Noah Vinter
As the cannabis industry continues to grow, it is attracting the attention of big alcohol companies. The global cannabis industry is projected to be worth US$61 billion by 2026, and alcohol companies are keen to get a slice of the pie. Some of the big alcohol companies that have already entered the cannabis market include Heineken, Molson Coors, Constellation Brands, and Pabst Labs. These companies are investing in cannabis-infused beverages, particularly those containing THC and CBD, which are becoming increasingly popular among consumers. The collaboration between big alcohol and big marijuana shows that the two industries are joining forces to maximize profits rather than seeing each other as competitors.
| Characteristics | Values |
|---|---|
| Alcohol companies investing in the cannabis industry | Heineken, Pabst Labs, Molson Coors Brewing Company, Boston Beer Company, Hexo Corp., Tilray Brands Inc., Constellation, Southern Glazer's |
| Reason for investment | The global cannabis industry is set to be worth $61 billion by 2026, and the cannabis beverage industry is expected to be worth $22 billion by 2022. |
| Cannabis beverages' impact on liquor stores | Cannabis beverages are taking shelf space from beer, and their higher margins are helping liquor stores offset softening alcohol sales. |
| Alcohol companies' strategy | Alcohol companies are laying the groundwork to enter the lucrative but risky market. |
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What You'll Learn
Heineken's Hi-Fi Hops
Heineken has ventured into the cannabis business with its beverage Hi-Fi Hops, which is marketed as "hoppy sparkling water". The drink contains zero alcohol and is instead made with marijuana. Specifically, the active ingredient in the drink is tetrahydrocannabinol (THC), the main psychoactive ingredient in marijuana that causes a high. The drink is also available with cannabidiol (CBD), a non-psychoactive component of cannabis that is associated with therapeutic effects.
Hi-Fi Hops was launched by Heineken's California beer label, Lagunitas, on July 30, 2018, and was available in certain areas of California, where cannabis is legal. At $8 a can, the drink was relatively expensive, but this did not stop it from selling quickly. The drink was also available in two varieties, with one containing 10 milligrams of THC.
Heineken's decision to launch Hi-Fi Hops is part of a growing trend of established companies entering the marijuana industry. As the cannabis industry is expected to be worth $22 billion by 2022, beverage makers see an opportunity to boost their bottom line by entering this market. This is especially true as alcohol sales have been declining in states that have legalised marijuana. For example, a longitudinal study found that alcohol sales declined by 15% between 2006 and 2015 in marijuana-legalised states.
The launch of Hi-Fi Hops is also indicative of Heineken's innovative character. As a large and established company, Heineken's entry into the cannabis beverage market could help to legitimise and grow this category. Additionally, as liquor stores embrace cannabis beverages to boost their margins, they are taking shelf space mostly from beer because they are stored in coolers. This could further incentivise alcohol companies to enter the cannabis beverage market to maintain their presence in liquor stores.
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Molson Coors' Truss
As the cannabis industry continues to grow, with an estimated worth of $22 billion by 2022, major alcohol companies are increasingly investing in cannabis-related ventures. One such company is Molson Coors, which launched Truss, a CBD-infused beverage brand, in partnership with HEXO Corp, a Canadian cannabis producer.
Molson Coors, the second-largest beer company in the US, initially launched Truss in Canada in 2018 as a joint venture with HEXO Corp. The brand debuted with six cannabis beverage brands in Canada, including Flow Glow, a CBD-infused spring water produced in partnership with Flow Alkaline Spring Water. Flow Glow was launched in two flavours: Goji+Grapefruit and Raspberry+Lemon. It contained 10mg of CBD and 0.3mg of THC and was marketed towards new and existing cannabis consumers of legal age, offering a "low-to-mid-level dose" experience.
The partnership between Molson Coors and HEXO Corp has since expanded beyond Canada. In 2020, the companies announced the launch of Truss CBD USA, a new joint venture to produce non-alcoholic CBD-infused beverages in Colorado, USA. This venture is majority-owned by Molson Coors and operates as an independent company with its own management and resources. Truss CBD USA aims to leverage the success of its Canadian counterpart's hemp-infused brands while also building capabilities in the growing CBD beverage segment in the United States.
The expansion of Molson Coors into the cannabis beverage market through Truss reflects a strategic move to tap into the growing consumer interest in cannabis-related products. As legalization of cannabis progresses, drinks companies recognize the significant opportunity in the THC and CBD beverage space. By establishing Truss, Molson Coors is well-positioned to capitalize on this emerging market and potentially capture a significant share of the lucrative but risky cannabis beverage category.
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Pabst Labs' THC-infused beverages
With the cannabis industry expected to be worth $22 billion by 2022, it's no surprise that big alcohol companies are looking to get a piece of the pie. One such company is Pabst Labs, which has been investing in THC-infused beverages.
Pabst Labs is a member of the Cannabis Beverage Association, and they have been marketing THC-infused beverages under the Pabst Blue Ribbon brand name since 2020. These drinks contain 5 mg of THC per can, intended as a microdose, and induce a "noticeable little buzz". Pabst has expanded its cannabis beverage offerings to include root beer and selzter flavours, such as Strawberry Kiwi and Mango Blood Orange. There are also non-carbonated options, including Daytime Guava and Midnight Berries, which contain both THC and CBD.
THC beverages have been gaining traction, taking shelf space from beer in liquor stores and boosting margins for retailers. With Pabst Labs' established presence in the alcohol industry, their investment in the cannabis beverage category could help bring cannabis into the mainstream and drive further growth in this space. As more beverage alcohol companies follow suit, the momentum for cannabis beverages is expected to grow, despite the lingering question of how sustainable this side of the business will be in the long term.
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Boston Beer Company's cannabis-infused soft drinks
Several major alcohol companies are entering the cannabis business, including Heineken, Molson Coors, Pabst Labs, and Boston Beer Company. Heineken, through its American brand Lagunitas, has launched Hi-Fi Hops, a non-alcoholic drink containing tetrahydrocannabinol (THC). Similarly, Molson Coors has partnered with Hydropothecary to develop non-alcoholic, cannabis-infused beverages for the Canadian market. Pabst Labs, a member of the Cannabis Beverage Association, has also launched THC-infused beverages.
Boston Beer Company, the maker of iconic brands such as Samuel Adams, Truly Hard Seltzer, and Twisted Tea, has introduced TeaPot, a line of cannabis-infused iced teas. TeaPot blends real tea with specific cannabis strains to enhance different times of the day. Each 12-ounce can contains 5 mg of THC and is crafted to minimize any cannabis taste or aroma. The company's goal is to be the most innovative consumer-focused beverage company, and it sees the cannabis beverage category as an innovation frontier.
Boston Beer Company is headquartered and publicly traded in the U.S., where marijuana is still federally illegal. To navigate this legal challenge, the company established a Canadian subsidiary to oversee its cannabis beverage line. This subsidiary acts as a "legal firewall," partnering with licensed Canadian cannabis companies to grow marijuana, extract THC, and manufacture and distribute the product. Boston Beer Company is testing and selling its TeaPot product in Canada, where regulations are more permissive, with the potential for future expansion into the United States market.
The move into the cannabis-infused beverage market by Boston Beer Company and other alcohol companies is driven by the growing popularity of cannabis drinks. The cannabis industry is expected to be worth $22 billion by 2022, and beverage companies see an opportunity to boost their bottom line by entering this lucrative but risky market. Liquor stores are embracing cannabis beverages to boost their margins, as these drinks often have higher margins than beer and spirits. Additionally, cannabis beverages can attract new consumers who might not otherwise consume marijuana through traditional methods such as smoking or edibles.
Boston Beer Company's entry into the cannabis-infused soft drinks market with TeaPot is a strategic move to capitalize on the growing cannabis industry and meet consumer demands. By partnering with licensed Canadian companies and leveraging its expertise in beverage creation, Boston Beer Company aims to create innovative and socially acceptable cannabis-infused products while navigating the complex legal landscape surrounding marijuana.
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Hexo Corp.'s joint venture with Molson Coors
On August 1, 2018, Molson Coors Canada, the Canadian business unit of Molson Coors Brewing Company, and The Hydropothecary Corporation (also known as HEXO Corp) announced a joint venture to develop non-alcoholic, cannabis-infused beverages for the Canadian market. The joint venture, called Truss Beverages, will be structured as a standalone start-up company with its own board of directors and an independent management team. Molson Coors Canada will have a 57.5% controlling interest in the JV, with HEXO owning the remaining interest. Truss has been preparing for launch, including completing product formulations, branding, and constructing a cannabis beverage production facility in Belleville, Ontario. Truss is expected to launch its first beverages in Canada later this year.
Molson Coors and HEXO Corp have also expanded their partnership with another joint venture in Colorado called Truss CBD USA. This joint venture will explore opportunities for non-alcohol hemp-derived CBD beverages in Colorado and will be majority-owned by Molson Coors. Truss CBD USA will operate as a standalone entity with its own board of directors, management team, resources, and go-to-market strategy.
Molson Coors' partnership with HEXO Corp is part of its strategy to grow beyond the beer aisle with wine, spirits, and non-alcohol drinks. HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes innovative products to serve the global cannabis market. The company serves the Canadian adult-use markets under its HEXO Cannabis and Up Cannabis brands and the medical market under HEXO medical cannabis.
The joint venture between Molson Coors and HEXO Corp is an example of how alcohol companies are getting involved in the cannabis industry. As legalization increases, drinks companies see huge opportunities in the THC and CBD beverage space. Despite some companies having been burned by past cannabis investments, the cannabis industry is expected to be worth $22 billion by 2022, making it an attractive market for beverage makers.
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Frequently asked questions
Some of the world's largest alcohol companies have entered the cannabis business, including:
- Heineken N.V.
- Molson Coors Brewing Company
- Constellation Brands Inc.
- Anheuser-Busch InBev
These companies sell a range of cannabis-infused beverages, including non-alcoholic THC-infused drinks, CBD-infused drinks, and cannabis-infused beer.
Alcohol companies are entering the cannabis market due to the increasing legalization of cannabis and the resulting decline in alcohol sales. The cannabis industry is expected to be worth over $40 billion by 2025, and alcohol companies see an opportunity to target adult cannabis users as potential customers.
Yes, there are regulatory uncertainties and legal restrictions in the cannabis market that have burned some alcohol companies with past cannabis investments. Additionally, THC and CBD are not allowed in alcoholic beverages, and hemp-infused beverage alcohol products have not yet gained significant popularity.
