the sidelines for clearer guidance. These dynamics have opened the door to mid-sized operations to fill in the gap.
The Alkaline Water Co. (NASDAQ and TSX-V: WTER), a leading producer of premium bottled alkaline drinking water under its Alkaline88® brand, recently expanded into the CBD beverage space with the launch of its A88 Infused Beverage Division. The company plans on launching its CBD-infused Alkaline88® water products under the SOOTHE™ brand during the first quarter of this year, leveraging its distribution network of 47,500 retailers across 50 states.
Building a Category Leader
Most CBD beverage companies are brand new startups with no brand history. At the same time, many consumers are already hesitant about purchasing CBD-infused products without the worry of going through an untrusted source. These dynamics have created an opportunity for mid-sized companies—especially those in the functional beverage space—that already have an established brand that already instills trust among a larger customer segment.
Alkaline Water has built a leading functional water brand over the past seven years. During its fiscal second quarter, the company generated more than $8.6 million in revenue, which was a 78 percent increase over the year ago period. These substantial growth rates point to a growing distribution footprint and strong adoption among its target customer segment—health conscious customers looking for healthier beverage options.
When building out its CBD business, the company partnered with Infusion Biosciences Inc. to combine its state-of-the-art Electrochemically Activated Water system with IBS’ Aqueous Phytorecovery Process technology to infuse water-soluble cannabinoids without losing any chemicals or additives. The merger of IBS’ science and technology with the power and integrity of the Alkaline88® brand could create a market leading approach.
Existing Distribution Footprint
Another issue facing many CBD beverage companies is the lack of distribution channels—particularly in traditional retail. Many startups have connections with dispensaries and other small businesses targeting cannabis consumers, but it’s much harder to place products in mass retailers or health and wellness channels. These companies demand much more rigorous production and quality control that startups simply lack.
Alkaline Water has already become the #1 bulk selling alkaline water brand in the United States. Alkaline88® is available in over 47,500 retailers in all 50 states, including national retailers like Safeway, Albertsons, Walmart, Kroger, CVS, and other top regional and local supermarket chains. These connections could be invaluable when building out immediate distribution for its CBD water products across the country.
Management continues to aggressively expand distribution into new areas. Earlier this month, the company announced a Retail Services Agreement with E.A. Berg Associates to expand its retail channels in the convenience store sector. The agreement entails 22 E.A. Berg retail sales representatives selling Alkaline88® across convenience stores in California and Texas. These agreements could bring thousands of convenience stores into the fold.
The Alkaline Water Co. (NASDAQ and TSX-V: WTER) is well positioned to become a category leader in the CBD beverage space with its strong brand reputation and existing distribution channels. Investors may want to pay close attention to these trends given the interest among larger beverage giants, such as Coca-Cola, in the market, as well as the potential to continue expanding revenue to build long-term shareholder value.
For more information, visit the company’s website at www.thealkalinewaterco.com.
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About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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