AriZona Iced Tea to partner on cannabis-infused products

AriZona Beverages,  based in Woodbury, has agreed to partner with a Denver company to make and market cannabis-infused products such as AriZona gummies with THC, the companies announced Wednesday.

The agreement calls for Denver-based Dixie Brands Inc., which makes cannabis-infused taffy, fruit punch,  chocolate bars and other products, to develop and formulate the AriZona-branded goods.

Domenick Vultaggio, co-founder and chief executive of closely held AriZona, said that the partners are "expecting to introduce THC-infused gummies and vape pens," adding "the possibilities are endless."

THC (tetrahydrocannabinol) is the psychoactive ingredient in marijuana.

Vape pens, also known as e-cigarettes, heat a liquid concentrate to produce a vapor that can deliver THC, nicotine or other substances.

AriZona Iced Tea with THC is not on the drawing board, but "may be a possibility at a later date," Vultaggio said.

Vultaggio said the companies plan to roll out AriZona branded products in California, Colorado, Michigan and other states.

The Long Island iced tea company signed a "binding letter of intent" on Friday with Dixie Brands.

The three-year agreement would include an option to renew for up to two additional two-year terms.

 "AriZona has always led the way in product innovation," Vultaggio said. "The cannabis market is an important emerging category, and we've maintained our independence as a private business to be positioned to lead and seize generation-defining opportunities exactly like this one."

"AriZona is a power brand," Chuck Smith, chief executive of Dixie Brands, said in the news release.

He said AriZona will provide "the evolving cannabis consumer with a fun and flavorful experience alongside an iconic brand."

The letter of intent calls for Dixie and AriZona to reach a licensing agreement granting Dixie the right to use specified AriZona trademarks and other intellectual property. The agreement also would allow AriZona or an affiliate to invest up to $10 million in Dixie warrants   at a price of 59 cents. Warrants give holders the right to buy newly issued stock at a specified price until their expiration date.

Shares of Dixie Brands jumped 19.7 percent to 75 cents in over-the-counter trading Wednesday afternoon. 

Dixie operates in six U.S. states. In 2012, Colorado and Washington became the first states to legalize cannabis for recreational use.

Legislation to legalize recreational marijuana and related products remains stalled in New York State but has been ratified in 11 states and Washington, D.C.

In 2015, Vultaggio agreed to a $1 billion settlement in State Supreme Court to buy out the 50 percent stake in AriZona held by co-founder John Ferolito and a family trust. The agreement resolved a long-running legal feud between the co-founders.

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.