The CEO of Whole Foods just dropped a hint that the grocery chain could soon start carrying marijuana products. It's a sign that the biggest consumer companies are 'looming' over the industry.

Jeremy Berke

Mar 5, 2019, 03:08 IST

The CEO of Whole Foods just dropped a hint that the grocery chain could soon start carrying marijuana products. It's a sign that the biggest consumer companies are 'looming' over the industry.

Thomson Reuters

John Mackey, Co-Founder and Co-CEO of Whole Foods Market, speaks at the Milken Institute Global Conference in Beverly Hills, California.

Whole Foods CEO John Mackey said "chances are good" that the organic grocery chain would carry marijuana products in states where it's legal.
Investors and analysts say the world's largest food-and-beverage companies are looming over the industry, strategizing about how to ride the upside of the cannabis wave.
It's an industry that could be worth $194 billion over the next six years.

Organic groceries and marijuana?

Though the overlap in consumers may be obvious to some, Whole Foods, the Amazon-owned grocery chain, has been relatively quiet about its interest in the booming marijuana industry - until last week.

In response to a separate question at a conversation hosted by The Texas Tribune over whether the organic grocer would start carrying products containing edible insects, Whole Foods CEO John Mackey brought up the recent wave of states legalizing marijuana.

"If cannabis is ever passed in Texas, chances are good that grocery stores will be selling that too," said Mackey. "You just never know what happens over time with markets. They change and evolve."

Mackey's comments are a sign that the world's largest consumer companies are scrambling to try and figure out how to ride the upside of the cannabis craze as some have dealt with sluggish sales and declining stock prices. It's an opportunity that some investment bank analysts say could skyrocket to $194 billion globally over the next six years.

Last year, Constellation Brands, the beermaker behind brands like Corona and Modelo, paid $4 billion for a 38% stake in the Canadian cultivator Canopy Growth, setting off a wave of tie-ups between consumer giants and cannabis companies.

Constellation's incoming CEO Bill Newlands called cannabis "one of the most significant global growth opportunities of the next decade" on a recent call with investors.

Molson Coors also entered a joint venture with Hexo, a smaller Canadian marijuana producer, to produce marijuana-infused beverages for the Canadian market. (Canada federally legalized marijuana in October).

Hollis Johnson/Business Insider

A marijuana-infused edible gummy.

And Heineken has developed a cannabis 'beer' it sells through its California-based brand, Lagunitas.

Apart from beermakers, more traditional food-and-beverage companies are "looming" over the sector, said Korey Bauer, a managing director at Foothill Capital Management and the portfolio director for the newly-launched Cannabis Growth Fund

Bauer said he's spoken to executives at a number of consumer-packaged goods companies who've signaled that they're interested in cannabis.

"I think that's the next wave," said Bauer.

Is Starbucks next?

Analysts at the investment bank Cowen said they expect Starbucks to be the first coffee chain to introduce products containing CBD, a non-psychoactive component of marijuana that's thought to have some health benefits - once the Food and Drug Administration (FDA) clarifies its policies around using CBD as a food product.

"The dynamics are fluid, likely delaying adoption from major coffee players like Starbucks in the near term," the analysts wrote. "That said, we acknowledge a longer-term opportunity" once Starbucks understands the science and is able to properly control the dosage and consistency of the product.

Coca-Cola, for its part, was reportedly eyeing a CBD-infused beverage deal last year, though the company shot down those rumors on an October call with investors.

But some retailers have struggled to integrate marijuana products into their stores in jurisdictions where marijuana is legal, owing to the challenges navigating the often byzantine regulations in the brand-new industry.

Last year, Walmart's Canadian division said it would explore offering vaporizers and products containing CBD in its stores.

That seems to have been short-lived. In February, Walmart Canada pulled a marijuana vaporizer owned by Canopy Growth off the shelves and told Marijuana Business Daily, a trade publication, that it had no plans to carry cannabis or cannabis-related products.

That hasn't stopped a wave of consumer packaged goods execs from decamping to greener pastures - in this case, cannabis startups.

Peter Horvath, the CEO of Ohio-based Green Growth Brands, came to the cannabis industry with a wealth of experience across retailers, including American Eagle and Victoria's Secret. Green Growth is backed by the billionaire Schottenstein family, who own a large stake in the grocery chain Albertson's.

And Chris Burggraeve, the former chief marketing officer of AB InBev and an alum of Coca Cola and Proctor & Gamble, called CBD the new "avocado toast" in a recent interview with Business Insider.

Burggrave founded an upscale marijuana brand, Toast, in 2016. He says more of his former peers from the consumer world will start exploring cannabis deals.

"This industry has evolved substantially in a short period of time," said Burggraeve. "We ignore it at our peril."