Coming Soon From Molson Coors: Marijuana Beer
Molson Coors Brewing Co (NYSE: TAP) is developing a new adult beverage, and beer drinkers may soon have a way to avoid those alcohol-induced hangovers. This week, Molson Coors announced a new joint venture with Canadian marijuana producer Hydropothecary to develop a non-alcoholic, cannabis-infused beer.
In June, Canada became the first G7 nation to legalize recreational marijuana use nationwide. Molson Coors is now thinking outside the box to potentially capitalize on the opportunity and give its stagnant global beer sales a shot in the arm.
On Wednesday, Molson Coors announced a 57.5 percent ownership stake in a new joint venture with Hydropothecary created to help Molson Coors be first to the market when marijuana edibles become legalized in Canada, likely in 2019.
“Canada is breaking new ground in the cannabis sector and, as one of the country’s leading beverage companies, Molson Coors Canada has a unique opportunity to participate in this exciting and rapidly expanding consumer segment,” Molson Coors Canada CEO Frederic Landtmeters says in a statement.
Molson Coors may soon be on the cutting edge of inebriation innovation, and analysts say there’s plenty of money up for grabs. According to Deloitte, the Canadian marijuana market will be valued at $7.17 billion in 2019, and nearly 60 percent of Canadian users plan to purchase edible versions of the drug.
In the most recent quarter, Molson Coors reported a 2.4 percent year-over-year decline in worldwide sales volumes. That decline was twice as steep in the U.S. market, where beer sales volume declined 4.8 percent.
However, Molson Coors was able to grow earnings per share by 10.6 percent thanks in part to price increases and cost-cutting.
Bank of America analyst Bryan Spillane says Molson Coors management deserves credit for pulling all the right strings in a difficult market.
“Management is demonstrating it has flexibility to deliver on its full year business plans, free cash flow and cost savings targets despite cost pressures and US volume weakness (especially Coors Light),” Spillane says.
Regardless of whether or not Molson Coors can tap into the Canadian marijuana market, Spillane says TAP stock is a compelling long-term value.
“We expect operating performance to accelerate over the next 12 months, as 2018 should benefit from the integration of the Miller Coors and Molson Coors organizations,” he says.
Bank of America has a “buy” rating and $80 price target for TAP stock……Read more>>