New Age Beverages (NASDAQ:NBEV) has become a backdoor cannabis stock. With most of its current line of products, it does not stand out among beverage companies. However, a move into CBD-infused drinks could be the game changer NBEV stock needs.
Back in October, I recommended NBEV stock as a high-risk, backdoor play on marijuana.
Admittedly, I made this call one month early. Legal status in Canada became a “sell the news” event for any stock involved with cannabis.
NBEV lost more than half of its value over the next month.
NBEV Stock and CBD-Infused Drinks
Since mid-November, NBEV has more than doubled in value. In that time, interest in the market has risen. Anheuser-Busch InBev (NYSE:BUD) has partnered with Tilray (NASDAQ:TLRY) to research cannabis drinks. The U.S. has also legalized hemp. This allows New Age to sell CBD-infused beverages in all 50 states.
As the maker of Aspen Pure, Xing Energy, and Bucha Live Kombucha, it would not make for a particularly exciting stock. However, its Marley+CBD Mellow Mood brand could become a game changer.
This CBD-infused drink will first become available in four states with legalized cannabis. Now, success in those states could lead to its availability nationwide soon. Moreover, its CFO Gregory Gould comes in with a biotech and life sciences background. Such knowledge gives NBEV a leg up in bringing CBD-infused products to market.
NBEV Faces an Uncertain Market
Infused beverages have seen a mixed history. As my colleague Dana Blankenhorn points out, Coca-Cola (NYSE:KO) got its start in infused beverages as it contained cocaine for a brief part of its history.
Also, as our own Will Ashworth reminds us, NBEV could follow the path of Monster Beverage (NASDAQ:MNST). This company, formerly known as Hansen’s Natural Corporation, changed its name due to the success of its energy drink.
Still, for every Monster Beverage-type success, we see multiple stories comparable to that of Jones Soda (OTCMKTS:JSDA). Their use of unique flavors dazzled the market for a time, but an attempted move into the canned soda market pushed it back into obscurity.
So this begs the question of whether NBEV will follow the path of MNST or JSDA? The short answer is “we do not know.” This leaves NBEV in the realm of speculation.
Will NBEV Lead the Way?
Still, I think the speculation lies in company execution more than in its product. The Tilray-InBev alliance focuses on research. Also, the investment by Constellation Brands (NYSE:STZ) in Canopy Growth (NYSE:CGC) has not yet brought a CBD-infused beverage to market. Hence, NBEV appears poised to take the first-mover advantage.
This could help establish a moat, at least from a brand perspective.
Investors should also remember that even though Monster’s lead product holds a smaller market share than Red Bull, MNST still became a $30-plus billion company. With New Age’s new product, the $510 million NBEV could become the Monster or Red Bull of CBD-infused drinks.
Still, these beverages have now become legal nationwide. Hence, it will have to get its product out to the 50 states and beyond quickly. It will also have to build a loyal customer base that will remain as peers roll out competing products.
We do not yet know which companies will lead the way in this market. Also, whether consumers show a sustained interest in CBD-infused drinks remains unknown. However, if New Age Beverage stock can make itself the investment name in CBD-infused beverages, it could enjoy a bright future.
The Bottom Line on NBEV Stock
Although speculative, CBD-infused drinks could become the product that sends NBEV stock higher in the years to come. Thanks to hemp legalization, New Age can now offer CBD-infused products across the country.
NBEV stock has risen in recent weeks following hemp achieving legal status. However, with this industry in its infancy, it remains unclear whether New Age Beverage stock will become the Monster Beverage of CBD-infused drinks.
New Age has a new product and a leadership team with experience in a related industry. However, it must move quickly to have any hope of establishing a brand moat before competitors enter the market.
Still, if one holds some speculative cash and believes in the management team, they might see huge gains over the next few years by buying NBEV stock.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.