Shares of Aurora Cannabis (TSX:ACB) rallied on Monday (September 17) after a report indicated the company was the target partner for The Coca-Cola Company (NYSE:KO) for the development of wellness beverages infused with CBD.
The report from BNN Bloomberg indicated the partnership between Aurora and the beverage giant would seek to develop “beverages that will ease inflammation, pain and cramping.”
Unnamed sources said in the report the deal was “pretty advanced down the path” and would target the wellness market.
Stocks for Aurora closed Monday’s trading session with a whopping 16.86 percent increase in value from its previous closing price. ACB finished with a price per share of C$9.98.
Coca-Cola shares on the New York Stock Exchange also rose following the report. The share price for Coca-Cola raised to $46.32, representing a 0.72 percent hike.
During after hours trading, shares of the beverage company were up 0.32 percent on top of its closing price.
The massive beverage company behind popular sodas like Coke, Sprite and Dasani water counts with a US$197 billion market cap.
According to the report, representatives from Coca-Cola also met with Aphria (TSX:APH). However, conversations with the licensed producer (LP) didn’t advance much after.
Coca-Cola confirms interest in “non-psychoactive CBD”
After speculation ran rampant on Monday, Coca-Cola issued a statement in an attempt to clarify the rumors.
“We have no interest in marijuana or cannabis. Along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world. The space is evolving quickly. No decisions have been made at this time.”
Beverage companies seek potential in cannabis market
If confirmed, the move by Coca-Cola would continue a trend of established beverage companies seeking or obtaining entries into the emerging cannabis space.
Doug Waterson, CFO and portfolio manager with Faircourt Asset Management and manager of the Ninepoint UIT Alternative Health Fund told the Investing News Network (INN) a majority of the rally for Tilray was due to its leading position as the company set to win the partnership with Diageo.
Last year, Constellation Brands (NYSE:STZ) became the first alcohol producer to get involved with the public cannabis space directly following an investment deal into Canopy Growth (NYSE:CGC,TSX:WEED).
In August, that relationship showed its evolution as Constellation Brands re-upped in Canopy supplying the producer with a C$5 billion investment to help the company expand international opportunities.
“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space,” Rob Sands, CEO of Constellation Brands said.
The partnership between these two is also set to develop cannabis infused beverages.
Charles Taerk, president and CEO of Faircourt Asset Management, told INN the move from Constellation brought legitimacy to the cannabis space and made him ask himself which company was next for a partnership.
“[There is a] list of companies that we feel are well positioned, have capacity and don’t have a dance partner, so it’s potential,” Taerk said.
The other alcohol company to enter the cannabis space was Molson Coors Brewing (NYSE:TAP,TSX:TPX). The company formed a joint venture with cannabis Quebec-based LP HEXO (TSX:HEXO), formerly known as The Hydropothecary Corporation.
The new entity will also seek to develop non-alcoholic beverages infused with cannabis.
The entry from another beverage company into the cannabis space would only help to improve the legitimation process the industry has embarked on this year as legalization is weeks away in Canada.
Pressure for beverage companies to diversify and find new revenue streams has also been at the centre of these moves into the cannabis space.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.