While pot stock buyers endure short term volatility in the cannabis sector, some companies are taking them longer term view.
Accordingly, Molson Coors Brewing Co. (TSX: TAP) is looking to the future of cannabis edibles for a boost to the company’s bottom line. The company recently signed a Joint Venture (JV) agreement with pot producer HEXO Corp in its first foray into the space.
Preparing for edibles’ legalization
In conversation with Canada’s being in Bloomberg, Molson Coors CEO Mark Hunter said the company plans to “secure a meaningful share” of the cannabis-infused beverage market. Meanwhile, cannabis edibles are not yet legal in that country.
“We will be in a ready-to-go position and, you know, one of the first on the playing field as the market opens up,” Hunter said in an analyst conference call. Molson Coors released its most recent quarterly earnings report Wednesday.
While recreational cannabis products are now legal in Canada, edibles are not. That means users can currently buy dried flowers, oils and pre-rolled joints right now. However, edibles will only be legal next year.
Beverages could be large part of cannabis market
Industry watchers throw around large estimates of the cannabis industry’s future value. Hunter’s estimate is a $10 billion valuation. Of that, he believes about 20 to 30 percent will eliminate from cannabis-infused non-alcoholic beverages.
Moreover, a conservative cannabis-beverage market size estimate still values the market segment at $1.5 billion.
The company launched a joint venture with Hexo Corp. (TSX: HEXO) in October called Truss. Truss will bring beverages to the Canadian market after cannabis-edible legalization.
Truss is conducting product research, and will share more details on developments early in 2019.
Molson staying ahead of the bud ball
“We decided as a business that we did not want to be a spectator as this new market opened up and we wanted to be a participant,” Hunter said.
Molson Coors Canada shares were up 6.3 percent to $84.50 on the Toronto Stock Exchange Wednesday. Molson Coors Brewing was up 8.11 percent to US$63.93 on the New York Stock Exchange.
The company beat earnings expectations with a third-quarter profit higher than last year ago, due to higher sales.
Cannabis-infused beverages look to be a large segment of the cannabis sector, gauging by interest from major brands like Constellation and Coca-Cola. For more coverage on the cannabis-infused beverage market, see this article. And check out our introduction to cannabis investing here.
The brewer reported US$338.3 million profit (US $1.56 per diluted share) for the last quarter, compared to US$287.0 million profit ($1.33 per diluted share) a year ago.