Arizona Beverages Enters Licensing Agreement with Cannabis Company

(Photo courtesy of Arizona Beverages)

A licensing deal between bottled tea giant Arizona Beverage Co.and Dixie Brands,Inc. is the brightest green light to date signaling a future formarijuana-infused teas.

Arizona is the No. 1 iced tea brand by volume in the U.S. Dixie,a Denver-based cannabis company that markets a line of elixirs containing 100 miligramsof THC, is a pioneer in edibles including candies, mints, as well as oils forvaping and topical creams. The agreement, which gives Arizona the right topurchase up to $10 million of the company, puts Arizona’s vast distributionnetwork in the enviable position of introducing marijuana-infused teasnationwide. Currently 11 states permit sales of marijuana for recreationalpurposes and 33 permit medicinal use.

The move could just as easily backfire by hobbling Arizona’sdistribution resources due to federal laws that prohibit the interstate transportationof THC. Initially Dixie will manufacture and sell the products at licenseddispensaries within the few states that permit distribution. The beverage linewill likely include tea, lemonade, soda, seltzer and coffee and will featureingredients such as CBD where the distribution of THC is prohibited. Dixieannounced in a releasethat it will launch in the U.S. and expand to Canada (where sales of THC arelegal nationwide) and finally Latin America.

Numerous publicly traded firms have explored sales of THC inbeverages, including Corona brewer Constellation Brands Inc. and Coors Lightbrewer Molson Coors Brewing Co. which is developingmarijuana drinks in Canada, the WallStreet Journal reports. The Journal notes severalobstacles including the fact that many banks will not take money derived fromcannabis sales and companies that sell marijuana in the U.S. cannot list onmajor U.S. stock exchanges. Arizona is privately held but will not be involvedin production.

(Photo courtesy of Dixie)

DonVultaggio, Arizona’s chairman and CEO acknowledges the risk. “You’ve got to bewilling to try things,” he said. “The upside is we’re one of the first ones inan emerging space.”

"Thecannabis market is an important emerging category, and we've maintained ourindependence as a private business to be positioned to lead and seizegeneration-defining opportunities exactly like this one,” writes Vultaggio.“The Cannabis category is an ideal space to bring the flavor and fun of Arizona into new and exciting products, and weselected Dixie Brands as our partner to bringthese products to market after touring their best in class manufacturingfacilities, and spending considerable time building a strong relationship withtheir management,” he said.

“Bothcompanies share a heritage of quality, excellence in manufacturing, and doingthings the right way, and we look forward to all this partnership has instore,” according to the joint release.

Thepotential is huge. Market researchers expect CBD products alone to generate $20billion in sales within the next five years. Edibles and beverages have provenpopular in the states that permit the sales of marijuana for recreational use.Dixie distributes its products in five states and sells elixirs in Colorado,California, Nevada and Maryland with plenty of market to expand. Several statesincluding Oregon and Washington legalized pot years ago and host a thrivingedibles segment.

MJBiz Daily, quoting Green Wave Advisors’ Matt Karnes, notes that whilenews of the partnership “indicates to the cannabis sector that there’spotential for more such partnerships, many similar deals probably won’t getinked until there’s some type of federal legislation in place.”

Thedeal has the potential to displace existing marijuana brands in the six U.S.states where Dixie has a presence, Karnes said, because at some point theinfused product space will become fully saturated and newer brands won’t beable to pull customers away from those that have already cemented market share.

Arizonameanwhile is expected to attach its name to vape oils and gummies. Dixie CEO Chuck Smith said that “for nearly a decade Dixie Brands has crafted award-winning cannabis-infusedproducts creating some of the most recognized and trusted brands in theindustry, and we are thrilled to have found a partner that shares our values.He suggests that THC-infusedcans of Arizona could be in the works “down the road.”

Sources: WallStreet Journal, DixieBrands Inc.