Late Wednesday afternoon, Canadian cannabis company Tilray announced a joint venture initiative with beer giant AB InBev. The two companies have committed to spending $50 million each to explore the development of non-alcoholic cannabis drinks.
The entry of the world’s biggest brewer into the fast-changing‚ rapidly expanding cannabis industry generated a lot of buzz, even though AB InBev is playing catch-up with Molson Coors and Constellation Brands. (Favourite mainstream media miss-take goes to the Financial Times: “The involvement of the drinks company behind Budweiser in recreational cannabis brings new legitimacy to an industry previously the domain of drugs cartels.”)
For now it’s a Canada-only research deal—figuring out ways to infuse drinks with tetrahydrocannabinol, (THC) and cannabidiol (CBD) ahead of next October’s legalization of edibles and beverages. “Decisions regarding commercialization will be made in the future,” was the official line in the press release.
AB InBev’s participation is through Labatt Breweries of Canada. “Labatt is committed to staying ahead of emerging consumer trends,” said Kyle Norrington, president, Labatt Breweries of Canada. “As consumers in Canada explore THC and CBD-infused products… We intend to develop a deeper understanding of non-alcohol beverages containing THC and CBD that will guide future decisions about potential commercial opportunities.”
In an on-air interview with Bloomberg Thursday, Tilray CEO Brendan Kennedy said they signed the deal with AB InBev in order to have products ready for when edibles and beverages become legal in Canada. Tilray has been working to resolve key challenges like solubility and time-to-onset and time-to-peak-effect.
“With AB InBev we will work on other problems, such as what is the right flavour, what is the right packaging, what is the right brand for these various products to launch in Canada,” he said. “And we are excited to launch them in Canada sometime next October when the new regulations come into effect.”
Some of the products will be similar to beer and wine. “They’ll have a rapid time to onset—15 minutes—there will be no calories and they won’t leave people with a hangover the next day,” he said. The company is also working on drinks catering to exercise recovery and to help people sleep and relax.
While Tilray’s stock enjoyed a brief spike after the news broke, it has since trended downward. At the Motley Fool on Friday, Keith Speights said the market was underwhelmed by the deal for three reasons: It’s a joint venture only in Canada, and there’s no direct cash infusion for Tilray. Speights also didn’t like the statement about commercialization being a down-the-road thing. “That phrasing doesn’t provide a warm-and-fuzzy feeling that Tilray has found itself a committed partner.”
And finally, Speights pointed out that Altria, which owns 10% of AB InBev, likely plans to develop cannabis drinks of its own through its just-announced 45% stake in Cronos and probably won’t feel great about AB InBev producing competitive products.
—Photo: My 420 Tours, Wikimedia Commons