This was a big week for healthy beverage firm New Age Beverages (NASDAQ:NBEV). NBEV stock made its way more than 21% higher on Monday after the firm inked a distribution deal with none other than Walmart (NYSE:WMT).
The superstore’s massive reach got investors excited about the future of New Age Beverages, and rightly so — teaming up with Walmart should be a boon for the firm’s expansion. But before you rush out to buy NBEV stock on news of the deal- here are three things you should consider.
Cannabis Infusion
One of the big reasons New Age Beverages stock has been on investors’ radar at all is the fact that the company is working to develop cannabis-infused beverages. Anything marijuana-related is of interest right now with the pot market expected to deliver explosive growth and NBEV’s mainstream energy drinks could be a great way to gain some exposure without investing in a grower or distributor.
However, there are a few things to keep in mind when it comes to NBEV’s cannabis aspirations. The company is using CBD in its “relaxation” drinks. CBD doesn’t contain THC and therefore doesn’t cause a high, which makes it easier to sell than run-of-the-mill marijuana. The drink line launched this year, but it won’t be sold at Walmart. So far, the distribution deal doesn’t include the cannabis-infused drinks.
It remains to be seen exactly how cannabis beverages play out — the Food and Drug Administration is due to hold a public hearing at the end of May to discuss how safe cannabis-derived products are, and how their marketing should be handled. The outcome of the meeting could set a precedent for how NBEV proceeds with the new line of drinks.
Healthy Energy
Another big reason investors like New Age Beverages’ Marley drinks is that they are perceived to be healthy. Unlike rival energy drinks which are often looked down upon by the health community, Marley Mate is described as a healthy way to get an energy boost without the crash of coffee. The drink has the lowest sugar, calorie and carbohydrate count of all yerba mate options on the shelf right now.
There’s been a great deal of growth in healthy food and beverage segments recently and NBEV has emerged as a good way to get a slice of that pie. If the Marley Mate gains traction in Walmart, it could be a great way to set up the CBD drinks for success. Right now cannabis-infused drinks are a bit of an enigma, but positioning them as a health drink could be a great way for NBEV to reach out to a much larger market when the beverages become available.
More Than Mate
Another big point to remember is that NBEV’s deal with Walmart only includes Marley Mate right now. The brand sells different flavors of the yerba mate drink, three of which will be available in Walmart stores, but so far that’s where it ends. In addition to yerba mate and CBD drinks, Marley offers a line of cold-brew coffee drinks as well.
It remains to be seen exactly how the Walmart deal will play out and whether the superstore will pick up more of the firm’s beverages. A lot of that likely depends on whether NBEV’s marketing push will draw enough attention to Marley brand drinks to maintain the brand’s momentum. Last year, NBEV saw demand rise by upwards of 70%, thanks in large part to Marley brand drinks, and management vowed to up their marketing game this year as a response. Those marketing efforts, which include a variety of approaches, including GeoFraming campaigns and digital coupons, will play a key role in whether the Walmart partnership moves forward.
The Bottom Line on NBEV Stock
It’s not hard to understand why NBEV stock had a massive leap on Monday. The firm’s Walmart deal is big news and the stock deserved a lift. Now the question is whether the rally can continue. Of course, cannabis stocks tend to be volatile and a pop like this could be dangerous. But, luckily for investors, NBEV isn’t just a pot stock.
Although the company’s Marley beverages are in the spotlight now, it’s important to note that the firm also has a portfolio of other non-alcoholic drinks. At the end of 2018, the firm acquired Morinda Holdings, a health beverage company with access to 60 countries across the world. The Morinda deal importantly gives NBEV access to China and Japan, a massive leg up for its portfolio of drinks.
The bottom line here is that New Age Beverages stock is well-positioned for future success both inside and outside the marijuana market. The Walmart deal marks a huge stepping stone for the firm, but it’s likely just a first step to greater success.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
