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 miligrams of THC, is a pioneer in edibles including candies, mints, as well as oils for vaping and topical creams. The agreement, which gives Arizona the right to purchase up to $10 million of the company, puts Arizona’s vast distribution network in the enviable position of introducing marijuana-infused teas nationwide. Currently 11 states permit sales of marijuana for recreational purposes and 33 permit medicinal use.
The move could just as easily backfire by hobbling Arizona’s distribution resources due to federal laws that prohibit the interstate transportation of THC. Initially Dixie will manufacture and sell the products at licensed dispensaries within the few states that permit distribution. The beverage line will likely include tea, lemonade, soda, seltzer and coffee and will feature ingredients such as CBD where the distribution of THC is prohibited. Dixie announced in a release that it will launch in the U.S. and expand to Canada (where sales of THC are legal nationwide) and finally Latin America.
Numerous publicly traded firms have explored sales of THC in beverages, including Corona brewer Constellation Brands Inc. and Coors Light brewer Molson Coors Brewing Co. which is developing marijuana drinks in Canada, the Wall Street Journal reports. The Journal notes several obstacles including the fact that many banks will not take money derived from cannabis sales and companies that sell marijuana in the U.S. cannot list on major U.S. stock exchanges. Arizona is privately held but will not be involved in production.
Don Vultaggio, Arizona’s chairman and CEO acknowledges the risk. “You’ve got to be willing to try things,” he said. “The upside is we’re one of the first ones in an emerging space.”
“The cannabis market is an important emerging category, and we’ve maintained our independence as a private business to be positioned to lead and seize generation-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 we selected Dixie Brands as our partner to bring these products to market after touring their best in class manufacturing facilities, and spending considerable time building a strong relationship with their management,” he said.
“Both companies share a heritage of quality, excellence in manufacturing, and doing things the right way, and we look forward to all this partnership has in store,” according to the joint release.
The potential is huge. Market researchers expect CBD products alone to generate $20 billion in sales within the next five years. Edibles and beverages have proven popular 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 states including Oregon and Washington legalized pot years ago and host a thriving edibles segment.
MJ Biz Daily, quoting Green Wave Advisors’ Matt Karnes, notes that while news of the partnership “indicates to the cannabis sector that there’s potential for more such partnerships, many similar deals probably won’t get inked until there’s some type of federal legislation in place.”
The deal 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 the infused product space will become fully saturated and newer brands won’t be able to pull customers away from those that have already cemented market share.
Arizona meanwhile 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-infused products creating some of the most recognized and trusted brands in the industry, and we are thrilled to have found a partner that shares our values. He suggests that THC-infused cans of Arizona could be in the works “down the road.”