Molson Coors Brewing Co. is betting on pot by starting a joint venture with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused beverages for the Canadian market.
The partnership between Molson Coors Canada and Quebec-based cannabis producer Hydropothecary will be structured as a standalone company with its own board and management team. A chief executive officer will be named in the coming weeks.
“We decided entering the cannabis space would provide us with a real growth opportunity,” Frederic Landtmeters, CEO of Molson Coors Canada, said in a phone interview. After talking with several potential partners, Molson Coors chose Hydropothecary because of its research and development capabilities, its loyal customer base and its strong brand, he said.
The partnership is a first for a major brewer with operations in Canada, where recreational marijuana will become legal on Oct. 17. Though cannabis-infused edibles and beverages won’t initially fall under the provisions of the law, Molson and Hydropothecary expect those products will become legal sometime in 2019.
‘Staggering’ Potential
The companies declined to provide financial metrics, but Hydropothecary CEO Sebastien St. Louis said the potential market size for cannabis beverages is “staggering.” He said the deal with Molson Coors will give his company, which is renaming itself HEXO Corp., the opportunity to be a first mover.
“They’re bringing capability as a Fortune 300 company that quite frankly no cannabis company even comes close to replicating,” St. Louis said.
Molson Coors will have a 57.5 percent stake in the company and three board seats, while Hydropothecary will hold the remaining stake and two board seats. The transaction is expected to close before the end of September. As part of the deal, Hydropothecary will issue share warrants to Molson.
The deal comes as more mainstream companies are showing interest in the cannabis space. 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.
The beer makers might be hedging their bets. Sales of alcoholic beverages declined significantly in states that legalized medical marijuana, according to research by the University of Connecticut and Georgia State University.
This article was provided by Bloomberg News.