Molson Coors Canada, HEXO To Form JV For Cannabis-infused Beverages

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Molson Coors Canada, HEXO To Form JV For Cannabis-infused Beverages

According to a Wednesday morning press release, the two companies have agreed to form a new joint venture "to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization", which is planned for October 17.

Molson Coors will gain a 57.5 percent controlling stake in the project, and HEXO will retain ownership of the rest.

Closing of the transaction, which is targeted to occur before September 30, 2018, is subject to the satisfaction of certain conditions.

In May, marijuana producer Aphria Inc. said it has reached a deal that will see Southern Glazer's Wine & Spirits, one of North America's largest wine and spirits distributors, become its exclusive distributor of recreational cannabis products in Canada. Hydropothecary will own the remaining ownership interest. However, cannabis-infused edibles and beverages will not be immediately legalized - those products expected to receive approval sometime in 2019.

He said the marijuana industry could fuel alcohol's next growth cycle or instead suffocate an industry already on the defensive.

The move follows an announcement a year ago by Constellation Brands, which revealed it would will pay CAD 245 million ($191 million) for a 9.9% stake in Canopy Growth Corporation, a Canadian supplier of medicinal marijuana, paving the way for it to launch a series of cannabis-infused alcoholic drinks.

Molson Canada is the Canadian arm of beverage giant Molson Coors Brewing Company (NYSE:TAP)(TSX:TPX), and HEXO is a recognized leader in Canadian medical cannabis.

In a memo following the announcement, Cowen and Company analyst Vivien Azer called Molson Coors' entry into the cannabis market encouraging due to her "view that cannabis and alcohol are substitute social lubricants".

"There is a paradigm shift underway and cannabis has the potential to provide answers to the alcoholic drinks industry's existential questions", said Spiros Malandrakis, head of alcoholic drinks at Euromonitor. The two companies say they will "explore the highly anticipated consumable cannabis market".

Several other companies have ventured into the non-alcoholic infused cannabis beverage business, including California's Manzanita and Madrone, Washington's Le Herbe and Colorado's Dixie Elixirs.

The Molson Coors brewery in Montreal. That was up from US$367.1 million or $1.70 per share in the second quarter of 2017. Worldwide net sales (-0.2 percent) and volume (-2.4 percent) of Molson Coors' products declined in the second quarter.

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