Everybody else is doing it. 

By Tim Nelson
August 07, 2019

It’s no secret that the marijuana business is booming in the US now that recreational sales are legal on both coasts. That’s led big beverage brands like AB Inbev and Constellation Brands to cautiously explore the cannabusiness space in an effort to seize the opportunity. The latest such company to dip its toes into the world of weed is simultaneously surprising and yet perfectly logical at the same time. 

The Wall Street Journal reports that AriZona Beverage Co., famous for its dollar cans of iced tea, Arnold Palmers and the like, is hoping to make the leap from convenience stores to dispensaries. That will come via a licensing deal with Dixie Brands Inc., a cannabusiness known for selling weed vaporizers, edibles, and—naturally—drinks. If the partnership is approved by Dixie’s board, AriZona would be offered the right to buy up to a $10 million stake in the Denver-based weed company. 

At this stage, exact product details or partnership plans are still being developed. Company officials who spoke with the Journal suggest that AriZona co-branded vape pens and weed gummies would lead the way, before getting into a more familiar territory: THC-laced beverages. Things have yet to pass the speculative stages yet, but it sounds like iced tea and lemonade are (obviously) on the table, and seltzer, soda, and coffee (not all of which are currently offered by AriZona) could be in the mix as well. 

For AriZona, the decision to enter the rapidly-growing recreational marijuana space comes at a time when the company is looking to shake things up. In terms of sales volume, their share in the iced tea market fell from 23.4% to 16.2% from 2013 to 2018. 

The hope among executives is that this attempt to diversify their business could pay dividends: “You’ve got to be willing to try things,” Arizona’s chairman and CEO Don Vultaggio said of the move. “The upside is we’re one of the first ones in an emerging space.”

While AriZona is far from the first established consumer food or drink brand to kick the proverbial tires of the cannabis market, AriZona can afford to act more quickly. As marijuana is only legal at the state level, larger businesses would likely encounter issues with production (as product can’t be transported across state lines), not to mention that any companies selling marijuana cannot appear on major stock exchanges. 

As a privately-held company, AriZona can avoid some—but certainly not all—of those challenges, while taking the opposite approach of their competitors. Molson Coors, Constellation Brands and other publicly traded players have concluded that they must test in Canada (where Marijuana is legal at the federal level) before any potential rollout in the US. On the other hand, AriZona can work within the confines of certain states, likely Colorado given their partnership with Dixie. This could have the effect of giving them a first-mover advantage should the US federal government ever legalize marijuana nationwide. 

For now, any product launch timeline is unknown. But given that marijuana and AriZona drinks could arguably be considered complementary dating back to the time before weed was legal anywhere, there’s reason to believe these efforts won’t simply go up in smoke. 

 

 

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