Molson Coors Canada creates JV for cannabis beverages

Roman Schwartz
August 4, 2018

Molson Coors Canada and leading Canadian cannabis producer, The Hydropothecary Corporation (TSX:HEXO), announced a joint venture earlier this week. This new venture will function as a stand-alone startup company that has its own independent management team and board of directors.

Molson Coors will have a 57% controlling interest in the unnamed joint venture project.

Hydropothecary would own the rest.

The Molson Coors Brewing Company is joining the cannabis game.

Recreational cannabis will become legal across Canada on October 17th, and the clock is ticking.

"We believe that the merger of the cannabis and beverage industries hold great potential for investors looking to reap the benefits of innovation in the space", a group of analysts at Beacon Securities, a Toronto-based investment bank, said in a note.

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Like the other women interviewed for this article, Sabina did not wish to have her surname published for fear of harassment. I get more smiles on the street and people are asking me more questions", said Ayah, 37.

"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".

These deals appear to be hedges against falling alcohol sales where legal cannabis has been introduced.

The regulatory framework around edible and drinkable cannabis products likely won't be in place until 2019, said Molson Coors. "Our full year underlying cost savings and free cash flow guidance has not changed, despite ongoing industry demand challenges in the USA and Canada and inflationary pressures". Alcohol giant Constellation Brands Inc., the maker of Corona beer, bought a stake in Canadian pot producer Canopy Growth Corp. last year, and cigarette maker Imperial Brands Plc last month took an equity stake in closely held Oxford Cannabinoid Technologies.

Gatineau, Quebec-based HEXO now operates with more than 300,000 square feet of production capacity with an additional 1,000,000 square feet of expansion set to be completed by the end of the year.

The Molson Coors brewery in Montreal. 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.

"Although the industry faced another tough quarter due to a challenging April as well as the impact of holiday mismatches, we are dissatisfied with our overall market share trends and we will continue to focus on reinvigorating Coors Light while maintaining the strong improvements in Miller Lite and continuing to accelerate our performance in above premium to improve both top and bottom line results", Hunter said.

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