CBD company strikes deal to enter sports nutrition segment
Canopy Growth, an Ontario-based leader in the Canadian marijuana industry, has bought a majority stake in BioSteel Sports Nutrition, a Toronto-based producer of athletic nutrition and hydration products. The cash transaction gives the cannabis producer a 72% stake in BioSteel on the path to 100% ownership. Terms were not disclosed.
Growing Strategy
Canopy Growth says the transaction is part of a growth blueprint, which will pave the way for Canopy Growth to enter the sports nutrition and hydration market. Founded in 2009, BioSteel distributes unsweetened sports drinks in Canada, the US and Europe.
Canopy Growth CEO Mark Zekulin said the company views the adoption of CBD in future BioSteel products to be a “potentially significant and a disruptive growth driver” for the business.
CPG strategist Joshua Schall of J. Schall Consulting agreed. He told NutraIngredients-USA the deal, “adds validity and credibility to the growing CBD-based active nutrition market. Canopy Growth is one of the largest marijuana companies in the world and instead of trying to create nutritional supplement offerings themselves, they sought out a deal with an established and highly-regarded brand in the supplement industry.”
The acquisition is also a precursor for CBD product offerings in accordance with US regulations and beyond. In June, Canopy Growth announced its plans to open up hemp processing facilities in seven US states in the coming months. Earlier this year, the company announced plans to enter the US cannabis market, starting with the construction of a $150 million industrial Park in Kirkwood, New York, for hemp-derived CBD extraction and processing.
CBD: MVP?
“The use and acceptance of CBD-based products in the professional sports landscape has changed. We have witnessed the negative effects of prescription painkillers and athletes are looking for healthier alternatives,” said Michael Cammalleri, co-founder and co-CEO of BioSteel Sports Nutrition.
The company boasts several high-profile brand ambassadors including NHL Hall of Famer Wayne Gretzky and current Dallas Cowboys star Ezekiel Elliott.
Elliott’s deal with BioSteel “allows them to activate the star running back as the leading endorser of CBD products once permitted by the NFL. To date no active player has been able to do so,” according to the statement.
John Celenza, co-founder and co-CEO of BioSteel Sports Nutrition, says “The consumer market and many of our athletes have a growing knowledge of cannabis and CBD products and this partnership ensures that we will continue to raise the bar in the sports nutrition field."
CBD-infused drink sales on the rise
Last year, the global sports drinks market was valued at $22.37, according to Grand View Research. The firm predicts the segment will see a 7.8% CAGR in the US. CBD-infused drink sales are expected to jump from $227 million this year to $1.4 billion in 2023, according to a report by food and drink consulting firm Zenith Global.
Expect to see ‘a slew of activity’ in the M&A market
Schall predicts the the non-pharmaceutical CBD market will be driven by three main product segments - topicals/skincare/beauty, food/beverage, and nutritional supplements. “If a marijuana company wants to get access to these product segments, they can either create brands from scratch or acquire existing brands. I think this transaction will strike up some interesting conversations between the other integrated marijuana companies and supplement brands. Alternatively, I think the M&A market will really heat up when CBD becomes federally legal in the US and big CPG players can actively join the market. You will see a slew of activity happen aggressively when the regulatory environment in the US is cleared up, hopefully in 2020,” he said.
