AB-InBev and Tilray end cannabis JV as Tilray snaps up more breweries

Canada | The world’s leading brewer, AB-InBev, and cannabis firm Tilray have ended their partnership by mutual agreement. According to Tilray’s CEO Irwin Simon, on 6 January 2022, AB-InBev was unwilling to launch THC beverages in Canada. Cannabis drinks can legally contain either THC, which is psychoactive, CBD, which is non-psychoactive, or a blend of the two. They must not contain any alcohol, though.

When Tilray first announced the partnership in 2018, shortly after Canada legalised recreational cannabis, the two companies pledged to invest a total of USD 100 million in the venture, called Fluent Beverage. Each company had a 50 percent ownership interest.

Fluent Beverages will now operate as a wholly-owned subsidiary of brewer Labatt (owned by AB-InBev) and Tilray will act as Fluent’s co-manufacturing partner. Tilray, for its part, will retain the manufacturing equipment for CBD and THC beverages, on top of receiving a royalty-free, perpetual, worldwide license to utilise the technology.

Weak demand for cannabis beverages

The end of the AB-InBev-Tilray joint venture may have been triggered in part by underwhelming sales of cannabis beverages in Canada. According to analytics firm Hifyre and American financial services firm Cantor Fitzgerald, cannabis beverages represented just 2 percent of total Canadian cannabis sales in the fourth quarter of 2021.

However, Tilray’s decision to continue buying US craft breweries – and thus become a competitor – could have also played a role. In December 2021, Tilray acquired San Diego’s craft breweries Green Flash and Alpine for a total of USD 5.1 million (or USD 150 per barrel beer sold) from private equity firm WC IPA. WC IPA had acquired the assets in a foreclosure sale in 2018.

Although both breweries have seen their sales decline in recent years, they still had a combined output of 34 000 barrels beer (40 000 hl) in 2020, per the website brewbound.com. In December, Tilray also bought the Breckenridge Distillery in Colorado for USD 103 million.

The acquisitions came about a year after the Canadian cannabis firm, Aphria, purchased Georgia’s craft brewer SweetWater for USD 300 million. In 2021, Aphria and Tilray merged to create the world’s largest cannabis company under the Tilray moniker.

Thinking beyond IPAs

Obviously, Tilray must be thinking Beyond Beer. Tilray has made it clear, says goodbeerhunting.com, that it will enter the US cannabis market when the US federal government eventually legalises recreational cannabis, which could be another two years from hence.

Per the website, Tilray has already connected SweetWater and another of its subsidiaries, RIFF Cannabis, for a RTD cocktail line (no CBD or THC added yet) and leadership has shared interest in expanding SweetWater into THC beverages.

Not least, the San Diego breweries Green Flash and Alpine will give Tilray more options for future cannabis products in California. The Golden State is the nation’s largest market for cannabis, with about USD 5 billion in taxable sales of cannabis in 2021, almost double the 2019 intake.