The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) announced May 8 it will be expanding both into the U.S. market and in the CBD beverage space. The Mississauga-based company is teaming up with newly-formed Califormulations LLC, and will be working with flavor and fragrance maker, Symrise Inc. The new company will be based out of Columbus, Georgia to help TGOD grow and develop innovative product lines including organic hemp-based CBD beverages.
Access to the U.S.
The new venture is helping TGOD get its foot into the U.S. market, which is the key part of the investment. Having a way to reach customers south of the border will be important for the company’s long-term growth.
Currently, U.S. laws only allow some hemp-derived products, and regulations for food and beverage products containing CBD are being drafted by the Food and Drug Administration. But the expansion is a bold step for TGOD to compete with key rivals in the industry down the road. A limited number of Canadian cannabis companies have ventured in the U.S. market thus far, which could give TGOD an advantage over its competition.
Launch of CBD Beverages
TGOD is looking to capitalize on the growing potential for hemp-based CBD beverages with its investment to expand the U.S. market, and it is optimistic alongside other investors that the FDA will move forward to green light CBD food and drink products.
“We are incredibly excited to partner with Califormulations to further our development of hemp-based CBD beverage products,” said Brian Athaide, CEO of TGOD. “With the US market for functional beverages, including wellness, energy and sport recovery, currently worth over USD$20 billion, we want to remain on the cutting edge of innovation and establish the foundation for future proprietary and novel TGOD-branded products.”
Meanwhile, cannabis giant Canopy Growth Corp (NYSE:CGC)(TSX:WEED) has made its move into hemp-based beverage market with the advantage of having a big deal already in place with Corona maker Constellation Brands (NYSE:STZ). And even though TGOD might not have a big beverage maker on board, adding Symrise will boost TGOD’s value and help the company take a bigger bite out of the beverage market.
Now that TGOD can start working on beverage product varieties, flavors, and marketing, it will have a head start to generate a brand to draw in consumers and could capture significant market share.
Expansion of CBD beverage brands in the U.S.
In addition, the expansion project will offer support and services to other brands as well. According to TGOD’s statement, Califormulations will be “serving global branded companies with concept-to-shelf beverage commercialization support including formulation development, technical services, in-house pilot scale production and contract manufacturing co-ordination.”
This strategy aims to raise stakes in the beverage space by developing partnerships with other companies. The expansion creates possibilities for mergers and acquisitions, and providing services to other companies could certainly lead to more opportunities for consolidation.
CBD drinks have seen a rise in popularity over the last year, and are forecast to be worth US$1.4bn in the US in 2023, according to Zenith Global. North of the border, edibles (beverages) are expected to be green lighted by Health Canada by October 17, which could create a big testing ground for companies looking to market drinks on a national scale.