An agreement with Coca-Cola could make Aurora cannabis a real thing – The Motley Fool

Coca Cola (NYSE: KO) had a lot of slogans throughout his long history. A recurring theme that dates back to 1969 is "It's the real thing". From now on, a potential deal with Coca-Cola could make the largest Canadian marijuana producer.

Aurora Cannabis (NASDAQOTH: ACBFF) According to a report by BNN Bloomberg TV, it is in serious talks with Coca-Cola to develop cannabis-infused drinks. Could an agreement with Coke and Aurora be even more important than Constellation Brands& # 39; (NYSE: STZ) partnership with Canopy growth (NYSE: CGC)?

Key Differences

There are significant differences between the potential agreement between Coca-Cola and Aurora Cannabis than that between the alcohol manufacturer Constellation Brands and Canopy Growth. One of the major problems is that the type of cannabis infused beverage envisioned by Coke may not be the same as what Constellation and Canopy envision.

BNN Bloomberg reported that Coca-Cola would not comment on any discussions with Aurora. However, a spokesman for the company said in an email to BNN Bloomberg that "with many others in the beverage industry, we are watching the growth of non-psychoactive CBD closely. [cannabidiol] as an ingredient in functional wellness beverages around the world. The space is changing rapidly. "

Canopy Growth CEO Bruce Linton said his company and Constellation planned to launch cannabis-infused drinks, including non-calorie beverages with cannabinoid blends. He told Jim Cramer in an interview this summer: "We're talking about getting into a bar and having a tweed and a tonic."

Coca-Cola, by contrast, seems to be interested in more therapeutic cannabis-based beverages aimed at relieving cramps, inflammation and pain. A source told BNN Bloomberg that Coke was seeking to develop cannabis-infused beverages in the recovery beverage category.

In addition, Constellation Brands made two major investments in Canopy Growth. In October 2017, Constellation joined Canopy and purchased a 9.9% stake in the marijuana growers for approximately $ 191 million. Last month, Constellation invested an additional $ 4 billion in Canopy, raising its stake to 38%. It seems more likely that Coca-Cola is forming a joint venture with Aurora instead of buying a large part of the company, as did Constellation with Canopy.

A huge impact

No matter how you look at it, an agreement with Coca-Cola would be huge for Aurora Cannabis. This would also be extremely important for the cannabis industry in general.

After the Constellation-Canopy Partnership announcement last year, many (including yours) thought it was important in large part because it helped to further legitimize the cannabis industry. And when Molson Coors Later, I chose her cannabis partner. I thought it was a step closer to legitimizing the industry.

Like many others, I thought the floodgates could open other big businesses to form alliances with marijuana growers. This seems to be what is happening. Reports have recently surfaced that the Guinness brewer Diageo could be the next among liquor companies to forge a cannabis partnership. There is speculation that big tobacco companies could also get into the battle.

But if Coca-Cola is Aurora's partner, this would increase the legitimacy level of the cannabis industry more than any other offer, in my opinion. Coke is one of the best known and most respected brands in the world. A Coca-Cola deal would also increase the likelihood that more beverage manufacturers, be they alcoholic or not, can partner with marijuana growers.

A particularly relevant Coke slogan

There have been many slogans for Coca-Cola over the years. I think one of these slogans is particularly applicable in the discussion of a potential deal with Coca-Cola and Aurora: "Make it real". I bring up this old Coke slogan of 2005 for several reasons.

First, there is no market yet. BNN Bloomberg reported that Coca-Cola has met another major Canadian marijuana producer, Aphriaa few months ago, but these discussions did not go anywhere. It is possible that the talks between Coke and Aurora are also futile. This is not real until an agreement is reached.

Second, for investors who consider Aurora cannabis or other marijuana stocks, realize that when you evaluate these stocks. It's easy to get caught in the dizziness of big deals with big business and the rapid growth of cannabis markets around the world. But also remember that marijuana stock assessments reflect a large part of this growth. Some might argue that inventories reflect much higher growth than might be expected over the next few years.

However, the actions of Aurora Cannabis have drawn attention to the possibility of a partnership with Coca-Cola. And for a good reason. It seems that Coca-Cola's most relevant slogan is this: "Have a coke and a smile".