JOINT VENTURE: Molson partners with Quebec's HEXO to develop cannabis-infused beverages

Aug 04, 2018, 05:52
JOINT VENTURE: Molson partners with Quebec's HEXO to develop cannabis-infused beverages

Beer maker Molson Coors (TSX: TPX.B) has partnered with a Quebec-based cannabis company called Hexo to develop non-alcoholic, cannabis-infused drinks in Canada.

Molson Coors Canada will have 57.5% controlling interest and remaining stake with Hydropothecary, in the joint venture.

Weed beer has been something talked about ever since it became clear that the federal government was going to legalize marijuana. Molson Coors will control 57.5% of the now unnamed venture, the company said in a news release.

"While we remain a beer business at our core, we are excited to create a separate new venture with a trusted partner that will be a market leader in offering Canadian consumers new experiences with quality, reliable and consistent non-alcoholic, cannabis-infused beverages".

"There is a paradigm shift underway and cannabis has the potential to provide answers to the alcoholic drinks industry's existential questions", said Spiros Malandrakis, head of alcoholic drinks at Euromonitor. At the time of the announcement, the two companies said they'd work together to make cannabis-based drinks for distribution in jurisdictions where those products are legal.

He said the marijuana industry could fuel alcohol's next growth cycle or instead suffocate an industry already on the defensive.

Legal adults will be able to purchase smoked and vaporized forms of marijuana in October, but edibles and other ingestible cannabis products aren't expected to be available for sale until sometime in 2019.

The companies aim to develop non-alcohol cannabis beverages for the Canadian market once it becomes legal, after the country voted to legalise recreational use of the drug last month.

Last year, Corona beer-maker Constellation Brands Inc became the first major beer and spirits producer to partner with a Canadian marijuana producer, picking up a almost 10 percent stake in Canopy Growth Corp.

HEXO, based in Gatineau, Que., now has more than 300,000 square feet of production capacity with an expansion more than three times that size to be completed by the end of the year. HEXO is the name of a recreational cannabis brand recently launched by Hydropothecary, as well as the company's current ticker symbol on the Toronto Stock Exchange. Deprince Race & Zollo Inc. owned approximately 0.14% of Molson Coors Brewing Co Class B worth $20,590,000 at the end of the most recent quarter. The company reported $1.88 earnings per share for the quarter, beating the Thomson Reuters' consensus estimate of $1.83 by $0.05.

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