Boston Beer to create cannabis R&D hub in Canada

Dive Brief:

• Boston Beer Co. is creating a subsidiary that will oversee research and innovation into nonalcoholic cannabis beverages. Located in Canada, where cannabis use is legal, the company will develop and test products as it watches regulatory developments in the United States and worldwide. 
• The company has hired Paul Weaver as director of cannabis to oversee the innovation hub. Weaver is the former director of innovation for Canopy Growth and also served more than six years at Molson Coors Beverage in a similar capacity.
• With the establishment of the research and innovation hub, Boston Beer is putting a formal stake in the still developing but promising cannabis beverage segment to line up its next big growth opportunity after the wild success of hard seltzer.

Dive Insight:

Boston Beer’s tremendous success in hard seltzer has clearly convinced it of its chances leading another new beverage segment with enormous potential — cannabis beverages.

“Innovation is core to what we do, beginning with craft beer, then hard cider, hard iced tea, and now Truly Hard Seltzer,” said CEO Dave Burwick in a statement. “We believe nonalcoholic cannabis beverages could represent a new frontier of innovation and want to be ready for future opportunities in the US.”  

Burwick first mentioned Boston Beer’s interest in the cannabis market in a 2019 interview, noting the company’s desire to apply its positive experiences with the Truly brand in hard seltzer. In the company’s most recent earnings call this past April, the exec said Truly’s off-premise market share rose 6.5 percentage points in first-quarter 2021 to reach more than 28%, and it accounted for about 40% of hard seltzer case growth year to date. He credited the performance of Truly Iced Tea Hard Seltzer, which launched in January and already has 4.3% share of the off-premise market for the segment.

Innovation is key to Truly’s success, with a steady rollout of new products. Most recently, the brand has debuted punch varieties and its Extra Hard 8% ABV seltzer, following its January 2020 debut of Truly Lemonade Hard Seltzer.  

This demonstrated expertise with new product segments and brand development will benefit Boston Beer in the cannabis beverage market, which has drawn careful but determined interest from a range of large alcoholic beverages manufacturers. Truss CBD USA, a joint venture majority owned by Molson Coors and operated with Canadian cannabis producer Hexo, launched Veryvell, a line of nonalcoholic sparkling CBD beverages in Colorado. And AB InBev and Tilray partnered on nonalcoholic beverages containing THC and CBD. 

Canada, which allows the sale of some infused food and beverage products, is the ideal testing ground for the U.S., which some industry participants consider the largest potential market for cannabis beverages in the world. This includes Canadian cannabis company Aphria, which merged with Tilray earlier this month and now operates under the name Tilray. Prior to the merger closing, Aphria entered the U.S. market after its $300 million acquisition of SweetWater Brewing Company. CEO Irwin Simon characterized the opportunity as dependent on cannabis being federally permissible here. President Joe Biden has been described as “lukewarm” in his view on legalization. 

For Boston Beer, cannabis beverages also allows it to continue diversifying should its hard seltzer sales start to flag. The category is already crowded with competitors including alcoholic beverage giants such as Anheuser-Busch, Diageo and Heineken, which have also chased the segment’s sales as the beer business matures and declines. Nonalcohol players like Spindrift have entered the space, while energy drink brands like Monster are reportedly also weighing the opportunity. 

The establishment of an innovation headquarters, a market to test products and the leadership of an exec familiar with both cannabis and beverages gives Boston Beer a powerful running block to push off of once U.S. regulators give their consent.