Molson Coors (TAP) is the latest company to announce that they’ll be entering Canada’s marijuana market. The multinational brewing company plans to offer marijuana beer in Canada’s market when cannabis, for adult use, becomes legal nationwide. The Cannabis Act was passed into law, allowing for recreational marijuana use to become legal.
Economists estimate that the market will bring in $5 billion in recreational use revenue on top of revenue that comes from the medical marijuana industry.
Molson Coors hopes to be able to take some of the industry’s market share with the creation of marijuana beer. The company has partnered with Hydropothecary, a Canada marijuana producer, to help develop a cannabis-infused beer. The beer will be non-alcoholic. Molson Coors will own a 57.5% stake in the joint venture and hopes the partnership will be able to boost the company’s beer sales.
Beer sales across the world have remained largely stagnant, causing Molson Coors to search for alternative markets to bring in more sales.
Molson was in discussions with four major marijuana producers in Canada before coming to a joint venture agreement with Hydropothecary.
Marijuana edibles are expected to become legal in 2019, and Molson will be breaking into the industry as the first company to offer a cannabis-infused beer that removes all of the alcohol from the equation. The beer, which is expected to be sold in the best breweries in the country, will not cause drinkers to suffer from the traditional hangover that’s experienced with beer and alcohol.
Studies suggest that Canada’s marijuana market will skyrocket to over $7 billion in sales in 2019. Edibles are an in-demand item, with 60% of those that use marijuana planning to purchase edible versions of cannabis.
The addition of cannabis beer will hopefully help Molson Coors stave off falling sales, which fell 2.4% year-over-year in the most recent quarter. The decline in the United States market was 4.8% year-over-year as more beer drinkers opt to go to local breweries that serve craft beers.
Cost-cutting efforts and higher profits helped the company post earnings per share of 10.6% despite slumping sales.
Molson’s slumping sales have done little to deter analysts from expecting the company to post strong growth going into the next 12-month period. The company’s stock has a “buy” rating by Bank of America, which has applauded the company’s ability to remain flexible, deliver growth and do so in a market where sales are falling.