Heineken joins the cannabis market

While the North American cannabis industry is currently being consolidated With major players and investments totaling several hundred million dollars, innovation is in full swing as companies vie for a share of this promising market. If Dried flowers are losing ground and its prices are falling In the United States, investors are exploring alternative products, and among these, cannabis-infused beverages are gaining popularity. Major alcohol companies have focused on this type of product to enter this competitive market. The latest to enter the fray is Heineken, which has just launched its beverage Hi-Fi Hops.

Good things come in threes

Last October, Constellation Brands which, among other things, produces beer Corona, was the world's first major alcohol company to enter the market cannabis by purchasing 9.9% of the capital of Canopy Growth Corp. The investment totaled $190 million, plus $150 million in convertible debt that will be converted into equity or repaid with interest. This investment marked the beginning of the partnership between the two companies, which plan to collaborate on the development of new products, including beverages.

Recently, it was the turn of Molson Coors Brewing Co. to announce a partnership with Hydropothecary Corporation and the creation of’a THC-infused beer. Although Hydropothecary Although it is not among the market giants in terms of annual production, its agreement with Quebec—which has opted for a public cannabis distribution system—makes it the province’s primary supplier (providing 200,000 kg per year) for five years, placing the company in a strong position and making it an ideal partner.

Today is Heineken which is entering the race with its new beverage, already on the market in the U.S., where the company has suffered losses—despite encouraging figures elsewhere in the world—due to competition from the cannabis market. On July 30, the company launched a non-alcoholic, beer-flavored, cannabis-infused beverage in a handful of California dispensaries. Hi-Fi Hops is marketed under the brand name Lagunitas wholly owned by Heineken. There are two versions: one containing 10 mg of infused THC and another containing 5 mg of THC and 5 mg of CBD. The drink costs 8$ per 33cl can but is apparently selling very well, according to an article in the Business Insider.

An initiative that is clearly needed

The growth of the cannabis market represents a threat to the major alcohol industries whose situation is already less than ideal. In fact, consumers who choose to use cannabis tend to turn away from alcohol, and the major companies have clearly understood this. While legalization is already a reality in North America, these companies are entering the competitive cannabis market out of necessity and opportunism—to mitigate its impact on their products and to capitalize on the profit opportunities it offers. Last May, Molson Coors experienced its worst day in thirteen years in terms of share price decline following the announcement of its first-quarter results.

Will these initiatives be enough to save a declining industry? Given the market capitalization of these companies, it is unlikely that the cannabis industry—which is still in its infancy—will generate enough revenue to offset their losses. This is especially true since, for now, cannabis-infused beverages are not included in Canada’s legal cannabis program. Their status will be addressed in 2019 in accordance with amendments to Canada’s Cannabis Act. It is likely that by then, things will have changed significantly and competition will have intensified.