Why Beer Makers Are Embracing Cannabis
Updated: Sep 10, 2019
With the spread of cannabis legalization throughout North America, a whole new mainstream industry is being born. But why is it falling to beer makers to take advantage of this compelling trend?
Who ever said you shouldn’t mix beer and weed?
At the end of August, Boston Beer (NYSE: SAM) CEO David Burwick said that the Samuel Adams-maker was “looking at” entering the cannabis market. The announcement came as no surprise to investors, who have in the past few years become more than used to the partnership between marijuana and Big Alcohol.
The rise of cannabis as a commodity is directly linked, of course, to its legalization and decriminalization in Canada as well as across a number of U.S. states. Currently, weed is legal in 11 states, two territories, and the District of Columbia, although the substance is still forbidden at federal level. That last part is particularly important, as the federal ban prohibits U.S. companies from listing on domestic stock exchanges or raising capital from investors. As a result, the big winners in the space have so far been Canadian.
The movement towards legalization is also catching on around the world. In Europe, most people associate weed culture with the hazy coffee shops of Amsterdam. In fact, marijuana is technically illegal in The Netherlands, but the law goes mostly unenforced as a result of the country’s “tolerance” policy. However, the tiny country of Luxembourg has revealed that it will become the first in Europe to officially allow the substance. Elsewhere, New Zealand will hold a referendum next year on the question of legalization.
This trend has not gone unnoticed by big business. Last year, after Canada became the largest developed nation to legalize marijuana, beer maker Molson Coors (NYSE: TAP) took a 57.5% stake in Quebec-based weed producer The Hydropothecary Corporation (TSX: HEXO). Around the same time, Heineken’s (AMS: HEIA) popular Lagunitas brand launched a weed-infused sparkling water product, while Anheuser-Busch InBev, the world’s largest brewer, partnered with Tilray in a $100 million deal. In the most sizeable investment of them all, Corona-maker Constellation Brands (NYSE: STZ) spent $4 billion for a minority stake in Canadian weed company Canopy Growth (TSE: WEED).
One of the factors that links these separate ventures is the ambition to popularize a new class of consumer product: the pot-infused, non-alcoholic beverage. For obvious reasons, the general public does not yet have much of a taste for marijuana drinks, which make up only about 3% of total legal cannabis sales. But the world’s major beer producers -- perhaps driven by a decline in consumption of their core products, at least in the U.S. -- appear jointly convinced that the correct combination of quality and marketing will bring the newborn beverage into the mainstream. So far, the release of Heineken’s Lagunitas Hi-Fi Hops would suggest that one marketing strategy will be to position infused drinks within the “health and wellness” category.
We have also learned from Boston Beer’s latest announcement that new businesses are still entering the race to win the drinkable cannabis prize. “We’re not going to be the first one in,” Burwick himself admitted in an interview, adding that the Boston Beer will “play it sometime down the road.”
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Constellation Brands. Read our full disclosure policy here.