Cannabis, a canned lemonade drink, imported from Switzerland, was given to more than 200 children from schools in Aberystwyth, west Wales, attending the opening of a Sustrans route.
A spokeswoman for the British Soft Drink Association said today that an immediate investigation would be launched into the drink.
Owen Watkins, chief executive of Ceredigion County Council, ordered the drink off the shelves of a leisure centre's cafe when he realised what it was called.
Mr Watkins said the council had asked staff at the Plascrug Leisure Centre cafe, which is privately run and independent of the council, to provide refreshments for the cycling launch, but was "shocked" by what they were given.
He said: "We had asked for soft drinks to be supplied for the event. When I got the call to say that the drink was called Cannabis I ordered them to be taken away immediately.
"We have very strong views on dealing with drugs especially in schools. It is completely unacceptable to give children a drink called Cannabis."