Molson Coors, Tilray search for ‘next billion-dollar idea’ in recent booze deals

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There was a lot of buzz in the beer industry this week as two brands bulked up their portfolio and another slimmed down.

On Tuesday, cannabis and consumer packaged goods giant Tilray (TLRY) scooped up eight beer and beverage brands from Anheuser-Busch InBev (BUD) for a price tag of $85 million, while Molson Coors (TAP) acquired Blue Run Spirits for an undisclosed price.

Both Tilray and Molson Coors are banking that the new brands will build on their existing portfolios and tap into the next big trend.

“If you are a big branded food and beverage company right now you are looking for the next billion-dollar idea because that’s the only way you can really move your earnings numbers,” Greg Portell, a lead partner at Kearney Global Markets, told Yahoo Finance. “It’s very difficult to create a $100 million brand and all of a sudden make it a billion dollar brand inside those big companies.”

Tilray aims to make ‘craft beer cool again’

Tilray has been challenged in recent years as the high around cannabis continues to fade. Shares of the cannabis and consumer brands company are down nearly 90% compared to 2018.

As the company waits for weed legalization in the US, it has pushed into adjacent categories, such as beer and spirits. Tilray CEO Irwin Simon told Yahoo Finance on Tuesday he wants to “diversify the brand” and “make sure we were not dependent upon legalization.”

Tilray’s stock soared 36% on Tuesday following the deal, a move Morningstar strategist Kristoffer Inton said he “didn’t get.” On the deal overall, though, Inton remained ambivalent.

On one hand, “it’s adding to a [craft beer] strategy that they’ve had been going down for a bit,” Inton said. “Buying these wasn’t a surprise, in that sense. It adds to that business.”

But on the other hand, he added, “I don’t see a lot of synergy between cannabis and alcohol,” due to their different distribution strategies.

A man grabs four beers at a time on the bottling line at the Breckenridge Brewery.

Jose Johnson grabs beers four at a time on the bottling line at the Breckenridge Brewery in Denver. (Photo By Joe Amon/The Denver Post via .)

The eight brands now under Tilray’s umbrella include some well-known names like Shock Top and Breckenridge Brewery as well as smaller regional brands like Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and energy drink brand, HiBall Energy.

Down the line, Simon alluded to the company making THC-infused alcoholic beverages. But for now, he said, the acquisition is aimed at making “craft beer cool again” and ramping up its manufacturing capabilities in the Northeast.

The acquisition comes as Anheuser-Busch InBev’s Bud Light sales are beginning to stabilize after months-long fallout from boycotts over an advertisement for the brand by transgender influencer Dylan Mulvaney.

Tilray CEO Simon said this acquisition was “totally separate” from the Bud Light controversy. He added that all employees from the respective brands will join Tilray, and the company is “working with them on a transition.”

In a statement to Yahoo Finance, Anheuser-Busch executive Andy Thomas said that Tilray reached out earlier this year “with interest in purchasing these brands and breweries.”

Although Anheuser-Busch shed some of its craft beer brands, Thomas added the Bud Light maker is still “committed to its craft brewery partners … and focused on working with them to lead growth in the segment.”

Molson Coors exec: Whiskeys, bourbons ‘are on fire’

In the background, Molson Coors continues to gain momentum.

In recent years, the US-Canadian company has been quietly expanding its overall beverage portfolio, partnering with energy drinks, and bringing on spirit brands. In 2020, the company even changed its name from Molson Coors Beer Co. to Molson Coors Beverage Co.

“Beer will always be central to who we are,” Michelle St. Jacques, an executive at Molson Coors Beverage Co., said in a statement to Yahoo Finance. “But we live in a world that extends beyond beer, and we have opportunities beyond beer, so our portfolio should extend beyond beer.”

Blue Run Spirits is the latest in that strategy.

“High-end whiskeys, bourbons, and ryes are on fire, and we believe in the future of that space,” St. Jacques said. “Our approach is working. Our beers are stronger than they’ve been in many years. Our portfolio is premiumizing. And we continue to expand our offerings beyond beer.”

The Kentucky-based bourbon brand, Blue Run, is known for its distinctive butterfly logo. Created in 2020, the founders, all of whom did not come from the industry, found success in “sneakerizing” the bourbon business by doing limited drops, similar to the sneaker business, to build a following.

At the same time, St. Jacques added that beer is still core to the business and “have been on an upward trajectory for the past few years”

In its quarterly earnings call, CEO Gavin Hattersley said, “Coors Light and Miller Lite, combined, we’re 50% bigger than Bud Light by total industry dollars and 30% bigger than [Constellation Brands’] Modelo Especial in the second quarter.”

Still, it’s far from guaranteed that Blue Run Spirits will get more attention following its acquisition by Molson Coors, per Portell, which has a portfolio that consists of a range of offerings from well-known household brands like Coors Light to lesser-known names like Hamm’s and Mad Vine clean cola.

“Companies that are better at managing smaller niche brands are going to be able to maximize the value of those brands more because they can put more resources to them,” Portell said. “Imagine if you are sitting in that big branded company, and you have $1 to invest, where are you going to put it? It’s very unlikely it’s gonna go to the small niche brand.”

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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