Jan 28 2021 by MICHAEL BERGER
One of the most exciting verticals of the Canada’s cannabis 2.0 market is with beverages and this is a trend that we have been closely following.
From Constellation Brands, Inc. (STZ) to Molson Coors Beverage Company (TAP), we have seen multi-national beverage conglomerates enter the cannabis beverage market. These operators are selling tetrahydrocannabinol (THC) infused beverages in Canada and cannabidiol (CBD) beverages in the US. Going forward, we expect to this trend become more significant when federal regulation eases in the US and will monitor how cannabis operators adapt to a changing market environment.
In late 2020, Aphria Inc. (APH.TO) (APH) announced a transformation acquisition in the beverage space and reported an agreement to buy Sweetwater Brewing Company for approx. $300 million. The transaction provided the Canadian cannabis producer with significant infrastructure in the US and we expect it to accelerate the company’s ability to capitalize on the US market.
A few months after the agreement was announced, SweetWater announced the launch of a hard seltzer product line with Oasis® Premium Hard Seltzer. This is a vertical that has been gaining incredible traction in recent years and are favorable on the growth prospects that are associated with this market.
When compared to other large beverage companies, SweetWater has been slow to execute on the hard seltzer market and believe that this failure made the brand an attractive acquisition target for Aphria. If you look at the management team at Aphria, you will notice that several executives have years of experience working for leading multi-national beverage conglomerates and we find this to be significant.
The move that SweetWater made into the hard beverage market is expected to be a major revenue generator and we will monitor how the product line gains traction. We believe that the cannabis beverage market is in the early innings of a major growth cycle and expect to see Aphria follow a strategy that is similar to companies like Canopy Growth Corporation (WEED.TO) (CGC) and HEXO Corporation (HEXO.TO) (HEXO).
We believe the move into the hard seltzer market improves the visibility that is associated with the cannabis beverage opportunity. Over the next quarter, we expect Aphria to report significant developments with the cannabis beverage market and this is an opportunity that our readers should be aware of.
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