Lexaria set to disrupt the cannabis infused beverage industry
Recently, Lexaria Bioscience Corp. (OTCQX: LXRP) (CSE: LXX) launched ChrgD+ described as a water-soluble, ready-mix hemp supplement powder packet formulation designed to be added to any drink, in any location, creating many innovative-use applications. A ‘disruptive technology’ is an innovation that creates a new market that disrupts and eventually displaces established market leading products and companies. While many make the ‘disruptive’ claim, few succeed. I believe ChrgD+ will be disruptive to the cannabis infused beverage industry. It is a sign of the times that we can talk about disrupting an industry that is in its infancy. But if you think about where the infused beverage industry is headed, I think you will agree with me.
LXRP’s ChrgD+ incorporates multi-spectrum hemp oil, processed using their patented DehydraTECHTM technology that allows effective delivery of hemp oil into any existing beverage, hot or cold. At just 2 grams per pouch, ChrgD+ packets can be carried and consumed anywhere in your preferred soft drink, coffee or energy drink with individual servings. ChrgD+ is nearly flavorless, colorless and odorless, offering minimal impact to your already-favorite beverage other than a distinctive food-grade pearlescent sparkle to remind you that you are getting ChrgD+. Chris Bunka, CEO, says the “…ChrgD+ product format is being evaluated by others for use in their psychoactive cannabinoid products sector as per our proven track record as a technology provider to the industry.”
In developing DehydraTECHTM, the technology underlying ChrgD+, LXRP had powdered forms of a range of formulations, including a water soluble beverage version, for their own testing and development purposes. LXRP has been incubating different ways to deliver both psychoactive and non-psychoactive cannabinoids as well as nicotine, vitamins, and certain pain relievers. ChrgD+ is an optimized beverage version that adds virtually no taste, colour or aroma to the final product. The company has engaged a formulator on a six month contract to produce a finished product that will have no taste, colour or aroma. This work is expected to be completed in January.
In addition, Lexaria has engaged Cultivating Wellness Inc, a California-based brand development and distribution company, to create the ChrgD+ premium brand. Cultivating Wellness’ distribution network reaches tens of thousands of retail buyers in convenience stores, grocery chains, specialty retail, and national accounts.
The cannabis beverage industry is evolving according to a business model that offers a CBD or hemp infused beverage. In other words, here is our hemp infused water, juice, beer, wine and so on. It happens my beverage of choice is Diet Coke. I have tried a range of diet beverages and Diet Coke is my preference. Others might choose Pepsi, RC Cola, Red Rock, etc. When CBD and THC infused beverages are legalized, if I want a CBD infused drink, for example, I am out of luck unless Coca-Cola makes a cannabis infused version of its diet cola. The same is true of any other beverage: water, wine, beer and so on. What ChrgD+ means is that a consumer can enjoy the beverage of their choice and infuse it currently with hemp and when legalized, THC or CBD. That, to me, will be disruptive of an industry that is barely off the ground.
Management has not lost sight of its basic business plan. It does not intend to become a consumer products business with ChrgD+ except for some proof of concept type branding and marketing. With the expectation that cannabis infused beverages will be approved in 2019, LXX plans to license the ChrgD+ technology to a major.
One of the advantages of investing in LXX is their potential opportunity to develop other disruptive technologies directed to nicotine, vitamins and pain relievers. From an investment valuation point of view, it is also worth noting that LXX has over 50 patent applications filed in 40 countries across nine patent families and at least seven more patent families planned. This is to go along with nine patents it already has. LXX has a substantial intellectual property portfolio that is growing rapidly.
In our assessment of the outlook for cannabis stocks, we have been looking for an event that will propel prices higher. Individual company stocks are also event driven and for Lexaria, we believe ChrgD+ could be such an event. We believe ChrgD+ has the potential to move LXX to the front of the infused beverages lineup. As always, there may be competitive technologies that emerge but if management can deliver on its promise to refine ChrgD+ so that the faintest flavour, aroma and colour can be reduced to effectively zero and with the speed and efficiency of delivery inherent in the DeHyraTECHTM technology, we believe ChrgD+’s competitive position will be strong.