Molson announces it's developing non-alcoholic drinks infused with cannabis

The Molson Coors brewery in Montreal.
Canadian Press

In a joint venture with leading cannabis producer, The Hydropothecary Corporation, the two companies will develop non-alcoholic drinks infused with cannabis.

The deal is expected to close before September 30, just ahead of the proposed legalization of recreational marijuana in Canada.

The hundreds of active molecules in the marijuana plant can be transformed into various products beyond just ones that give a buzz, said Hexo CEO Sebastien St. Louis.

Molson Coors Canada will have a 57.7% stake in the new company and Hydropothecary will hold the balance. The drop follows a 3% global fall in Q1, and Molson Coors CEO Mark Hunter said he is "aggressively addressing" volume performance in North America.

The brewer is the latest to capitalize on Canada's decision to legalize recreational marijuana later in the year, a market industry watchers say could be worth $5 billion to $10 billion.

Market research firm Euromonitor International estimated that the global market for legal and illegal cannabis is about $150 billion, with legal marijuana sales in Canada projected to total $7.5 million and $10.2 billion in the USA this year.

Molson Coors sales declines improved slightly in the second quarter of the year but a global volumes drop saw the U.S. and Canadian brewer pledge to address weakness in its home markets. "Visibly intimidated, insular, and inherently conservative, large parts of the alcohol industry acknowledge and highlight the dangers to their penetration rates and profitability, but largely fail to see the huge potential behind the plumes of hazy smoke". Alcohol giant Constellation Brands Inc., the maker of Corona beer, bought a stake in Canadian pot producer Canopy Growth Corp. last year, and cigarette maker Imperial Brands Plc last month took an equity stake in closely held Oxford Cannabinoid Technologies.

Recreational marijuana is set to become legal in Canada on October 17, but edible products infused with pot - including beverages - will remain illegal until specific government regulations are rolled out in 2019 at the earliest.

HEXO now has more than 300,000 square feet to work on the new drink with and is getting an expansion more than three times that size to be completed by the end of the year.

Meanwhile, Molson Coors reported that it earned US$424.1 million or $1.96 per diluted share in the second quarter. HEXO is the name of a recreational cannabis brand recently launched by Hydropothecary, as well as the company's current ticker symbol on the Toronto Stock Exchange. That was up from US$367.1 million or $1.70 per share in the second quarter of 2017.

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