Tilray Brands announced an $85 million all cash deal to acquire eight craft beverage brands from Anheuser-Busch earlier this week.
The Canadian cannabis firm has quickly established a portfolio of craft beer brands in the U.S. with the acquisitions of SweetWater, Montauk, Green Flash and Alpine.
The company will add the following brands once the deal closes by the end of September:
- Shock Top;
- Breckenridge Brewery (Littleton, Colorado);
- Blue Point Brewing Company (Patchogue, New York);
- 10 Barrel Brewing Company (Bend, Oregon);
- Redhook Brewery (Seattle, Washington);
- Widmer Brothers Brewing (Portland, Oregon);
- Square Mile Cider Company (Portland, Oregon);
- HiBall Energy (discontinued in May).
Tilray CEO and chairman Irwin D. Simon, during an investor call Monday, said the “transformational” deal “will fuel Tilray Brands’ future in the U.S. craft beer industry and reflects the ongoing strides we’re making in diversifying our overall business.”
Tilray’s bev-alc portfolio, which will now include 11 craft beer brands and Breckenridge Distillery, will account for 30% of Tilray’s overall business. Adult- and medical-use cannabis and medical distribution will each make up 30%, and wellness products will account for 10%.
The latest deal will triple Tilray’s size, from 4 million cases annually to 12 million cases (more than 870,000 barrels), and make it the fifth largest Brewers Association-defined craft brewing company by volume.
Simon spoke with Brewbound about the transaction on Tuesday. What follows is an edited version of the conversation.
Brewbound: A-B said you contacted them earlier this year about acquiring the eight brands. My working theory is that you inquired first about Breckenridge and the conversation evolved from there. How far off am I?
Simon: You’re not far off. I inquired about Breckenridge. I inquired about Blue Point because of the synergies with Montauk Brewery. Then, as I looked to map out our strategy about being a national beer distribution company … we didn’t have anything in the Pacific Northwest. So that’s where 10 Barrel came up. And then we started to have other discussions and other brands and Shock Top came up.
Brewbound: You have the Breckenridge Distillery, so it seemed natural.
Simon: It was confusing. The distillery and the brewhouse and Breckenridge and stuff like that. And we have a Fort Collins facility, so it just made sense. So that’s where I reached out and that’s where I started, but I was also looking for production for Montauk, and that’s why Blue Point made sense.
Brewbound: Several of these are in cannabis friendly states. How much of a factor was that in this?
Simon: Not really, because unless cannabis legalization happens federally, there’s nothing that I really can do even if they’re in cannabis friendly states. It was more I wanted to build a national beer distribution branded business, and these brands really brought it together for us.
Brewbound: The announcement said you’re taking on all of the employees of these breweries. How many employees will you take on?
Simon: There’s approximately 800 employees, and most of the employees that come here are either in the brewhouses or in the manufacturing facilities.
Brewbound: Are there any layoffs planned?
Simon: There’s no layoffs planned. But with anything, either people leave or there’s duplication to figure out. Within ABI, they were kind of all run separately. Then there was a lot of work that was done through corporate that we’ll have to take over. The good news is we have that infrastructure in place with SweetWater, with Montauk and with our other beer businesses. Headquarters for this will be run out of Atlanta.
Brewbound: You’re adding a lot of complexity. How do you balance that with the existing brand expansions of SweetWater and Montauk?
Simon: The good news is we have a great team in place under Ty Gilmore’s leadership, and I’ve done it before with Hain [Celestial Group], over 70 acquisitions. We did it with HEXO. We did it with Tilray. We did it when we acquired SweetWater. We weren’t in the beer business. So we have a pretty good plan in place in doing this. We will absolutely depend on ABI for some transitional services and help. Ultimately, there’s a plan that will close over the next 60, 90 days, but there’s a good plan in place of how we ultimately get there.
Brewbound: How long do you anticipate the integration process to take?
Simon: I hope to get this integration done by the end of our fiscal year, which would be May 2024.
Brewbound: Several of the craft beer brands have been in decline for several years. Not everything you’re taking on was a focus for A-B. How do you reverse those trends?
Simon: The craft beer industry needs some new energy invoked into it. And I think with that, with focus, with spending some money on these brands, with some innovation and with being in the right distribution systems, and I’m not saying it’s not today, first and foremost is to stop the decline and then hopefully get growth.
SweetWater, when we took it over, was not really growing. It was flat. Then went into a decline because we had COVID. Green Flash, Nelson and Alpine were declining. And Montauk was growing but nowhere near what it is today.
So we’ve had some great success in turning around our beer businesses. And let me be very clear, it’s not going to be easy. There’s work to do in regards to stabilizing the business. There’s work to do on innovation. There’s work to do with retailers. So there’s some heavy lifting we got to do out there in order to get this back growing again.
Brewbound: Which brands excite you the most?
Simon: I have four kids, you love them all the same. They’re complementary. The Breckenridge brand has tremendous opportunity with tremendous facilities. And that’s because of our Breckenridge Distillery. There’s tremendous growth outside of Colorado into the Texas market and other markets.
We’re the fifth largest craft beer business in the Northeast. You put Montauk and Blue Point together, and the two of them can be a real strong combination. Also, we need capacity to produce Montauk, and it can move right into Blue Point.
The other one I come back with and really look at is Shock Top. This was a rocket at one time. And it really has fallen off. It was advertised on the Super Bowl not too long ago, a few years ago. It’s a great tasting product. It’s a well-known product. It just needs some attention.
Brewbound: Shock Top was once a gateway beer for a lot of people. Can it get back to that place or does it play a different role?
Simon: The whole thing is what’s the right place for it. It’s not getting back to where it was. What is the right positioning for it? And how do we reposition it? What’s the right innovation behind it? What are the right markets for it? Shock Top, of all the brands, is the most well-known.
Brewbound: You made an interesting point during the analyst call. To paraphrase, you’re not worried about where these brands were before, you’re concerned with what you’re going to do with them.
Simon: Yep. People came back to me and said, “You got a great deal. You paid a great price.” You only paid a great price if you get this growing and you get this going in the right direction. That’s the big thing that I got to focus on.
When we bought SweetWater, it was one brand. When we bought Montauk, it was one brand. We got eight. So we really got a lot to do here, and that’s the big thing. Where’s the right focus?
If I sat here today and said to you, in one year we’ll have everyone growing again, you’d say this guy’s either drinking all his beer or smoking some of his other stuff. The thing is, it’s not cut your way to profitability, it’s make sure you grow your way to profitability. I think there are tremendous opportunities in the craft beer category to make it cool again.
Brewbound: It’s going to take some marketing. Are you willing to invest in the marketing to make it happen?
Simon: You got to. You can’t stack ‘em high and watch ‘em fly. Those days are over.
It can’t be a secret out there. You really got to spend money on these brands. The good news about social media, man, it can drive volume. The bad news about social media, if you screw up, it can drive down volume. But you really got to have a good plan. And you really have to spend money on it.
Brewbound: Will these brands move to your network or will they stay in the A-B distribution network?
Simon: That has not been decided yet.
Brewbound: Where do you plan to produce Shock Top?
Simon: Don’t know yet. A lot of these products are still made at other ABI facilities, and when we move it out, where do we have the capacity? Where’s our biggest markets? Where are we shipping it to? So that’s still to be figured out.
Brewbound: But it won’t be at A-B facilities?
Simon: It will be for a little while. They’re great producers and low-cost producers, and they produce a hell of a lot more beer than I do and they can produce it cheaper than I can. So I’m not running away from that so quickly.
Ultimately, I got to take the training wheels off and ride the bike myself because I got these facilities. And I’m not gonna let these facilities run at 50% to produce beer at ABI facilities. But they can produce a lot cheaper. So there’s still some things to figure out.
Brewbound: A-B discontinued Hiball. Is the plan to resurrect that brand?
Simon: Absolutely. It has tremendous potential. The energy category still has lots of legs. So I would love to make sure we relaunch it.
Brewbound: A-B is divesting of brands. Constellation is getting out of craft. One of the reasons that I find Tilray fascinating is you’re investing in craft pretty heavily.
Simon: The big thing for shareholders, as a public company, I was not going to sit here and just wait for cannabis to legalize in the U.S. I now have a strong platform in the U.S. If it legalizes, great. If it doesn’t, then I got another great business out there.
You said it. Constellation is getting out of craft. You see ABI moving away from it. So it does give me an opportunity to move into craft without a lot of these big guys there and gives us some opportunities.
Brewbound: How open is Tilray to additional acquisitions in the craft beer market?
Simon: Absolutely open. It’s interesting how many reach outs I had over the last 24 hours.
Right now, we got our hands full. But absolutely, my objective is to build a half a billion dollar beer and spirits business. That’s going to come from innovation, organic growth, and additional acquisitions.