30 June 2021
Prior to merging with Tilray, Inc. (TSX: TLRY) (Nasdaq: TLRY), Aphria acquired Sweetwater Brewing Company for approx. C$300 million.
When we first learned about the acquisition of the US craft beer company, we became increasingly excited about Aphria’s leverage to the cannabis beverage market. One cannabis is legalized at the federal level in the US, we expect SweetWater to provide the company with significant infrastructure and distribution in the US.
Earlier this week, SweetWater announced a major development and started a collaboration with Broken Coast Cannabis Ltd., which is considered to be a leading Canadian craft cannabis brand. The collaboration will offer a coastal lager and we expect the product line to gain traction with consumers.
For more than six month, the companies have been focused on advancing the collaboration and we are favorable on the amount of time that was put into the creation of the product. The companies said the product genuinely aligns with Broken Coast’s West Coast vibe and we find this to be an important aspect of the story.
SweetWater’s Broken Coast BC Lager is available exclusively in the US (on draft in bars, restaurants, and select retail locations) and expects to launch a 6-pack in mid-July. We expect the launch of the product to serve as a catalyst for growth at Tilray and will monitor how the collaboration expands over the next year.
Tilray’s management team has considerable experience in the alcohol industry, and we classify this as a core pillar of the story. We expect the management team’s relationships to play an important role in the growth of Tilray’s beverage business and expansion in the US.
Cannabis Beverages have Become a Big Business
A few months ago, Marijuana Business Daily published an article that showed a significant increase in the amount of cannabis beverage revenue in 2020 (from a percentage of total US cannabis sales revenue standpoint). When compared to 2019, the increase in revenue is substantial and this is a trend that we expect to continue as cannabis continues to be accepted by and available to a larger part of the US population.
Two high-profile Canadian Licensed Producer (LPs) that are capitalizing on the cannabis beverage market are Canopy Growth Corporation (WEED.TO) (CGC) and HEXO Corporation (HEXO.TO) (HEXO). The company have formed strategic relationship with leading alcohol companies Constellation Brands, Inc. (STZ) and Molson Coors Beverage Company (TAP), respectively.
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