December 18th, 2018
The United States Congress passed the 2018 Farm Bill, and while the measure awaits President Trump’s expected signature to become law, the bill’s hemp provisions represent a decisive show of bipartisan support for the hemp industry. As with any new law, there remains work to be done. The U.S. Department of Agriculture will establish a regulatory framework for hemp farming and commerce, and states will implement their own programs or adjust existing ones accordingly. The Food and Drug Administration will likely make clear its stance on hemp derivatives, like cannabidiol (CBD), as food additives. To this point, the FDA has not been actively suppressing CBD in food products, and it is hard to see why it would start now in the face of widespread legalization.
The upshot for companies operating, or planning to operate, in the hemp derivatives market is that commerce will become easier with interstate restrictions lifted and banks able to comfortably work with the industry. The companies with the best existing infrastructure may be in an advantageous position, already crouched at the line with a roadmap in place as the federal government fires off the starting gun. The Alkaline Water Company (NASDAQ: WTER) (TSX-V: WTER) looks like one of those companies, with extensive distribution networks throughout the U.S., plans to enter the Canadian and Chinese markets in early 2019, consistently high earnings growth, and recent listing on the NASDAQ Capital Market. With the framework in place, Alkaline Water is ready to introduce truly water-soluble CBD to its already successful product lines.
Existing Beverage Sales Network
WTER’s leading brand, Alkaline88®, is the #1 selling bulk alkaline water in the U.S., distributed through retail chains including Walmart, Safeway/Albertsons, CVS, and Kroger. Current U.S. distribution reaches over 50,000 stores. The company utilizes co-packing facilities across the country, making nationwide distribution efficient and allowing the company to deploy capital in product and marketing expansion efforts rather than investing in its own production equipment and facilities.
The strategy has been working, as Alkaline Water has been growing its revenue in the explosive functional water and beverages sector. Its most recent quarterly report, for Q2 of its Fiscal Year 2019, showed a 78% increase over the same quarter the year prior with sales totalling $8.6 million. Alkaline Water is targeting revenue in the $40 million range for its FY2019, doubling the FY2018 number of about $20 million. These numbers are based on Alkaline88® sales, and do not reflect the company’s recent forays into infused beverages like CBD and vitamin water.
Alkaline Water, it should be mentioned, recently uplisted to the NASDAQ. Already listed on the Venture exchange in Canada, WTER now operates on a higher tier of stock exchanges than most potential competitors in the CBD beverages space. Combined with its extensive distribution network, established branding, and significant revenue growth, Alkaline Water appears to be in a favorable position as the U.S. opens up its hemp-derived beverages market.
Water Soluble CBD Offerings
Alkaline Water has an agreement in place with Infusion Biosciences to leverage that company’s revolutionary water soluble cannabinoid technology. Cannabinoids are generally soluble in fats but hydrophobic, meaning that CBD and other cannabinoids have to be encapsulated or nano-ized in some way in order to be delivered in a water-based formula. Infusion has found a way to truly dissolve cannabinoids directly in water, resulting in products with uniform distribution of CBD throughout the drink. The technology also provides for a more rapid and uniform onset and offset of the effects of CBD or other cannabinoids than oil-based delivery techniques.
Alkaline Water plans to start distribution of its CBD-infused water, branded SOOTHE™, in early 2019. Starting with flavored, CBD-infused versions of [email protected] as well as a line of sparkling hemp-extract waters, the company will distribute and expand product offerings as state and federal regulations allow.
Trends Point to the Future
According to Beverage Daily, bottled water is the most successful beverage in the U.S. in terms of both revenue and volume. Refreshment beverages like value-added water, energy drinks, and bottled water have outperformed traditional beverages and alcohol over the last several years. Consumers are choosing low-calorie options while also looking to functional beverages like probiotics, CBD and kombucha to potentially boost health.
Alkaline Water is operating squarely in the middle of these product trends. With its national distribution and rapidly growing sales of Alkaline88® leading the way, the company’s near-term launch of CBD beverages bodes well for its accelerated growth over the coming quarters.
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About Robin Lefferts
MJShareholders.com is the largest dedicated financial network and leading corporate communications firm serving the legal cannabis industry. Our network aims to connect public marijuana companies with these focused cannabis audiences across the US and Canada that are critical for growth: Short and long term cannabis investors Active funding sources Mainstream media Business leaders Cannabis consumers