Study looks at how cannabis will disrupt food and beverages
- The global cannabis market stands at $150 billion today and legal sales are expected to grow to represent 77% of the total global market by 2025. With such growth on the horizon, Euromonitor released a white paper that explores the effects this ingredient will have on FMCGs.
- The paper noted alcoholic drinks are by far the most embedded consumer packaged good in the cannabis sector. It indicated there is an expectation for “THC” to replace “ABV” as an indicator of intoxicant levels in adult beverages.
- Euromonitor also noted it expects to see global sales of CBD-infused packaged foods to double during the next two years.
What was once a Schedule 1 narcotic frowned upon by the average consumer has transformed into a disruptive force that is part of conversations in CPG boardrooms across the world.
Alcohol companies are particularly getting into the market. This evolution of alcohol companies into alcohol and cannabis companies should not come as a surprise.
As of the end of 2018, U.S. beer volumes have declined for five years straight. As sales drop, beer producers are experimenting with everything from craft beer to light beer to convince drinkers back onto the bandwagon. One of the things that seems to work are lower-alcohol and non-alcoholic beer offerings. Propelled by shifting consumer trends, Big Beer, including Constellation Brands, Molson Coors Brewing and AB InBev have pushed the envelope even further and invested in CBD and THC-infused nonalcoholic beverages.
It seems to be a logical path to explore. According to a study from A.T. Kearney, 30% of Americans are willing to try a cannabis-infused nonalcoholic beverage, and 17% would be interested in an alcoholic drink containing the substance.
Although Euromonitor reports soft drinks seem to be the next logical front for CBD to grow into, it appears mainstream giants like Coca-Cola are not ready to take the plunge. Last fall, CEO James Quincey downplayed getting into the space anytime soon, though there were reportedly talks of the Atlanta company entering into a partnership with Aurora Cannabis. However, if and when that partnership occurs, cannabis will have access not only to soda but coffee as well through Coca-Cola’s $5.1 billion acquisition of Costa Coffee last year.
Soft drink companies may eventually have to ease into the cannabis space. Consumers are moving away from sugar-filled drinks in favor of healthier alternatives like water, which in 2016 surpassed soda consumption for the first time. Cannabis plays squarely into the health and wellness space, and in markets where it has launched, cannabis soda has been successful. Euromonitor is forecasting that it will become the next big functional ingredient for beverage companies.
At the same time cannabis is making its way into the beverage space, packaged foods are also getting a dose of this ingredient. Euromonitor anticipates the level of its disruption will be comparable to that of plant-based foods. While this may be a bold prediction, it is true consumers are looking for functional ingredients that do more for their bodies than simply feed them.
Companies looking to capitalize on cannabis will likely incorporate it into any number of products. Over time, products using CBD as an ingredient will narrow to items that play in the health and wellness space. Depending on how FDA regulation for the substance shakes out, this could potentially present a problem, especially in the realm of label claims allowed for CBD.
Still, overall it would behoove food manufacturers to pay attention to this buzzy ingredient and consider how to tap into its explosive popularity.