💨 Is Tilray Brands still a Cannabis company?
💨 Is Tilray Brands still a Cannabis company?
With the recent $85M all-cash acquisition of 8 brands from AB InBev and one-third of revenue to come from Beverage, Tilray Brands is now a diversified cannabis/beverage/wellness company.
Press release
Investor presentation
Shares of Tilray (TLRY) increased 36% Tuesday, 8/8/20 (announcement came after market closed)
Tilray acquired eight brands for $85M from AB InBev all-cash. The brands include Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company and HiBall Energy (was discontinued in May 2023). Based on volume, this will make Tilray the 5th largest craft beer company in the U.S., jumping from ninth (SweetWater, Montauk, Alpine and Green Flash). The acquisition turns Tilray into a diversified cannabis, beverage, and hemp company with recognizable brands. Tilray also owns Breckenridge Distillery and Happy Flower CBD sparkling non-alcoholic cocktails.
Four of the brands—Shock Top, Breckenridge, 10 Barrel and Blue Point—produced a combined 495,000 barrels of beer in 2022, according to the Brewers Association (BA). Production data for Widmer Brothers, Redhook, Square Mile and Hiball were not broken out separately. In the last 13 weeks (ending June 17), total dollar sales for Shock Top declined -23.2% YoY in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages. Brand volume declined -29.2% YoY in the period. In the last 13 weeks, Breckenridge off-premise dollar sales declined -11.4% YoY, while volume declined -14.5%, according to NIQ data shared by 3 Tier Beverages. In the last 13 weeks, Blue Point dollar sales declined -21.6% YoY and volume -29.6% in NIQ-tracked off-premise channels. Unlike its counterparts, 10 Barrel increased dollar sales (+8.9% YoY) and volume (+3.2%) in the last 13 weeks in NIQ-tracked channels.
After the deal, AB-Inbev will be left with 12 craft beer brands—Goose Island (495,000 barrels), Elysian (305,000 barrels), Golden Road (215,000 barrels), Karbach (155,000 barrels), Four Peaks Brewing (140,000 barrels), Wicked Weed (115,000 barrels), Devils Backbone (75,000 barrels), Platform (20,000 barrels, ceased operations in Ohio; lives on as three IPAs), Cisco Brewers (N/A), Omission (N/A), Veza Sur (N/A), and Wynwood Brewing (N/A).
The strategy has been building for some time now:
CEO Irwin Simon has a history of roll ups at Hain Celestial
The deal is projected to triple the size of Tilray's beer portfolio
In November 2020, Tilray (Aphria) acquired SweetWater Brewing Company for $300M. In December 2021, Tilray acquired Breckenridge Distillery. In January 2022, Tilray acquired Green Flash and Alpine for $5.1M. In November 2022, Tilray Brands acquired Montauk Brewing Company.
Beverage-alcohol revenue is expected to be $300M, with ~$250M coming from craft beer
The acquisition further increases Tilray’s approach to winning in Cannabis—acquire brands and distribution—and have a strong baseline to win when U.S. Federal legalization happens.
While some brands are more recognizable than others (Sweetwater, Shock Top), the more important strategic rationale for the acquisition is that it expands the company’s capabilities in beverage
Strengthens relationship with Anheuser-Busch owned/partner distributors, creating national access across all major channels
Six production facilities (adding two in OR, one in CO, one in NY from this transaction) and 12 brew pubs provides infrastructure to immediately jump into cannabis beverage / lounge upon legalization. Craft brewers have used brew pubs to test out new products and engage with consumers.
Overall, the transaction adds EBITDA / improves EBITDA Margins in the short-term while providing optionality in the long-term. Craft beer volumes declined (6%) in 2021 and (9%) in 2022, while the purchased portfolio has seen dollar sales declines of (6.4%) year to date and a (8.5%) decline in 2022
Increases diversification of geographic reach. Tilray’s current portfolio (with Sweetwater being the majority) meant its 65% of volume came from the Southeast and 25% from the Northeast. With this deal, the combined portfolio will now be 28% Northeast, 18% Northeast, 17% Central, 30% Pacific Northwest, and 7% West Coast. The acquisition puts Tilray Brands in markets that it wouldn’t otherwise have been able to enter with its current beverage business.
Portfolio maintains even distribution of retail chain and independents channels. Tilray Brands was already in 59% of chains and 41% of independent stores, but will be more slightly more balanced with 56% of chains and 44% of independent stores.
Not Waiting on Cannabis Legalization. Irwin Simon, Tilray chairman and CEO, joins ‘Squawk on the Street’ to discuss Tilray’s decision to buy some alcohol brands from Anheuser-Busch, the company’s decision to move away from cannabis legalization and more.
Make “craft beer cool again.” In an interview with Yahoo!, Irwin Simon says he sees such an opportunity within the craft beer business. Simon says Tilray's strategy is "how do we make craft beer cool again?" Irwin says they will try to make "craft beer cool again" by "coming up with unique products, connecting with the consumer, and, with that, we will hopefully get these products growing in the right direction." However, Irwin does say that it will cost the company money to improve packaging and market the brands.