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article imageMolson Coors in talks with Canada pot firms as legalization looms

By Karen Graham     Jun 23, 2018 in Business
Denver - Another beer-maker is looking for a way to get into the marijuana business. Denver-based Molson Coors Brewing Co. is said to be in talks with several Canadian pot firms on investing and collaboration in marijuana-infused beverages.
With Canada poised to legalize the recreational use of marijuana in October, Molson Coors is already in discussions with several Canadian cannabis firms about investing and collaborating on marijuana-infused beverages.
Multiple sources have told BNN Bloomberg the move is aimed at stemming the company's declining beer sales.
The company is looking for “a high-quality product that isn’t going to embarrass them," and an assurance of a cannabis supply high enough to sustain such a drink, one of the sources said. The company has been in discussions with four cannabis firms for the last six months, including Aphria Inc. and Aurora Cannabis Inc.
“We have assembled a team in Canada to actively explore the risks and opportunities of entering the cannabis space in that market, where it will be federally legal by this fall,” Chief Executive Officer Mark Hunter said at an investor presentation on June 6, 2018, reports the Denver Post.
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Molson Coors
"We’ve said specifically we’re interested in the infused beverage space and we do intend to enter that market,” Aurora Cannabis’ Chief Corporate Officer Cam Battley said Friday by phone. Aphria could not be immediately reached for comment.
However, Colin Wheeler, a spokesman with Molson Coors, said in an email to BNN Bloomberg the company doesn’t comment on rumors or market speculation.
Why such a collaboration is important
A report released in April by Cowan & Co. defined alcohol and cannabis as "substitute social lubricants." The report said that binge-drinking behavior, (meaning drinking at least seven alcoholic drinks per setting), is set to fall in North America as marijuana use widens.
"Our analysis found that adult-use cannabis states also have consumers that report meaningfully lower quantities of alcohol consumed per binge drinking session, relative to medical and non-cannabis states,” said Vivien Azer, a senior analyst covering beverage and tobacco companies at Cowen & Co., who authored the report.
According to the report, Molson Coors has a 33 percent share of the Canadian beer market in 2017, down from 40.5 percent in 2008. With a deal, Molson would end up with meaningful exposure to the North American cannabis market as the No. 2 beer seller in both Canada and the U.S.
Constellation Brands  Inc.  took a 9.9-percent stake in Canopy Growth Corp for $245 million.
Constellation Brands, Inc. took a 9.9-percent stake in Canopy Growth Corp for $245 million.
Constellation Brands
Molson would be following Constellation Brands Inc. The U.S. distributor for Corona beer disrupted the cannabis industry by taking a 9.9 percent stake in Canopy Growth Corp. in October 2017 for $245 million. Constellation's investment in Canopy Growth, Canada's largest marijuana company by market capitalization, is now worth $877 million after the alcohol producer acquired one-third of a $600-million convertible note offering announced on Friday.
Basically, a convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company
Additionally, Miami, Florida-based Southern Glazer’s Wine & Spirits LLC announced a partnership with Aphria in May this year. The company's Canadian subsidiary, Great North Distributors will be Aphria’s exclusive cannabis representative in Canada, according to a press release on May 17.
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