The Green Organic Dutchman (TSX:TGOD) (OTCQX:TGODF) announced last week that they are adding 40,000 kilograms to their production capacity. The new, nearly 290,000 square foot facility will produce marijuana specifically for their beverage and edible division, bringing their edible capacity to 170,000 kilograms.
Jason Zandberg, a financial analyst with Vancouver’s PI Financial, recently told Bloomberg that he believes cannabis beverages will be a “strong product category” in the Canadian market. “Many consumers are used to drinking intoxicants as it is more socially acceptable to smoking/vaping,” Mr. Zandberg clarified.
The Dutchman is, in fact, narrowing their focus on the beverage industry. The brand launched their Green Organic Dutchman Beverage Division earlier this month to become a supplier of organic ingredients for global beverage brands. “This launch allows us to engage larger beverage companies in a very unique manner as TGOD has the facilities, ingredients and the intellectual capabilities that make us a compelling choice,” CEO Robert Anderson said in a statement.
TGOD is working with a $55 million R&D budget. Part of the budget covers their multi-phase plans for the seventy-two acres they designated exclusively for cannabis-infused products, including beverages. The new facilities will represent the first collaborative environment for future joint ventures between a cannabis company and existing beverage businesses.
The Money in Drinkable Marijuana
The market for edible and drinkable weed is on the rise. Just last year, over eleven million edibles were sold in Colorado alone. In California, pot users spent $180 million on edibles and infused beverages. As far as infused beverages are concerned, the American market saw over $35 million in beverages sold throughout Colorado, California, Oregon, and Washington State in 2017. There is even talk that cannabis beverages could surpass soda sales by 2030.
“We believe that the beverage and edible market will be the largest single segment of the cannabis market. Cannabis, as the base ingredient, makes these products possible. The medicinal and recreational market for CBD and THC will only increase over time,” TGOD President Csaba Reider said last week. “With the legalization of cannabis announced on June 20…The time is now to dedicate infrastructure, services and expertise to developing proprietary products.”
In terms of being the largest segment in the industry, cannabis beverages and edibles are predicted to generate between $12 and $22 billion when the recreational market finally settles. That is in contrast to the $5 billion smokable marijuana is projected to earn.
Smoking vs. Drinking
Not only is smoking marijuana on the decline, but other cannabis-infused edibles and drinkables are also working their way into the market. According to Deloitte’s 2018 Cannabis Report, cannabis-infused beverages are in the top five potential edible products for which consumers are most excited. Brownies, chocolate, and candy are the only products more popular with pot users than a cannabis beer.
Deloitte’s report also mentions the potential negative effects awaiting the alcohol and tobacco industry after cannabis legalization. The report suggests that the public may use weed as a substitute for alcohol, but it is too soon to predict whether cannabis will be complementary to the business or just straight up competition.
The idea that people are more comfortable with drinking presents an interesting market potential for cannabis companies like The Green Organic Dutchman. Rather than relying on smoking or vaping, infusing beverages taps into a market that is already familiar with drinking socially. By dedicating a brand specific to the beverage industry, TGOD might be setting themselves up for a pretty successful fiscal year.
*Photo Credit: Susanne Nilsson