This top-selling iced tea company is going all in on cannabis…

Arizona Beverage Co. makes the best-selling iced tea in America, and it has identified cannabis as a growth area for its business.

Arizona has recently entered into an agreement with Dixie Brands Inc. (CSE: DIXI, OTC: DXBRF) to produce and sell iced tea containing THC.

It’s hard to overstate the importance of this deal.

It is the first instance of a mainstream U.S. consumer products brand making its valuable trademarks available for THC products.

Heineken has a similar deal for a hops-based beverage in California, but it used its trademark for Lagunitas, rather than its Heineken one, and Lagunitas has been a cannabis-friendly brand since before Heineken even purchased it.

Companies without that avowedly pro-cannabis history are worried not just about the federal prohibition on THC products, but also about the “reputational risk.”

Arizona has decided that risk is low because a majority of Americans support cannabis legalization.

And not only are company executives hoping to profit from their brand name, they also hope to profit from investing in the cannabis industry.

Here’s how I see all of this playing out…

The Dixie Deal

Arizona is getting the right to acquire up to about 10% of Dixie’s stock.

For our Lifetime Members, you may recall that we talked about Dixie back in March.

The teas will carry Arizona’s name, though, the exact packaging has not yet been worked out. I suspect that Arizona and Dixie will incorporate some design element to make the THC easy to distinguish from the regular iced teas.

Dixie will formulate, make, and distribute the beverages. The company operates in California, Colorado, Maryland, Michigan, and Nevada.

THC beverages are not legal in Maryland, so the products won’t be available there. The companies did not disclose a target shipping date for the other states.

Now that you know a little bit more about how the deal is going to work, let’s take a look at what this means for cannabis investors.

Arizona Beverage Co. Is Ready to Cash in on Cannabis

Arizona was the perfect beverage maker to make this unprecedented leap.

It is a privately-held company, so there won’t be any upset stockholders confronting company management.

But the fact that the company is allowing its most valuable trademarks to appear on a cannabis product is significant, as is Arizona’s willingness to take an equity stake in Dixie. Previously, we had seen similar deals occurring in Canada, where there is no complication with the federal government when it comes to cannabis.

However, even in Canada, companies have not lent their trademarks to cannabis – Molson Coors has a joint venture with Hexo Corp. (NYSE: HEXO) to make THC beverages when they become legal. Though, those beverages may not sport the Molson brand.

Similarly, there are no Corona-branded cannabis products, even though Constellation Brands (NYSE: STZ) has invested more than US$4 billion in the industry.

I suspect we’re still some time from seeing another blockbuster deal like Constellation’s investment in Canopy, but smaller investments like Arizona’s will become common, especially as companies find they can make a profit before they ever ship any product.

These announcements send stocks up, and Arizona already has a $300,000 profit on an investment it hasn’t even yet made!

But there are still some issues to consider.

The next wave of cannabis IPOs is coming… and it could deliver an influx of cash straight to your wallet. Find out more here.

Understanding the Arizona/Dixie Deal

THC beverages have not yet caught on the way some other categories of new cannabis products have. Most cannabis beverage sales are an “add-on option” to a larger order – few consumers go into a dispensary and purchase beverages alone.

Currently, beverages make up a tiny fraction of total cannabis sales.

That makes Arizona’s move particularly audacious.

We can only speculate what information a big company like that must have that moved them to this investment at this time, but you can bet that other food and beverage companies are looking at the same data as Arizona. One piece of data we do have is that Canaccord Genuity projects cannabis beverages will be a $600 million market by 2022, with $340 million of that being beverages with THC.

Overall, I have two questions about this deal.

How well will a national brand do on cannabis shelves?

The Lagunitas products were initially flying off the shelves more quickly than the manufacturer could make them, but now, just about any dispensary I visit in California has a good stock. There are plenty of iced tea brands on dispensary shelves in places where it is legal, so will Arizona blow them away because of the power of its brand, or will consumers prefer the smaller, local brands?

I think the Arizona brand will dominate the iced tea category as long as Dixie does a good job formulating the product.

But there are no guarantees.

My next question: When will we see the next similar deal?

There are almost certainly companies that were afraid to go first but are willing to be second, third, or fourth now that Arizona has taken the leap. I suspect there are a lot of phone calls happening this week, and we could see more deals this fall.

And these already-established brands will be an important challenger to any company seeking to establish a brand in the cannabis industry with a similar product.

For our Lifetime Members, you can access our full analyst report about Dixie right here.

Greg Miller

Executive Director, National Institute for Cannabis Investors

P.S. It seems like everyone wants to get in on the CBD revolution. With its medical applications for epilepsy, anxiety, autism, chronic pain, and more, the hemp CBD sector is on track to grow 15 times faster this year than the cannabis market overall. And with major retailers like CVS, Walgreen’s, and Walmart starting to sell CBD products in addition to numerous smaller, local dispensaries, sales in this sector are projected to soar to $22 billion by 2022 – that’s a 3,622% jump in just three years! Our experts have identified two tiny CBD companies with massive profit potential… and both are currently trading for under $4. Find more info here.


Comments

10 responses to “Cannabis Hits the Mainstream Again Thanks to the Arizona Beverage Co.”

  1. Morning Greg how are you thank you for commenting on this new development. I was informed of this on Saturday. What I find disturbing is that every time a little good news is shared that may affect our share prices in a positive way we are hit with some bad news that makes what ever positive development null and void. CannTrust just got hit with a half dozen or more new infractions from Health Canada which I am sure will affect the industry in a negative way thus impact our share prices the same!!! I hope you have a great day and much success to all of us in the future!!!!

  2. What is the hold up with Sproutly, with one of the best truly water soluble patents in the industry, Is it beverage companies or is it Sproutly causing this inaction of a merger or acquisition?

  3. Good morning Greg I’m an elite member as well
    as an IPO member and would like to know what the two CBD companies are that are under 4 dollars.

  4. Great, you’ll introduce products to kids with thc all in the name of the almighty dollar. Thc is a gateway drug to other dangrouse drugs.

    • That’s a parenting issue. I have 2 kids in high school that have never drank so….They are both taught right from wrong. Why are you even on this if you have issues with THC or Cannabis. Also THC IS NOT A GATEWAY DRUG, IF ANYTHING IT is ALCOHOL. ALCOHOL KILLS MORE PEOPLE AND KIDS THAN CANNABIS. I’m a 25 year 911 paramedic and I have seen it all so I can speak on what I am typing.

  5. Hi Greg,

    The FDA seems to be putting out some negatives about cannabis in any kind of edible being illegal. Does this also impact states that are marijuana legal and selling pot edibles? And does it include CBD oil? Lots of confusion out there.

    Thanks

  6. I’m still waiting for Coke to approach Sproutly about a deal. What I don’t understand is that Sproutly has the leading tech when it comes to THC or CBD beverage formulation so why aren’t they being approached by a national brand? It’s almost as if their deal with Moosehead hurt them and thus their stock price. I’m wondering if it has something to do with lack of marketing and exposure. Even BevCanna who just IPO’d recently seems to be getting better acceptance than Sproutly. Do investors just not know about Sproutly yet? And Greg, as far as the beverage demand slowing down, it may have something to do with most THC beverages separating and tasting like urine. And those are 2 more problems that Sproutly has already solved.

  7. This is in response to a post from “Paul” on Aug 12 when he said and I quote ” This is a gateway drug to more dangerous drugs”
    I have been hearing this BS for years…and it couldn’t be less true
    The term “gateway drug” is overhyped and totally false when it comes to cannabis use. This is simply a way for people opposed to this lucrative and healthful drug to gain traction in their pitiful need to oppose it

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