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Investment Thesis
We all heard the controversy of Coca Cola (KO) and the way they injected cocaine into their drinks until 1929, when the company stopped producing cocaine after studying the negative effects . Now, Coca Cola has the chance to make CBD-infused drinks that will be infused into the CBD. They considered this after speculation around the farm bill, and the health benefits of the CBD were amazing. The company announced today that it plans to embark on the world of CBD-infused drinks. This is music for KO investors because it allows them to make money on a company that has a bright future. Because CBD is used for medical purposes, many patients prefer to drink or eat it rather than smoking it. With Coca Cola being the biggest name in drinks, their CBD drink should be the most popular. The company could generate significant revenue and profits for Coca Cola and benefit investors.
Why it could help Coca Cola
Coca Cola ventured into different types of drinks recently. The main example of this would be their acquisition of Costa Coffee for $ 5.1 billion, which took place on August 31. To add to that, they also own drinks such as Smartwater, Dasani, Fanta and Sprite to name a few. All of these drinks have allowed Coca Cola to hold more than 50% of the soft drink market. Yesterday morning, news that the agricultural bill, a bill allowing the legal sale of the CBD in the 50 states, is about to be adopted. That's what prompted Coca Cola to develop CBD-infused drinks. CBD is not like THC where it can attract the user, but it has been proven to help relieve dull pain and relieve anxiety. In addition, CBD can allow people to sleep longer and improve insomnia. There are potential side effects, including diarrhea and nausea. Now the question is how could this benefit Coca Cola. The reason is simple: if the bill is passed, the CBD market is expected to reach $ 22 billion by 2022. Given that Coca Cola is widely regarded as one of the best beverage manufacturers in the world, its beverage infused with patients. By imagining that they could capture 10% of the market – depending on their existing popularity and the advertising they may create – they could consider generating $ 2.2 billion in revenue per year by 2022. Although this may not seem like much, with the increasing chronic pain occurring around the globe, the use of CBD should only increase in the future. That being said, by imagining that the market can continue to grow and their market share may increase, they could consider a $ 5 billion income on CBD infused beverages by 2030.
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Coca-Cola will take advantage of this new range of potential drinks by more than the income from the beverages themselves. This could be one of the biggest public relations moves that a company has made in their history if it pursues it. The company will have more children than ever as they launch a new era in the field of beverages. Even if people are not going to buy the new CBD drink, Coca-Cola can pique the curiosity of someone to review and buy his original drink. It will be a new market that has never been explored before and for which Coca Cola has to get involved is huge for the company. They already have manufacturing capacity and delivery infrastructure to be one of the largest beverage distributors in the world. The commercialization of this new product should not be too problematic for them. As for the market itself, Coca-Cola will energize it much faster than it was started by a number of small businesses. Small businesses will have to compete with Coca Cola to sell their products, but as the market has proven with companies like Apple (AAPL) and Nike (NKE), consumers are willing to pay for a brand of confidence even if the product is the same or worse. To add to that, other companies will be greatly affected by Coca Cola's expansion into the CBD world. (Update 20/09/18 15h50 ET) To begin, Aurora Cannabis (OTCQX: ACBFF) is the company that will most likely provide CBD to Coca Cola according to speculation. Based on the potential partnership and news of the agricultural bill, their stock has grown by 17.74% today. Coca-Cola Bottling Consolidated Co. (COKE), which will be the main bottler of the new product, is also expected to increase in the near future.
Disclosure: I / we have no position in the actions mentioned and we do not plan to enter positions in the next 72 hours.
I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I have no business relationship with a company whose stock is mentioned in this article.
Editor's Note: This article discusses one or more securities that are not traded on a major US market. Please be aware of the risks associated with these stocks.
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