Marijuana stocks have been on fire lately, with investors looking at the rising tide of new jurisdictions in which marijuana is becoming legal for recreational use. With the entire nation of Canada legalizing recreational cannabis later this month, the companies that will provide the marijuana that users want to smoke see a potential gold mine ahead.
But there's another area of the cannabis market that's only now starting to get more attention. Both well-established cannabis companies and new upstarts are moving full speed ahead to develop consumer products that could potentially have a much larger addressable market than those who want to smoke weed. Along the way, investors in companies like New Age Beverages (NASDAQ: NBEV) and India Globalization Capital (NYSEMKT: IGC) have seen their shares soar -- and even more gains could lie ahead for those seeking to develop and sell drinks infused with cannabidiol (CBD).
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NEW LEADER EMERGES IN MARIJUANA AND CBD-INFUSED BEVERAGE RACE
What is CBD?
Cannabidiol is a chemical compound that's found naturally in marijuana. Unlike other compounds found in marijuana, especially tetrahydrocannabinol (THC), CBD lacks the extreme psychoactive impacts associated with cannabis use.
Many of those in the cannabis industry tout the beneficial medical impacts of cannabidiol. Pharmaceutical companies have looked closely at CBD, and there have been some notable successes in discovering promising treatment. The most noteworthy is GW Pharmaceuticals' (NASDAQ: GWPH) Epidiolex, a CBD-derived treatment for certain forms of epilepsy that gained approval from the U.S. Food and Drug Administration earlier this year.
Setting the stage for CBD-infused beverages
The beverage industry has gone through a transformation of its own recently, moving away from sugary sodas toward healthier offerings. As cannabis products become legal, the ability to offer CBD-infused beverages hits two high-demand themes hard: legal recreational cannabis and the opportunity to test products that could have health benefits.
Some of the giants of the budding marijuana industry were among the first to look seriously at CBD-containing beverages. One reason why Canopy Growth (NYSE: CGC) attracted the attention of Constellation Brands (NYSE: STZ) for a major investment was that the two companies saw the potential profits from experimenting with drinks containing cannabis-derived ingredients. Similarly, Coca-Cola (NYSE: KO) has searched for growth opportunities, and reports suggest it could collaborate with Canada's Aurora Cannabis (NASDAQOTH: ACBFF) to produce a beverage with CBD.
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