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After Coke, It's PepsiCo's Turn to Monitor Cannabis Market

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The rapidly growing marijuana-infused drinks industry is looking at another potential beverage giant to cross the threshold. After Coca-Cola Company (KO - Free Report) announced last month that it was closely watching the growing industry with an intension to associate itself with healthier drinks, it’s now PepsiCo’s (PEP - Free Report) turn to follow Coke’s footsteps.

Per a CNBC report, PepsiCo’s CFO Hugh Johnston said on Oct 2 that the company will look “critically” at making an investment in cannabis. PepsiCo’s announcement came a day before its former CEO Indra Nooyi’s departure.

PepsiCo did not reveal any plans that the company may have about its future exposure to the cannabis industry. However, the company is not expected to stay away from adopting marijuana, as this industry holds the key to future growth of the food and beverage industry.

Consumer Preferences Driving Beverage Market

As more consumers eye healthier drinks, giving up their sugar sodas for sparkling water, fruit juices, and the new cannabis-infused beverages, players in the beverage segment feel the pressure to diversify their products to accommodate consumers’ changing tastes.

Half of PepsiCo’s revenues come from healthier food products and beverages. The company’s potential tie-up with the marijuana industry should further boost its sales.

Cannabidiol (CBD), a non-psychotropic drug found in the cannabis plant, is at the center of this new industry. Cannabidiol decreases pain and inflammation, treats seizures and does not allow cancer to spread rapidly, according to the American Cancer Society. This is why cannabis-infused drinks have grabbed the attention of health conscious consumers.

Other Players Are Investing in Cannabis Too

In order to stay in the increasingly competitive beverage space, many major companies in the food and beverages industry are considering cannabis-infused food products and drinks in their menus.

Constellation (STZ - Free Report) , the Corona beer maker, announced an additional $4 billion stake in Canopy Growth Corporation in August, increasing its investment in the Canadian cannabis company, per a CNBC report. The beer making company had taken a 9.9% stake in Canopy Growth in October 2017. Constellation may start selling its cannabis-infused drink in Canada from 2019, although it has no plans to market the product in the United States until cannabis is legalized across the country.
Apart from Constellation, Molson Coors Brewing Company (TAP - Free Report) and Heineken’s (HEINY - Free Report) Lagunitas Brewing Company are also brewing their own cannabis-infused beverages.

PepsiCo’s potential entry into the marijuana space for healthier drinks is in line with Nooyi’s push for healthier drinks and snacks. With rising preference of consumers for healthier food products, this could be an important step for PepsiCo.

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