Lexaria’s DehydraTECH Builds Market Share in Cannabis Beverage Industry
May 1st, 2018
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The cannabis industry is expected to reach $50 billion by 2026 in the U.S. and C$22.6 billion over the coming years in Canada, according to industry analysts. While cannabis flower still commands the most sales, cannabis-infused products have become the fastest-growing segment across North America. Investors may want to look at companies serving this unique market segment, particularly as recreational legalization goes into effect.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) recently announced a definitive technology licensing agreement with GP Holdings LLC, a developer of cannabis infused beverages, providing access to its breakthrough technology that enhances bioavailability.
Cannabis Beverage Market
Constellation Brands’ (NYSE: STZ) purchase of a 9.9 percent equity stake in Canopy Growth (TSX: WEED) for $191 million sent shockwaves through the cannabis community in October of 2017. Constellation Brands President and CEO Rob Sands said that the nationwide legalization of marijuana will occur in the United States, but in the meantime, the company would start to sell in countries where recreational marijuana is already legal.
Specialty beverage companies had already been coming out with new cannabinoid infused beverages before the deal, but the move signaled that larger players in the multi-billion dollar beverage industry may be interested in expanding. Given the size of the alcohol industry, many of these companies may see cannabis-infused beverages as a market that could become just as large and offer a different type of effect upon consumption.
In July 2019, the Cannabis Drinks Expo will debut in San Francisco to bring together drinks producers, manufacturers, brand owners, distilleries, and breweries, along with the beverage supply chain to discuss the implications of legal cannabis. Events like these could open up the market to more established beverage companies looking to build a presence in the industry by incorporating cannabinoids into their products in newly legal markets.
California’s cannabis beverage market is expected to become one of the largest edible product segments following the state’s legalization of recreational cannabis this year. Arcview Market Research, in partnership with New Frontier, estimated that California’s market could reach $6.5 billion by 2020, driven by the legalization of recreational cannabis. These figures translate into an enormous market opportunity for companies competing in the space.
Lexaria’s patented DehydraTECH™ technology is designed to increase the bioavailability, improve the flavors, and rapidity of onset of cannabinoids across a wide range of products, including beverages.
In late-April, the company announced a deal with GP Holdings LLC to leverage the technology to bring cannabis-infused beverages to market in California. GP Holdings aims to become a leading THC beverage contract manufacturer in the state with a new state-of-the-art bottling facility coming online within the next two quarters. The two companies have been collaborating for months on integrating DehydraTECH™ into its formulations.
“The use of DehydraTECH™ triggers a race to the top in the California THC beverage and topicals market through this 5-year license agreement,” said Lexaria CEO Chris Bunka in the press release announcing the deal. “This is another long-term strategic relationship that will give consumers the faster acting and highly potent products they deserve, and class leading flavor profiles for the beverage segment in particular.”
Under the terms of the agreement, Lexaria provided GP Holdings with semi-exclusive rights for five years in exchange for a lump sum and royalty on revenue generated from products developed using its DehydraTECH™ technology. The agreement enables Lexaria to generate near-term revenue while still offering other licensee partners the option of using GP’s formulation and expertise to produce cannabis-infused beverages in the state.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) has made tremendous progress in commercializing its DehydraTECH™ technology. In addition to the GP Holdings agreement, the company announced a deal with Hill Street Beverage Co. to develop cannabis-infused alcohol-free beers and wines in Canada. These types of deals should create steady recurring cash flow and exceptional long-term value for shareholders.
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