News that Molson Coors expects to bring cannabis-infused beverages to the Canadian market as early as next year sent shares of Gatineau-based marijuana producer Hexo – the brewing giant’s partner in developing pot-laced drinks – up 10 per cent on Wednesday.
"We will be in a ready-to-go position and, you know, one of the first on the playing field as the market opens up," said Molson Coors CEO Mark R. Hunter in a conference call with analysts after the company released its third-quarter earnings report Wednesday.
Recreational cannabis products such as dried flower and pre-rolled joints became available for legal purchase in Canada on Oct. 17, but edibles and pot-laced beverages won't be legalized until next year.
Estimates suggest the cannabis market could be valued somewhere between $7 billion and $10 billion, he said, with about 20 to 30 per cent of that coming from cannabis-infused, non-alcoholic beverages.
Even if one assumes the low end of both those projections, the beverages segment could be worth about $1.5 billion, he said.
Molson and Gatineau’s Hexo Corp. (TSX:HEXO) launched Truss, a joint venture, earlier this month. Truss will develop the beverages for the Canadian market following legalization.
Hexo announced in September that it had secured a stake in a 2-million-square-foot Belleville production facility. CEO Sébastien St-Louis told OBJ that the firm will work with partners such as Molson Coors on developing cannabis-based products in a “centre of excellence.”
“If Molson decides that they need 150,000 square feet, I can offer it to them. If an Estée Lauder comes to the table and says, ‘I need half a million feet,’ then I can offer that to them. So it's really about flexibility,” he said.
Hexo’s share price rose more than 10 per cent on Wednesday, trading at $5.90 before markets closed.
Hunter said Molson is already researching what beverages it plans to offer and will be able to share more details early next year.
"We decided as a business that we did not want to be a spectator as this new market opened up and we clearly wanted to be a participant," he said.
The company is also preparing for potential further international expansion, he said.
Molson Coors Canada shares rose $5.01 or 6.3 per cent to $84.50 in afternoon trading on the Toronto Stock Exchange. The shares of its holding company, Molson Coors Brewing, rose US$4.72 or 8.11 per cent to US$63.93 on the New York Stock Exchange.
The company topped expectations as it reported its third-quarter profit increased compared with a year ago, helped by higher sales.
– With files from OBJ staff