Cannabis company Tilray Brands Inc. is taking on full ownership of the pot drinks company it ran with Molson Coors Canada.
The Leamington, Ont.-based pot firm said Friday that it had signed a deal to acquire the remaining 57.5 per cent of Truss, which is behind the XMG, Little Victory, Mollo, Veryvell, House of Terpenes and Bedfellows Liquid Arts brands.
The companies did not disclose the terms of the deal, but Molson Coors indicated it was willing to relinquish its stake because of the state of the market.
“The cannabis beverage market hasn’t grown to the industry’s initial expectations, so we decided to sell our portion of the TrussCanada joint venture and exit this space as we turn our focus to other segments with stronger growth potential," said Adam Collins, the brewer's chief communications officer, in a statement.
However, Blair MacNeil, Tilray's president, saw Truss as a way for his company to bolster its "stable of high-growth brands" and said the acquisition "further strengthens" its position in the Canadian market.
"We are excited to build upon our leading portfolio of beloved cannabis brands and to further diversify our product offerings while broadening our consumer reach and enhancing consumer’s lives," he said in a statement.
Tilray's move to up its stake in Truss comes as the cannabis industry rethinks how it can deal with persistent market headwinds.
Some firms have lamented how the illicit market has proved resilient, U.S. legalization has been slower than expected and a proliferation of cannabis stores has made building brand loyalty difficult.
To cope, many companies have resorted to layoffs and facility closures, but several are also eyeing other businesses.
Aurora Cannabis Inc., for example, is ramping up plans to grow and sell orchids.
Tilray, meanwhile, has put much of its attention on beverages.
Aphria, which was acquired by Tilray in late 2020, bought SweetWater Brewing Company, an Atlanta, Georgia-based craft beer company, ahead of the merger.
Aphria paid US$300-million for the deal, which it positioned as a way to expand into the U.S. and access the market more quickly in the event of federal legalization.
Tilray added even more booze to its portfolio earlier this month, when it signed a deal to buy eight beer and beverage brands from Anheuser-Busch Companies LLC.
The eight brands are Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy.
The brands are poised to make Tilray the fifth-largest craft beer operation in the United States.
The Truss deal straddles both arms of Tilray's business, allowing it to blend its cannabis and non-cannabis experience.
But cannabis beverages are not always an easy sell. Many see them as a novelty and are less likely to consume them because they are not sold in venues like bars or restaurants.
The latest data from the Ontario Cannabis Store shows beverages made up just two per cent of the pot retailer and weed shops' sales between January and March of 2022.
Almost $7 million in cold cannabis beverages were sold, with dealcoholized drinks bringing in less than $400,000 and hot beverages slightly more than $300,000.
By comparison, edibles, including baked goods, soft chews and chocolate, made up five per cent of sales, while dried flower reigned supreme, capturing half of all sales, which were valued at more than $200 million.
Those who are drinking cannabis beverages have seen fewer big names on pot store shelves recently.
Labatt Breweries of Canada bowed out of the cannabis business last year, winding down Fluent Beverages, which made non-alcoholic drinks containing some of the active ingredients found in cannabis.
Actor Seth Rogen's Houseplant brand, which was known for its cannabis-infused grapefruit and lemon sparkling waters, also left Canada, after ending its partnership with Canopy Growth Corp. The company has vowed to return to the country but has yet to relaunch.
But at least one analyst thinks cannabis beverage proponents have reason to be optimistic.
“With combustion generally on the decline in tobacco, we believe that non-combustible formats in cannabis will become increasingly popular as well, in particular beverages serving as an easier substitute social lubricant vs. alcohol,” wrote TD Cowen analyst Vivien Azer in a Friday note to investors.
This report by The Canadian Press was first published Aug. 18, 2023.
Companies in this story: (TSX:TLRY, TSX:TPX.B, TSX:ACB, TSX:WEED)
Tara Deschamps, The Canadian Press