The big news for the week was undoubtedly Molson Coors Brewing Company's announcement that they had entered into a definitive agreement to form a joint venture with The Hydropothecary Corporation (HEXO) to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalisation. The deal is expected to close before September 30th.
Who are Molson Coors?
Molson Coors Canada is the Canadian business unit of Molson Coors Brewing Company. Headquartered in Toronto, it is North America's oldest brewer and Canada's second largest brewer by volume, selling approximately one-third of the total Canadian beer market in 2017.
Its portfolio consists of leading brands in all major product and price segments, including global priority brands Belgian Moon, Coors Banquet, and Coors Light, regional champion Molson Canadian, and other key owned brands, including Creemore Springs, Granville Island, Molson Dry, Molson Export, Old Style Pilsner, and Rickard's, and strategic distribution partnerships, including those with Heineken.
The joint venture will be structured as a standalone start-up company with its own board of directors and an independent management team. Molson Coors Canada will have a 57.5% controlling interest in the JV, with The Hydropothecary Corp having the remaining ownership interest. The new company will combine the proven beverage experience of Canada's leading brewer with a recognised innovator in the fast-growing cannabis sector to explore the highly anticipated consumable cannabis market, which is expected to be legally permissible in Canada in 2019.
This continues a trend of alcohol companies entering the cannabis industry. In October 2017, Constellation Brands bought into Canopy Growth (which subsequently sent the industry – and all stock – on a hyperbolic growth streak), and Ontario-based MedReleaf – now part of Aurora Cannabis – teamed up with Toronto's Amsterdam Brewing Co.. to create a "cannabis-inspired beer."
Alcohol purveyors are shifting from a defensive posture against the looming wave of cannabis legalisation toward a belief that legalisation can be an opportunity for product diversification. We expect to see more of these deals moving forward. As always, we will keep you posted.