Cannabis infused beverages is an area of major interest for companies, investors and consumers, and is a vertical that we have been focused on.

Although this has been area of interest for companies, there are a limited number of cannabis infused beverages that are on the market and this is a trend that our readers should be aware of. The lack of products on the market implies that there is a significant opportunity for companies with an MVP (minimum viable product) ready to go to market.

When it comes to the cannabis beverage opportunity, Canopy Growth Corporation (WEED.TO) (CGC) and HEXO Corporation (HEXO.TO) (HEXO) are two of the first companies to come to mind. HYTN is another cannabis beverage company that we have recently highlighted and is an opportunity that our readers should be aware of. These operators are highly levered to the cannabis beverage market and we want to provide updates on the opportunities.

When will Canopy Growth Bring a Cannabis Beverage to Market?

Canopy Growth Corporation is one of the best-known cannabis companies and is an operator that we have been following since 2014. The last few years have been transformational for the business and we are impressed with the way the story has advanced.

One of the most exciting aspects of the story is related to the relationship that it has with Constellation Brands. In 2018, the corona beer maker invested approx. $4 billion in Canopy Growth and this is a relationship that served as a catalyst for the entire cannabis industry. Although we would expect the cannabis beverage market to be low hanging fruit for Canopy Growth, the company has not been able to bring a product to market and this has come as a surprise.

During the last year, Canopy Growth has been under considerable pressure and this has also had an impact on Constellation. The Corona beer maker recently made a number of management changes at Canopy Growth and we find the changes to be significant. Going forward, we expect the Canadian cannabis producer to bring new products to market and believe that it will be a beneficiary of the increased interest in cannabis beverage products.

HEXO has Not Been Able to Live up to Expectations

Similar to Canopy Growth, HEXO Corporation was one of the few companies to form a relationship with a leading alcohol conglomerate. The company formed a relationship with Molson Coors and this is a partnership that has not lived up to expectations. Unlike Canopy Growth’s agreement with Constellation Brands, HEXO’s agreement with Molson Coors did not include an investment and this represented a key differentiator between the companies.

Another way that HEXO has been similar to Canopy Growth is related to its inability to bring a cannabis beverage product to market. The Canadian cannabis producer has been having a tough time and recently had to lay off 10% of its staff. HEXO has been shutting down facilities and is working to become profitable.

We do not expect the cannabis beverage market to benefit HEXO in the near future and believe that it missed out on a substantial opportunity. Since inception, there has seemed to be a major disconnect between HEXO’s management team and the market. This worried us from the beginning, and we continue to be cautiously optimistic with the opportunity.

HYTN is a Cannabis Beverage Growth Story in the Making

Earlier this month, we highlighted HYTN Brands as a leading play on the Canadian cannabis beverage market. Unlike Canopy Growth and HEXO, HYTN has been able to execute on previously announced initiatives and is actually selling cannabis beverages in Canada.

During the last year, we have seen a massive increase in the amount of consumer demand for spiked sparkling water and companies like Sam Adams Beer Corporation have reported strong growth because of the vertical. HYTN is focused on a similar opportunity and has already launched a line cannabis-infused sparkling water beverage.

Through a strategic partnership with Zenabis Global Inc. (TSX: ZENA), HYTN has been able to significantly advance its fundamental story and we are bullish on the amount of value that can be generated through the relationship. The goal of the partnership is to launch cannabis-infused sparkling water beverages under the HYTN brand, and this is an opportunity that we expect to be a substantial value driver for both businesses.

According to the agreement, Zenabis will supply the requisite cannabis extracts and provide coast to coast distribution for the operation. The combination of HYTN’s beverage manufacturing expertise with Zenabis’ high-quality cannabis extracts allows for the companies to provide consumers with high-quality cannabis-infused beverages. The first shipment of the initial four flavors of the cannabis-infused sparkling water beverages is expected in the second quarter and we will monitor how the companies are able to execute on this. We are bullish on the amount of value that can be created between the businesses and believe that HYTN is in the early innings of a major growth cycle

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