In August, it announced a joint venture between Molson Coors Canada and Canadian cannabis producer HEXO (which produces medicinal cannabis through its Hydropothecary brand) to develop non-alcoholic, cannabis-infused beverages for the Canadian market.
Recreational cannabis became legal in Canada last month; with edible products set to follow next year. Molson Coors says it’s ready to be ‘one of the first on the playing field’ as the market opens up.
$10bn market value for Canadian cannabis?
With edibles not yet legal or on shelves, predicting the size of the market is obviously difficult, according to Mark Hunter, president and CEO, Molson Coors. But the company expects a sizeable market to evolve.
“Clearly, there are lots of numbers which are being bandied around with regard to the potential size of the cannabis market in Canada,” said Hunter, speaking in the company’s Q3 2018 earnings call last week.
“I think, if you take an average, then it suggests that this market may be somewhere between $7bn and $10bn in market value, with beverages somewhere between 20% and 30%. And that’s obviously non-alcoholic cannabis-infused beverages.
“Even if you take the low end of that estimate, then it suggests that the beverages segment could be circa $1.5bn of value.”
We’re well placed to be ready to take a meaningful share of the segment’
Molson Coors has taken a stance as a ‘participant, not a spectator’ as the new market opens up, and Hunter says its joint venture – called Truss – is a balanced, considered approach to the new market. Truss has appointed former Molson Coors executive, Brett Vye, as CEO, who will report to a board of directors, which consists of three members appointed by Molson Coors and two by HEXO.
Truss is structured as a standalone company with its own board of directors and independent management team. Molson Coors has a 57.5% controlling interest with HEXO holding the remaining 42.5%. The board of directors for the joint venture have been announced as Frederic Landtmeters, President and CEO of Molson Coors Canada; Paul Holden, VP of Legal and Industry Affairs of Molson Coors Canada; Scott Cooper, VP, Global Innovation of Molson Coors (Chairman of the Truss Board); Sebastien St-Louis, CEO and co-founder of HEXO, and Ed Chaplin, CFO of HEXO.
Truss will be in ‘start-up’ mode from now to the fall of 2019, building up the business and looking at how its portfolio will shape up. It will then start generating revenue in the fall of 2019 as legalization of edibles takes place in Canada.
“If you look at the strength of our go-to-market in Canada, if you look at our understanding of Canadian consumers and our understanding of brand-building in Canada and the capability that we have through our partner in HEXO, we believe that we’re well-placed to be ready to take a meaningful share of that [cannabis beverage] segment when it’s legislated for and opens up in the fall of 2019,” said Hunter.
“We have our CEO in place. That team is being built. We’re already in research around the portfolio and the beverages that will be offered, and we will be able to share those with you as we get into the early part of 2019.
“But we’ll be in a ready-to-go position and one of the first on the playing field as that market opens up.”
Once it’s secured a ‘meaningful share of this potentially high-value category’ the JV can prepare itself for potential international expansion, added Hunter.