Cannabis-infused beverages will make up 20 per cent to 30 per cent of the Canadian pot market and the joint venture between Molson Coors Brewing Co. and Hexo Corp. intends to be the leader in the segment, according to its chief executive officer.

Canada will allow beverages, along with edibles and other new formats, to be sold in legal dispensaries beginning in December. After legalisation was originally limited to dried flower and oils, companies are now positioning themselves to take advantage of the new categories, which are expected to attract more consumer demand and generate higher margins.

Gatineau, Que.-based Hexo partnered with Molson Coors last August to develop non-alcoholic, cannabis-infused beverages for the Canadian market. The companies officially launched their joint venture, called Truss, in October and named former Molson Coors executive Brett Vye as CEO.

“Our ambition is to be the beverage specialist,” Vye said in a phone interview. “We want to lead this category and we will lead this category.”

Truss has developed a portfolio of several different types of beverages that will be ready for Dec. 16, the first day pot drinks can legally be sold in Canada. It will produce its drinks at a plant in Belleville, Ont. that will be able to produce 200 bottles or cans per minute at full capacity.

Truss’s closest competitor is likely to be Canopy Growth Corp., which has partnered with Constellation Brands Inc. and is currently building a 125,000-square-foot bottling facility that will have the capacity to produce more than five million beverages a month. It’s also developing edibles and vapes.

“We’re beverage specialists, we’re not cannabis generalists,” Vye said. “That’s what I believe honestly differentiates us from our competition. We’ve got a big team behind us and all we think about every minute of the day is beverages.”

Deloitte estimates the Canadian market for cannabis-infused beverages will be worth $529 million annually. In a recent survey of 2,000 adults, 37 per cent said they intend to try them.

The format hasn’t been successful in legal U.S. states so far, accounting for just one per cent of 2018 cannabis sales by both value and volume, according to Deloitte.

Very few companies have succeeded in making cannabis beverages that taste good and have the high take effect in a way that’s similar to alcohol. Many in the industry believe the key to mainstream acceptance is creating a “sessionable” beverage, where one can have two or three drinks over a few hours while enjoying a steady, moderate high.

Vye said Truss has formulated products that kick in within 15 minutes and wear off in about two hours and is working with Molson Coors “to ensure we get the taste right.”

The challenge for beverage makers will be Canada’s strict limitations on branding and advertising cannabis products, which include the stipulation that such alcohol-related terms as “beer” and “wine” can’t be used to market pot drinks and that each container contain no more than 10 milligrams of THC, the cannabis compound that induces a high.

Vye said he largely supports the regulations and believes quality will matter more than brand in the early days.

“I think at launch, brand will be important but I don’t think it’ll be as important as taste and experience,” he said.

Truss will focus on its Canadian rollout for the next six to eight months but may eventually look at international opportunities, including the U.S.

“The dream would be one day you walk into a grocery store (anywhere) in the world and you’ll have your alcohol section and then you’ll have your cannabis-infused beverage section,” Vye said.

“That’s where it gets exciting.”

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Written by Kristine Owram fo Financial Post

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