Beer giant Molson Coors (TAP) is reportedly considering whether to offer marijuana-infused drinks via a partnership with a Canadian marijuana producer. An analyst said such a move would give Molson "meaningful exposure" to the North American cannabis market and some of the biggest marijuana stocks.
XA cannabis push could echo attempts by rival Constellation Brands (STZ) to head off the plant's perceived threat to alcohol sales. And it could accelerate the race of U.S. companies into Canada — and Canadian companies into the U.S. — following a vote in Canada last week to legalize recreational marijuana.
Molson Coors has held talks with companies as Aurora Cannabis and Aphria, according to BNN Bloomberg. The brewer has been exploring whether to "invest in (the companies) and collaborate on future cannabis-infused beverages," the report said. Molson has been in talks with the those companies and others over the past six months, the report said.
A Molson spokesman, when reached for comment, said "we don't comment on rumor or market speculation." Aurora Cannabis was not immediately available for comment.
Molson Coors Eyeing Marijuana Industry
Last year, Molson Coors CEO Mark Hunter said the company had a team to gauge the "potential impacts and/or the opportunities" of the marijuana industry. Molson this spring told IBD that it was "working actively" to understand cannabis' potential impacts on its business, and would "take our time and get it right."
A few weeks ago, at the company's Investor Day, Hunter said "we have assembled a team in Canada to actively explore the risks and opportunities of entering the cannabis space in that market, where it will be federally legal by this fall."
Prime Minister Justin Trudeau said that recreational legalization will take hold on Oct. 17. Legalization of edibles and other ingestibles — which have grown in popularity — will come later.
Marijuana Stocks Fall
U.S.-traded marijuana stocks, like Canopy Growth (CGC) and Cronos Group (CRON), jumped after Canadian lawmakers approved the legislation, but then sold off Friday.
Marijuana stocks retreated on Monday. Canopy Growth, which began trading in the U.S. in late May, sank 5.1% in the stock market today. Cronos stock, which began trading in the U.S. in February, slid 4.7%. But it's still above its 50-day line. ETFMG Alternative Harvest (MJ), an exchange-traded fund with exposure to the marijuana industry, retreated 2.8%, piercing its 200-day line.
Cowen analyst Vivien Azer, in a research note on Friday, said any Molson Coors move into the cannabis industry by Molson would likely resemble the one Constellation made with Canopy Growth last year.
In that deal, Constellation Brands took a 9.9% stake in Canopy to help "identify, meet and stay ahead of evolving consumer trends and market dynamics." The companies also agreed to share "knowledge and expertise." Constellation aims to collaborate with Canopy on cannabis-infused drinks.
Andy Thomas, the CEO of Craft Brew Alliance (BREW), whose brands include Red Hook, told IBD this spring he would consider making or selling cannabis drinks if pot were federally legalized.
On Friday, Constellation Brands, which sells Corona Beer as well as other alcoholic beverages, reports quarterly earnings.
Constellation Brands stock fell 1.5% Monday. Molson Coors stock rose 1.1%.
Molson Coors' 'Meaningful Exposure' To Marijuana
Azer said the report from Bloomberg was not a surprise. She said that Molson Coors "has meaningful exposure to the North American cannabis market (as the No. 2 participant in beer in both Canada and the U.S.)."
She also said that a potential partnership with Aurora or Aphria "makes sense to us as they are two of the more sizable competitors in the market." She said that the news of Molson Coors indicates that "a stake could be announced by the end of the year."
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