The Coca-Cola Company is in “serious talks” with Aurora Cannabis to develop a CBD-infused beverage, according to a report from BNN Bloomberg Television. The news sent shares of Canadian marijuana producer Aurora Cannabis up as much as 23 percent to $8 in early trading on Monday. The stock had settled to a gain of about 14 percent by noon Eastern time.
Coca-Cola, the world’s largest beverage maker, and Aurora Cannabis are “pretty advanced down the path” of coming to an agreement, according to an unnamed source familiar with the negotiations between the two companies.
“It’s going to be more of the ‘recovery drink’ category,” the source added.
The source also said that talks between the two companies are ongoing but are not certain to succeed. Even if they are successful, any deal reached may not be made public, according to the source.
Another source told BNN Bloomberg that Coca-Cola also held preliminary talks with Aphria, another Canadian cannabis producer, but that the negotiations had not advanced.
Companies Decline to Comment on Deal
Coca-Cola spokesperson Kent Landers declined to comment on Aurora Cannabis directly. But he did say in an email to BNN Bloomberg that “along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world. The space is evolving quickly. No decisions have been made at this time.”
Heather MacGregor, a spokesperson for Aurora Cannabis, also declined to comment on a potential deal with Coca-Cola. However, she did confirm that the company is interested in pursuing opportunities in the CBD beverage market.
“As a rule, we do not discuss business development initiatives until they are finalized, however, we have a responsibility to our shareholders to give proper consideration to all relevant opportunities that are presented,” MacGregor said.
Martin Landry, managing director of equity research at GMP Securities LP, told BNN Bloomberg that many consumer packaged goods (CPG) companies were looking to enter the CBD market and that the impending legalization of cannabis in Canada presented an opportunity to do so. The recreational use and sale of cannabis products will become legal in Canada this October under Bill C-45, which was passed by Parliament this summer.
“If I’m a big CPG company, the reason I’d want to partner with a cannabis producer is to use them as a test market to develop products here in Canada and perfect them, so then I can enter the U.S. down the road when it’s more appropriate to do so,” Landry said.
Landry also noted that large corporations in other product sectors were also eyeing cannabis and CBD as a promising business opportunity.
“There’s a lot of interest from [consumer-packaged goods], and liquor and tobacco [companies] to look at cannabis as a new growth vector,” said Landry.
Landry also said that he expects even more opportunity as the newly legal marijuana industry matures.
“What’s happening is that the cannabis industry is still in its infancy and there’s not a lot of partners to dance with,” he said.