Coca-Cola, Aurora exploring potential for cannabis-infused drinks

Coca-Cola said on Monday it was closely watching the growing marijuana-infused drinks market, responding to a media report that the world's largest beverage maker was in talks with Canada's Aurora Cannabis Inc.

The discussions over a possible product tie-up, first reported by Canadian financial channel BNN Bloomberg, could open a new front in Coke's battle to overcome sluggish demand for its sugar-heavy sodas by diversifying into coffee and health-focused drinks.

The report said there was no guarantee that talks between the companies would be successful, but Aurora shares responded by soaring 22 per cent. Coke stock gained slightly on a New York market weakened by concerns over trade tariffs.

The marijuana industry has been attracting interest from a handful of big corporate names as Canada and a wave of U.S. states move to legalize recreational use of the drug.

However, U.S. corporations are still cautious about taking steps into a business that remains illegal under U.S. federal law.

Aurora says it has interest in cannabis drinks

Both Coke and Aurora, in separate statements, said they were interested in cannabidiol infused beverages but could not comment on any market speculation about talks between them.

A spokeswoman for Aurora Cannabis said the licensed producer does not discuss business development initiatives until they are finalized, but notes that it has a responsibility to shareholders to give proper consideration to all relevant opportunities that are presented.

"Aurora has expressed specific interest in the infused beverage space, and we intend to enter that market. There is so much happening in this area right now and we think it has incredible potential," said Aurora's director of communications Heather MacGregor in an emailed statement.

Coca-Cola and Aurora would likely develop beverages that will ease inflammation, pain and cramping, the BNN report said.

A partnership between Coke and Aurora would mark the first entry of a major manufacturer of non-alcoholic beverages into the market for cannabis-related products, up till now a hunting ground almost solely for the alcohol industry.

Constellation and Canopy Growth

Corona maker Constellation Brands is plowing more than $4 billion into marijuana producer Canopy Growth to make cannabis based products, while Molson Coors Brewing's Canadian arm has said it will make cannabis-infused drinks with Hydropothecary Corp.

The size of the Constellation investment, announced a month ago, sparked speculation of other buy outs, investments and partnerships in the industry, pushing Canadian marijuana stocks higher.

"We continue to expect to see more deals between Canadian cannabis companies and the larger players in the global alcohol market who have yet to gain exposure to the category," Cowen analyst Vivien Azer said.

Azer said she would not be surprised by a similar move from Pepsi with "with CBD seemingly a good complement to their market share-leading Gatorade franchise."