The company behind Arizona Iced Tea is the latest beverage maker to jump into the cannabis industry by teaming up with Dixie Brands Inc. (CSE:DIXI.U) to offer weed-infused gummies and drinks in the U.S. and Canada.
Colorado-based Dixie Brands, which produces and sells cannabis-infused candies, topical creams, drinks and vape pens in six U.S. states, said on Wednesday it reached a licensing deal with privately held Arizona Beverage Co., America’s top-selling iced tea company, to produce THC-infused products. The companies will likely start with gummies and vape pens and lead to infused teas, lemonade, coffee and sodas, according to The Wall Street Journal.
The deal is subject to approval from Dixie’s board members and will give Arizona Beverage the option of buying a US$10 million stake in the cannabis company. Dixie will develop, manufacture and distribute the pot-laced products to licensed dispensaries, while Arizona will work on the conceptual design of the new brand.
Companies look to tap Arizona’s massive customer base
Arizona Beverage’s products are a staple in U.S. gas stations, convenience stores and sold in major retail chains like Walmart and Walgreens. But even though New York-based Arizona still sells the most iced tea in the U.S., it reportedly has seen its market share shrink since 2013 and has been looking for new opportunities.
Although the private company is under no pressure from analysts to increase its revenues, it sees the deal with Dixie as a great opportunity to develop new products and grow its brand with costumers:
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. The Cannabis category is an ideal space to bring the flavor and fun of AriZona into new and exciting products.
– Don Vultaggio, Chairman of AriZona Beverages
Dixie Brands gets needed exposure
For Dixie Brands, a fairly small stock on the Canadian Securities Exchange, the deal will help put the pot company on the map. With just $2 million in sales in its most recent quarter, Dixie Brands still has a way to go to become a formidable cannabis player. But by teaming up with a national brand to sell the new infused products, the company’s credibility is set to rise with consumers.
Dixie has been making infused products for almost a decade, and the pot firm is looking to double its operations this year. The company also plans to expand into Canada and across Latin America by the end of the year, further building on the 100 products it currently sells in six U.S. states.
The Canadian market for next-generation products, such as edibles and vape pens, will be legal and available for sale by the end of 2019.
Arizona and Dixie plan to sell their pot-infused products in the six states that Dixie currently operates in, but the two plan on entering the Canadian market when they are allowed to do so.
Other notable beverage companies entering the cannabis space include Corona maker Constellation Brands (NYSE: STZ), which famously invested $5 billion in pot giant Canopy Growth (TSX:WEED, NYSE: CGC) last year.
Dixie’s chief executive, Chuck Smith, calls Arizona Iced Tea a “power brand” that will help it develop some strong cannabis consumer packaged goods (CPG) products to compete with THC beverage rivals:
This partnership marks a watershed moment for the popularization and expansion of the cannabis sector overall, and is another large step forward for Dixie Brands’ strategy to build a house of famous cannabis CPG brands.
Under the terms of the agreement, the initial duration of the partnership will be for three years, but up to two more terms of two years each can be added.
— Dixie Brands (@DixieBrands) August 7, 2019