Heavenly Rx, a hemp portfolio company tied in with cannabis investment firm SOL Global Investments
invested $9 million to buy fifteen million shares of Jones Soda. This brings their ownership stake in the Seattle soda company to 25%. The infusion is a welcome respite for Jones, which has been accumulating losses.
In the arrangement, Heavenly Rx received a warrant to acquire an additional 20% stake and was granted the right to acquire stock in the open market to bring its shares up to 51%. Heavenly Rx’s move follows an investment made earlier this year by SOL Global, which purchased a 10% stake in Jones. Clearly, they believe in this soda brand and its ability to get buyers to try the CBD concoctions.
What is Jones Gonna Do With the Money
Jones is using the money to develop beverages featuring cannabidiol aka CBD. As you already know if you are reading this, CBD is the non-psychoactive cannabis compound that claims to have health and wellness benefits including, reducing pain, lowering anxiety, and reducing inflammation.
“It’s a good product extension for the Jones brand to drive growth,” said Jones Soda CEO Jennifer Cue.
Jones has a penchant for trying new things. This is the same company that once bottled a “Thanksgiving Dinner” soda and has churned out a rainbow of uniquely flavored beverages in bottles plastered with customer-shot photography.
But unfortunately, sales have slumped as many have shifted away from sugary soft drinks. Jones has responded, though. They reduced sugar in their line of sodas, they created sugar-free beverages and launched a non-carbonated lemon and coconut drink called Lemoncocco
A Needed Cash Injection
Financial records show that the company’s sales have been on a decline for the past three years. It closed out 2018 with $12.6 million in revenue, down from $13.3 million the year before. Its net loss widened to $2.1 million from $1.3 million.
2019 hasn’t been much better. Sales were $2.8 million during the first three months of the year and Jones reported a bigger loss in the same period.
Heavenly Rx CEO Paul Norman, who joined the Toronto firm recently after a 30-year career at the Kellogg Company, said he believes the opportunities for CBD drinks are immense.
And although there has been a surge of hemp-derived CBD products since hemp gained protections under the 2018 US Farm Bill, the market remains fractured and filled with smaller, lesser-known brands, he said.
Norman believes Jones has the opportunity to be a big-name brand in the space. “The category is going to grow to north of $20 billion,” he said. “It’s going to grow in a big part due to growth in mainstream distribution.”
The amount of growth will heavily depend on regulation. The US Food and Drug Administration
, which oversees food products and additives, is reviewing whether hemp-derived CBD extracts can be included in food, drink and personal care products.
If the FDA gives a green light, Jones won’t hesitate to jump in, CEO Cue said.