With CBD garnering attention from consumers all over the world, businesses far and wide are gearing up to capitalize on what could very well become the functional drink subsegment of our generation: CBD-infused beverages.

Recent embargoes on CBD in the United States, however, have left the fate of the CBD-infused beverage market in the hands of Canadian cannabis LPs for the time being.

Thanks to the recent appointment of 4 new big beverage executives, it appears that Tilray(NASDAQ: TLRY)—one of Canada’s leading marijuana producers—is quickly emerging as one of the potential leaders of the CBD-infused beverage market. 

But what exactly could Tilray’s new hires mean for the future of CBD-infused beverages in Canada?

Tilray’s New Beverage Executives

Fresh off of their previously announced partnership to research cannabis-infused non-alcoholic drinks with Anheuser-Bush InBev SA, Tilray has announced the appointment of 4 new senior executives—all of which who have worked for some of the world’s foremost Fortune 500 beverage companies, specifically Nestlé, Diageo, Coca-Cola, and Starbucks.

Via Tilray,

“We are pleased to have these experienced leaders join our team as we continue to disrupt the global pharmaceutical, alcohol, CPG and functional food and beverage industries,” says Brendan Kennedy, Tilray CEO.

Note the key phrase: functional beverage industry. Two of Tilray’s newly appointed executives, Greg Christopher (EVP of Operations) and Dara Redler (General Counsel) come from Nestlé and Coca-Cola, respectively—two of today’s biggest players in the functional drinks market.

CBD Could Disrupt The Functional Drinks Market

It’s no wonder why Tilray would be aiming to disrupt the functional beverage market.

According to a report by Technavio, the global functional drink market will be worth an estimated US$277.7 billion by 2020.

And with the hemp and CBD market expected to reach US$22 billion by 2022 according to a report by the Brightfield Group, CBD-infused beverages are quickly shaping up to become a significant subsegment of the functional drinks market, especially given the potential for CBD’s crossover into virtually every other subsegment of the functional drinks market (ie. fruit and vegetable juices, sports recovery beverages, energy drinks, ready-to-drink teas, and enhanced waters).

Given that recreational marijuana is still illegal in much of the world, some may argue that the potential crossover between CBD and the broader functional drinks market is overblown.

However, it’s important to keep in mind two key trends:

  1. The global functional drink market is largely dominated by the Americas, and 
  2. Both North and South American countries that have not yet already legalized cannabis are increasingly moving towards marijuana legalization

Tilray’s new beverage executives may indicate more than just a desire to disrupt the functional beverage market—it may also signal a desire to disrupt cannabis retail.

CBD-Infused Beverage Retail Is Overlooked

The retail side of CBD-infused beverages has received little attention, likely due to the fact that cannabis edibles (in both solid and beverage forms) will not be legal until late 2019

But considering the disruptive potential of CBD in the functional drinks market, it would be a grave mistake for Canadian LPs to disregard the importance of a distinct CBD-infused beverage retail experience.

That’s why it’s worth taking a closer look at Charlie Cain—Tilray’s newly appointed VP of Retail. Prior to Tilray, Mr. Cain served as CEO for Dockside Cannabis and before that, Vice President of Retail Operations, Concept & Development for Starbucks.

 Mr. Cain has a considerable amount of experience in the tea industry—which is likely the reason that when Starbucks acquired Teavana for $620 million in 2012, Mr. Cain was placed at the helm. 

Unfortunately, Starbucks made the decision to shut down all 379 of Teavana’s stores in 2017, citing sales underperformance and declining mall foot traffic (much to the pleasure of DAVIDsTEA shareholders across the globe).

Nonetheless, tapping Mr. Cain may be Tilray’s way of preparing for a unique CBD-infused beverage retail concept, as well as the seemingly inevitable demand for ready-to-drink (RTD) cannabis-infused beverages. 

The Race For CBD-Infused Beverage Market Share Quickens 

With the popularity of CBD reaching a fever pitch, the emerging CBD-infused beverage drink subsegment has the potential to turn the entire functional beverages market on its head. 

As billion dollar cannabis companies like Tilray bolster their management team in possible preparation for the advent of CBD-infused beverages, investors should pay close attention to if, and how, Tilray’s competitors respond in kind, as increased competition could indicate that industry consolidation is on the way.