Forget the ol’ puff, puff, pass. Marijuana producers are betting an increasing number of people would rather pour a drink infused with pot.

The Green Organic Dutchman Holdings Ltd. (TGOD.TO) plans to develop a product-testing and manufacturing center to explore using cannabis in everything from iced teas, juices and sports drinks, the company said Wednesday in a statement. That’s just the latest move by pot producers to get a footing in beverages.

While Canada has yet to pass the legislation that will make some forms of recreational pot legal this year -- including dried bud for smoking -- companies are already jockeying for position in the potentially lucrative beverage market. Although edible products, which could include hard candies, beverages, ice cream and baked goods, won’t be legal for at least another year, there’s been an “explosion of interest” in them, and six out of 10 consumers will probably choose to consume edible products, according to a June 5 report from Deloitte.

“Many consumers are used to drinking intoxicants as it is more socially acceptable to smoking/vaping,” Jason Zandberg, an analyst at PI Financial in Vancouver, said in an email. “I do believe cannabis-infused beverages will be a strong product category in Canada when this edible category is allowed.”

Outselling Soda

Beer and alcohol makers have taken notice and “are looking into their rear view mirror” at the potential threat, Charles Taerk, chief executive officer of Faircourt Asset Management in Toronto, said in a June 5 cannabis webinar. The combined medical and recreational marijuana market could be worth as much as $10 billion (US$7.7 billion) in the next five to seven years, and there are some studies that suggest sales of cannabis-infused beverages will outstrip traditional soft drinks by 2030 in convenience stores, he said.

Alcohol-free beverage company wants to make cannabis-infused drinks Terry Donnelly, CEO of Hill Street Beverage Co, talks about the company's application to Health Canada which could enable them to bring cannabis-infused wine and beer on the market.

Last year, Corona beer seller Constellation Brands (STZ.N) bought a minority stake in Canopy Growth Corp (WEED.TO), Canada’s largest marijuana producer. There will probably be at least one more major tie-up between an alcohol company and a pot producer, Beacon Securities analyst Vahan Ajamian said in a February note.

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Green Organic’s move comes amid speculation that the Ontario-based producer is a potential takeover target. Its research center provides a path for “large-scale beverage companies” to invest in the marijuana market directly or through a joint venture, the company said.

The rise in cannabis legalization could be bad news for traditional alcohol companies. Retail sales of beer and wine experienced a “sharp decrease” in U.S. states that have legalized medical marijuana, Bloomberg Intelligence analyst Kenneth Shea said in a Feb. 5 report, citing research from the University of Connecticut and Georgia State University.

Winnipeg, Manitoba-based producer Delta 9 Cannabis Inc. (NINE.V) plans to introduce next week its "Legal Lager," a rye-based beer that’s been infused with hemp seed and developed through the company’s partnership with craft brewer Fort Garry Brewing Co. While there’s none of pot’s psychoactive ingredients in the brew, the hemp gives it “a unique nutty finish,” and the plan is to eventually develop non-alcoholic beer that contains cannabis when regulations allow, said Delta’s Chief Executive Officer John Arbuthnot.

“We’re very bullish on the drinkables segment,” Arbuthnot said by phone. “We sat down and tried to envision where does cannabis fit into all of our lives and how could we complete cannabis being at a family dinner, and it didn’t seem to be in a joint or a vaporizer or even a brownie.”