Molson Coors (TAP) and Tilray (TLRY) are two companies that are looking for new opportunities in the beverage industry. Both of them announced major deals this week that could change the landscape of the market.
Molson Coors, a leading beer producer, acquired Blue Run Spirits, a Kentucky-based bourbon maker, for an undisclosed price. The deal will allow Molson Coors to expand its portfolio of premium spirits and tap into the growing demand for American whiskey.
Tilray, a cannabis and consumer packaged goods giant, bought eight beer and beverage brands from Anheuser-Busch InBev (BUD) for $85 million. The brands include Rolling Rock, Labatt Blue, Kokanee, Alexander Keith’s, and others. Tilray plans to use these brands to create new products infused with cannabis or CBD.
Both Molson Coors and Tilray are aiming to diversify their offerings and find the next big trend in the beverage industry.
Cannabis and alcohol: a risky or rewarding combination?
The deals by Molson Coors and Tilray reflect the increasing interest in combining cannabis and alcohol in the beverage market. Some consumers are looking for alternatives to traditional drinks that offer different effects and flavors.
However, mixing cannabis and alcohol can also pose some challenges and risks. For one thing, the regulatory environment for cannabis is still uncertain and varies by country and state. For another, the health effects of consuming both substances together are not well understood and could be harmful.
Greg Portell, a lead partner at Kearney Global Markets, told Yahoo Finance that big branded food and beverage companies are looking for the next billion-dollar idea, but they also need to be careful about the potential pitfalls.
“If you are a big branded food and beverage company right now you are looking for the next billion-dollar idea because that’s the only way you can really move your earnings numbers,” Portell said. “But you also have to be very careful about how you do that because you don’t want to alienate your core consumer base.”
Tilray’s strategy: diversify the brand and leverage international markets
Tilray has been struggling in recent years as the hype around cannabis faded and the competition intensified. The company’s stock price has dropped nearly 90% since 2018. To cope with this situation, Tilray has been pursuing a strategy of diversification and international expansion.
Tilray CEO Irwin Simon told Yahoo Finance that he wants to diversify the brand and make sure it is not dependent on legalization. He said that Tilray is not just a cannabis company, but a consumer brands company that can offer a variety of products across different categories.
One of those categories is beer and spirits, where Tilray has been making some moves. In addition to buying eight brands from Anheuser-Busch InBev, Tilray also has a joint venture with Molson Coors called Truss Beverages, which produces non-alcoholic cannabis-infused drinks in Canada.
Tilray also has a strong presence in international markets, especially in Europe. The company has a 20% market share in Germany, where recreational marijuana is expected to become legal in 2024. Tilray also has operations in Portugal, France, Australia, New Zealand, and other countries.
Tilray hopes that its global footprint and diversified portfolio will help it grow its revenue and profitability in the future.
Molson Coors’ strategy: focus on premium spirits and hard seltzers
Molson Coors is also facing some challenges in the beer industry, as consumers shift their preferences to other types of drinks. The company’s sales declined 8.7% in 2022 compared to 2021. To adapt to this changing environment, Molson Coors has been focusing on premium spirits and hard seltzers.
The acquisition of Blue Run Spirits is part of this strategy. Blue Run Spirits is a craft bourbon maker that was founded in 2019 by former Nike executives. The company produces high-quality whiskey that has won several awards and accolades. Molson Coors plans to leverage its distribution network and marketing expertise to grow Blue Run Spirits’ brand awareness and sales.
Molson Coors also has a strong position in the hard seltzer market, which is one of the fastest-growing segments in the beverage industry. The company owns Vizzy, Topo Chico Hard Seltzer, Proof Point Spirited Seltzer, and other brands that appeal to health-conscious consumers who want low-calorie and gluten-free drinks.
Molson Coors believes that its focus on premium spirits and hard seltzers will help it improve its margins and cash flow in the long term.