While cannabis has been the focus of the market over the past month, cannabis beverages have perhaps been the biggest subset of the industry. In fact, cannabis-infused beverages have emerged as a high-growth segment within the edibles category. One analyst believes that the growth within the beverage industry will be a driving force.
Canaccord Genuity detailed in a recent report that cannabis-infused beverages represent roughly 6% of edibles in mature U.S. markets, according to BDS Analytics, and less than 1% of overall cannabis sales in the United States. Revenue share for cannabis beverages should expand meaningfully over the next several years, outpacing overall cannabis retail demand by over two times.
The firm expects that this growth will be driven by a continued shift away from flower as a preferred delivery mechanism as more consumers are introduced to cannabis, a proliferation of THC-infused cannabis beverages, and the emergence of a wellness-facing CBD beverage category with non-psychoactive effect.
Canaccord Genuity said in its report:
In general, continuing growth for legal cannabis markets is supporting these trends by expanding consumer demographics and allowing for greater product diversity. While these trends represent a significant opportunity for US cannabis companies, they have not gone unnoticed by large mainstream beverage players looking to inject growth into their product portfolios. Interest has spiked from the beer industry on mounting evidence of a substitution relationship between cannabis and alcohol, while large soda companies increasingly view CBD as a natural fit within their strategically important wellness offerings. This outside interest is positive for the broader cannabis space, in our view, given larger players with strong distribution channels and expertise in building brands can derive significant value from a range of cannabis assets, either as owners or through partnerships.
Considering that edibles sales are growing faster than flower, the brokerage firm believes beverage growth will be even stronger. Canaccord Genuity is estimating a 34% compound average growth rate (CAGR) for THC-infused beverages, growing from $106 million in 2018 to $340 million in 2022.
In the firm’s view, the emerging CBD beverage category will be meaningfully additive to the forecast, reaching a healthy $260 million by 2022. Overall, Canaccord Genuity sees cannabis-infused beverages representing roughly 20% of the edibles category in just over four years, up from 7% in the 2018 forecast, growing at a 54% CAGR.