The countdown to the official nationwide legalization of recreational marijuana use in Canada has beverage companies scrambling to establish their place in this growing market. On Wednesday, Molson Coors joined the trend by partnering with Canadian cannabis company The Hydropothecary Corporation to manufacture cannabis-infused beverages.
The popular beer manufacturer’s Canadian unit has been talking with Canadian cannabis companies since June, according to Bloomberg. However, the company did not confirm these conversations when then they were asked about it. Wednesday’s news confirmed the company’s intentions to enter the cannabis-infused beverage market in Canada.
The alcohol company claims that this partnership will enable them to produce non-alcoholic, cannabis-infused beverages for the Canadian market after legalization. Through this joint venture, Molson Coors and Hydropothecary will develop a standalone start-up company that will have its own regulatory board of directors and management team. Molson Coors will have a 57.5 percent controlling interest in the joint venture, while Hydropothecary will have control of the remainder. This joint venture will utilize Molson Coors’ expertise in beverage formulation and Hydropothecary’s experience in the cannabis market to create consumable edibles, which are expected to be legal in Canada by 2019.
“Canada is breaking new ground in the cannabis sector and, as one of the country’s leading beverage companies, Molson Coors Canada has a unique opportunity to participate in this exciting and rapidly expanding consumer segment. This new venture is consistent with our growth strategy and our commitment to being first choice for consumers and customers by ensuring that Canadians have access to high-quality products that meet their evolving drinking preferences,” said Frederic Landtmeters, President and CEO of Molson Coors Canada in a statement.
This announcement comes after Molson Coors reported that their second-quarter net sales fell to three billion and 85 million dollars from three billion and 91 million dollars the year before. This decline in sales was disappointing and surprising for Molson Coors as analysts were forecasting their sales to hit $3.1 billion. In addition, the company’s sales declined by over three percent in the US as well. However, they did fare well in European markets where sales rose by more than 11 percent.
Molson Coors’ new partnership might help the alcohol manufacturer stay relevant in the Canadian market after legalization as the cannabis industry has the potential to steal some of the alcohol industry’s revenue. In fact, a research report by Cannabiz Consumer Group found that the beer industry could lose over $2 billion in sales to the cannabis industry. Additionally, market research firm, Cowen & Co forecasts that the recreational cannabis market could be worth $50 billion by 2026.
This potential revenue is why major alcohol companies such as Constellation Brands and Heineken are tapping into the cannabis market. As more states in the US legalize recreation cannabis, it is likely that there will be a lot of competition in the cannabis market in the near future. For now, Canada seems to be a great place to start producing and selling cannabis-infused beverages.
“We are excited about this partnership with Molson Coors Canada, an iconic leader in adult beverages, as we embark on the journey of building a brand new market. With this new company, we are bringing together Quebec’s oldest, most established company with one of its newest success stories in a truly innovative partnership,” said Hydropothecary’s CEO and co-founder Sebastien St-Louis in a statement. “As two leading companies who share a track record of excellent practices, as well as respect for law and regulations, Hydropothecary and Molson Coors Canada have established a relationship built on trust, and together we will develop responsible, high-quality cannabis-infused beverages for the consumable cannabis market in Canada.”