Iconic soft-drink maker Coca-Cola announced its intentions to dive into the cannabidiol, or CBD space. Undoubtedly, advocates of legal weed embrace the idea with open arms. However, I would caution against jumping onboard blindly. Marijuana investments are exciting, but Coca-Cola isn’t one of them.
I made this case recently for mainstream publication. On the surface, the proposed idea of distributing CBD beverages appears groundbreaking. It’s also timely. In the 2016 general election, a record number of states voted for legal weed. The degree of legality varied, of course, but the message was sent. This in turn bodes well for marijuana investments.
The issue, though, is that federal law supersedes state law. For instance, even if liberal California supports recreational cannabis, users can’t imbibe across state borders. And transferring cannabis from one state to another invokes federal law, and that is a huge no-no.
Therefore, Coca-Cola is extremely limited in where they can currently market a CBD beverage. The closest jurisdiction they can gain approval for is Canada, which is a recurring challenge among marijuana investments.
Time Doesn’t Favor Marijuana Investments
I’m a big believer in the cannabis business. Eventually, the Schedule I classification that impedes fully legal weed will go away. In my view, Schedule I is as archaic as anti-miscegenation laws. People will do with themselves what they please, and it’s not government’s job to police personal morality.
At the same time, I’m also a realist. Schedule I will take time to overturn. Yes, political forces are pressuring the Trump administration to legalize cannabis at the federal level. On the other hand, if President Trump caves, he will lose conservative support.
It’s a fine line and as a typical Republican, Trump upholds the status quo. The wildcard, though, is the economy. If we fall into another recession, the White House must surely consider declassification. As consistently demonstrated in the markets, marijuana investments represent the few asset classes in which young people are interested.
And Colorado has proven beyond any doubt that cannabis and CBD are extremely lucrative ventures.
Still, this will take time and this event represents an unknown variable. Here’s the big one: even if Coca-Cola gets the green light (no pun intended), it must rejig its business to comply with new laws. I just don’t see this as a viable path forward.
If you want exposure to marijuana investments, a better idea is to consider direct plays. At this juncture, Coca-Cola as a CBD play is much hype, little substance.