Molson developing non-alcoholic drinks infused with cannabis

Molson Coors Canada the business arm of Molson Coors Brewing Co. says it has entered into a joint venture to develop non-alcoholic cannabis-infused beverages

Molson developing non-alcoholic drinks infused with cannabis

Molson Coors Canada and leading Canadian cannabis producer, The Hydropothecary Corporation (TSX:HEXO), announced a joint venture earlier this week.

They will form a standalone company with its own board of directors and independent management.

Hydropothecary would own the rest.

Molson Coors Canada president and CEO Frederic Landtmeters added that consumer acceptance of cannabis in Canada is on the rise and said the company believes "that's only going to continue".

The transaction is expected to close before September 30 on the Toronto Stock Exchange.

The move follows an announcement past year by Constellation Brands, which revealed it would will pay CAD 245 million ($191 million) for a 9.9% stake in Canopy Growth Corporation, a Canadian supplier of medicinal marijuana, paving the way for it to launch a series of cannabis-infused alcoholic drinks.

Industry experts have pointed to the stigma of smoking as one reason companies are developing smoke-free ways to consume cannabis once its recreational use is legal in Canada, as of October 17 this year. "Our full year underlying cost savings and free cash flow guidance has not changed, despite ongoing industry demand challenges in the U.S. and Canada and inflationary pressures".

Molson Coors Canada will have a 57.7% stake in the new company and Hydropothecary will hold the balance.

In a memo, Euromonitor's head of alcoholic drinks, Spiros Malandrakis, wrote: "There is a paradigm shift underway and cannabis has the potential to provide answers to the alcoholic drinks industry's existential questions".

Canopy Growth Corp. reached a deal last fall with Constellation Brands that saw the alcohol supplier invest $245 million for a 10 per cent stake in Canopy, and the two partner on marketing and product development.

Hunter added the JV with HEXO, which now operates a 300,000 sq. ft production space and is expected to complete a 1 million sq. ft. expansion before the end of the year, is another piece in the company's overall strategy to grow and diversify its non-alcoholic portfolio, which includes investments in Clearly Kombucha and ready-to-drink chai tea maker Bhakti Inc.

Molson Coors Brewing Co Class B (NYSE:TAP) last posted its quarterly earnings data on Wednesday, August 1st.

"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". The company reported $1.88 earnings per share for the quarter, beating analysts' consensus estimates of $1.83 by $0.05.

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