Issue 57: Tilray Says "Brewski Beer Me"
The Canadian Cannabis Giant Is Increasingly Looking Towards Booze to Soothe Its Economic Woes. Plus, Trulieve Struggles To Beat The Heat.
Apologies for the delay, but we have another jam packed issue.
This week, I take a look at Tilray’s move to further diversify by doubling down on their craft beer portfolio, and I ask if extreme heat is really responsible for Trulieve’s slumping sales.
Tilray Says “Brewski Beer Me”
A Major Canadian Cannabis Company Further Diversifies Into The Alcohol Space, But Is the “Craft-Style” Beer Space In Any Better Shape Than Cannabis?
Things have been rough for a lot of big companies in the cannabis sector lately. Tilray is certainly no exception. Now, the Canada-based cannabis conglomerate is looking to further diversify their portfolio through a deal to buy a number of craft and “craft-style” brands from Anheuser-Busch, including Shock Top and Breckenridge.
This isn’t Tilray’s first foray into the beer world – they purchased Sweetwater and Montauk breweries back in 2020 – but this new deal will now make Tilray the fifth largest “craft” brewer in the U.S, signaling the biggest attempt yet by a cannabis company to diversify into other non-weed related industries.
Investors certainly loved this move, as the company’s stock has ballooned about 17% since the deal was announced. But beyond the hype, I think it’s worth asking: Is the craft beer market any safer than the cannabis space at the moment?
Craft Beer vs. “Craft-Style” Beer
You could argue that bragging about being one of the largest craft beer companies is a bit of an odd move. After all, craft breweries are defined by the Independent Brewer’s Association as companies that produce less than six million barrels a year. Many of the bigger craft beer makers intentionally produce less beer than they theoretically capable of making, just so they can meet the IBA’s definition of craft. It’s a bit like a flyweight boxer bragging about being the heaviest competitor in their weight class, simply because they managed to cut their weight as close as possible to the limit.
It should also be pointed out that some of these brands don’t actually qualify as craft at all. Shock Top is a “craft-style” beer, which is basically Big Alcohol’s attempt to piggyback off the success of the craft movement by creating brands that make customers feel like they are drinking an independent beer. Companies commonly obscure the fact that these “craft-style” beers like Shock Top and Blue Moon are owned by the likes of Am-Bev or MillerCoors, a practice that has led to lawsuits from consumers in the past. Despite pushback, these companies continue to get away with this practice by saying they’re under no legal obligation to respect the Independent Brewer’s Association’s definition of craft beers.
It’s easy to compare the debate over what constitutes craft beer to a similar situation in the cannabis industry, where a number of the largest businesses in the space have flower brands that they describe as “craft,” even though it’s often unclear what truly differentiates these products from the rest of their brands.
But the potential similarities between craft cannabis and what we’ve seen in the craft beer space don’t end there.
Alcohol Takeovers Can Be Just As Messy As Cannabis
As we’ve seen many times in the cannabis space, a giant conglomerate coming in and attempting to take over the operations of a small, locally-owned business doesn’t always go as planned. This has also proven true in the craft beer space.
Take, for example, the much publicized demise of Anchor Brewing Company. One of the few smaller breweries that survived the massive consolidation of the beer industry following prohibition, Anchor became one of the original faces of the craft beer movement that started towards the end of the 20th century. Its success led it to be purchased by Sapporo in 2017 for $85 million.
Sapporo then proceeded to run the 127 year old company directly into the ground. The purchase led to an almost immediate decrease in the working conditions at the factory, leading employees to unionize. Employees claimed that the company showed little interest in the company’s history or unique brewing methods, and instead invested a bunch of money into infrastructure in an attempt to allow it to brew Sapporo beer instead of Anchor. Coming from the cannabis space, it’s hard to read the details of Sapporo’s takeover and not think of how similair it is to what we’ve seen when large weed companies takeover smaller operators:
Dias thinks the Japanese macrobrewer’s biggest mistake was purchasing the company in the first place. “Sapporo tried to [upgrade the facilities] to brew Sapporo,” its eponymous flagship rice lager, he says, even though Anchor, with its roster of ales, specializes in open fermentation. “We can’t brew Sapporo. We just don’t have the capacity to do that. I don’t know how they didn’t f*cking realize that.”
From that foundational gaffe flowed others. Dias, who worked at Anchor from March 2021 to June 2023, and two current workers who spoke on background for fear of retaliation, describes the tragicomedy of brewing errors. Execs postponed necessary plant maintenance, fought workers’ successful union drive in 2019 and stalled on the follow-up (and eventually successful) contract negotiations this year, and demonstrated an “extremely novice” grasp of Anchor’s brewing cycle. “Production schedule is a joke,” one worker tells me. “It changes week of, on a constant basis. It used to be ‘because of our workforce,’ which was the excuse. Now it’s something else, tomorrow it’ll be something else. It’s almost as if [bosses] can’t figure out how to manage our inventory or what we can produce.”
- How Sapporo USA Sank Anchor Brewing Co.(Dave Infante, Vinepair.com)
Anchor’s employees weren’t the only ones disappointed by Sapporo’s takeover, as a redesign of the company’s classic logo and packaging irritated customers to the point where they started petitions and facebook groups to demand that Sapporo revert back to the old branding.
This all comulated with last month’s announcement that Sapporo intends to shut down Anchors operations.
Tilray’s Strategy
Obviously Tilray has been watching the Anchor situation closely with the intent of learning from Sapporo’s mistakes, right?
Maybe not. It seems like a key part of the publicly-traded company’s plan to “make craft beer cool again” is to update the packaging of some of the brands they just bought. From CEO Irwin Simon via Yahoo Finance:
“So again, it's coming up with unique products, it's connecting to the consumer. And with that, we'll hopefully get these products growing in the right direction and giving them attention. Absolutely, you got to spend money on them. You got to ultimately enhance some of the packaging. And I think there's such big opportunities.”
New shiny packaging is cool and all, but only time will tell if Tilray’s strategies for these brands is enough to overcome the challenges that many mid-size beer companies are facing right now, or how brewery workers will feel about their new corporate overlords.
It was probably a wise move to remove some of their eggs from the cannabis basket, but it remains to be seen if “craft-style” beers will truly be a place of safe refuge for the company, or if any other companies will follow suit with similar plans to diversify.
Some Like It Hot, But Trulieve Does Not
High Temperatures Are Just One Reason The Florida-based MSO is Feeling the Heat
Trulieve disclosed their Q2 earnings this week, and the company had a very creative excuse for why their losses were wider than expected: the extreme heat.
From Reuters:
Wallet pressure on consumer behavior and extreme heat are influencing top-line results in the current quarter, company executives said in a post-earnings call.
"Extreme heat primarily impacts cannabis sales via reduced store traffic as consumers stay indoors," said Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group said.
While it’s believable that people might delay a run to the store for a few days during a particularly extreme heatwave, I find it a bit hard to believe that the company’s customers stayed home for an entire fiscal quarter because it was hot out. After all, if the COVID pandemic taught the industry anything, it’s that people being trapped in their homes definitely does NOT lead to people consuming less weed.
Recent data from Arizona suggests the state’s overall market shows little sign of slowing down. It’s also worth pointing out that Massachusetts — a state that Trulieve fled from — has seen a record amount of sales in recent months, heat be damned.
More Cuts Coming
Current Trulieve workers who managed to avoid being laid off during recent cuts should also be aware of the the fact that the company isn’t done slashing jobs; executives mentioned “reducing core expenses” and “reducing redundancies” multiples times during their post-earnings call.
All of this comes in the same week that the company announced that their former CFO allegedly stole over $350,000 via bogus expense reports.
The company is also apparently looking to transfer the licenses at its former Holyoke facility to a new owner (🔐), although it’s unclear who that new owner would be at this point. It was also announced this week that the Massachusetts Cannabis Control Commission investigation into the company remains ongoing; this investigation was first opened in the fall of 2021.
Other News Bites
Another Tense Massachusetts CCC Meeting
Cannabis Control Commission Chair Shannon O’Brien started off this week’s meeting with a statement about her comments regarding Executive Director Shawn Collin’s apparent resignation and family leave. While she apologized for any disruption that the announcement caused, she stood by her decision to inform the rest of the agency’s Commissioners of Collin's plans.
This was hardly the only contentious topic at this week’s meeting. My full recap will be out later this evening. Update to a paid subscription to make sure you don’t miss out.
PAX Jumps Into The Delta-8 Game
Pax, a cannabis vape company that has recently move to launch their own cannabis products in various states, announced this week that they are launching their own line of hemp-derived cannabis products that can be shipped nationwide.
This follows news that Cookies has launched their own line of hemp-derived products, as national cannabis brands increasingly look for ways to get their products into states that have yet to legalize actual weed.
While I has sympathy for people stuck in states that still have prohibition, I’ll stick to the real stuff.
Resinate Offering Deli-Style in Massachusetts
Resinate, a Massachusetts dispensary with locations in Worcester and Northampton, announced this week that they will begin offering deli-style service at their retail locations. This is notable because only a small handful of operators in the Bay State currently sell weed in this manner, which involves selecting and weighing out cannabis directly in front of customers rather than it being pre-packaged at the cultivation site.
Deli-style used to be the norm back in the days when the industry was still in its infancy, but the rise of large cannabis corporations and stricter packaging requirements has led to pre-packaged cannabis taking over most of the market.
I’ve always been a bit torn on this subject; I like the idea of being able to see my weed before I buy it, but I don’t love the idea of it sitting in a giant tupperware container that gets opened and sniffed dozens of times per day. That being said, widespread adoption of deli-style service could eventually open the door for regulators to allow customers to bring their own jars to be filled, cutting down on the amount of plastic waste the industry produces. Companies in Massachusetts are certainly taking advantage of the fact that most consumers don’t have the chance to look at their flower before they actually buy it, so maybe deli-style is just what we need right now.
A launch date for deli-style sevice at Resinate has yet to be announced.
Alabama Seemingly Learns Nothing From Its Mistakes
The Alabama Medical Marijuana Commission took another shot at issuing business licenses this week. Most of the previous winners got their licenses back, with one notable exception: Verano Holdings, who lost their license to INSA without explanation.
WBRC News highlighted some of the problems with the last round of licensing that were revealed at the latest meeting:
A scorer hit “submit” button twice for one integrated license (the biggest category), doubling their score and messing up the average scores.
Evaluators incorrectly applied the wrong weight to every applicant score in all categories.
Scores in the Processor category were sorted/averaged by the evaluator, not the applicant.
Quantitative and qualitative scores were inconsistent in all categories, forcing some scoring changes.
Data-entry errors: some evaluators mis-keyed the numbers and had to be contacted by email to give the correct data, and some of the data they gave was applied to the wrong applicant or not at all.
Considering The AMCC voted to award the new licenses without any public discussion, you could argue this new licensing decision came with the same complete lack of transparency that we saw in the last round, raising concerns that this new decision will face the same legal challenges.
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New England
🔐 EQUITY EFFORTS FALL SHORT (Cassie McGrath | Boston Business Journal)
The seven companies that have maxed out licenses are Alternative Therapies Group; Garden Remedies; Green Thumb, which owns Rise and Affinity; Insa; NETA; Patriot Care Corp.; and Sunnyside Cannabis, formerly Cultivate and Temescal Wellness.
All except Garden Remedies are owned by multistate operators, which work in other states and often have more resources, and therefore an advantage to build faster than smaller, local businesses.
Only four businesses from the social equity or economic empowerment programs have more than one retail license. All of them — Pure Oasis, Western Front, New Dia, and Caroline’s Cannabis — have just two, according to state data.
ANALYSIS: Exiting medical marijuana companies in Massachusetts already had a massive advantage heading into adult use legalization because they already built out infrastructure and had experience selling cannabis. Then the state gave existing medical license holders an even bigger advantage by creating rules that prioritized the review of applications that were submitted by them.
Sadly, other states haven’t learned from this mistake, as Rhode Island is also currently giving their existing medical dispensaries a huge leg up.
Rest of U.S / National
THE FIRST CANNABIS GROWERS SHOWCASE SPROUTS IN NEW YORK (Anthony Krolikowski | News10ABC)
Organized by High Falls Canna, Director of Cannabis Operations, Matt Brewer, describes the Cannabis Growers Showcase as a partnership between those in the industry. “We’re excited to invite other farmers and friends and processors to this first annual event.”
This is the first time New Paltz has had local, legal access to marijuana outside of the legacy, or illegal market. The sellers also took this time to make connections with their customers. “They can take a look, they can meet the farmer, they can talk about the products and now they can purchase the products,” described Brewer.
ANALYSIS: Amidst a backdrop of lawsuits and a number of other headaches, it’s nice to finally see a bit of good news come out of New York. These showcases offer growers a way to directly sell their wares to consumers, allowing the state to hopefully work though it’s massive backlog of weed.
THE BRAND MARKETING STRUGGLE IS REAL [OPINION] (Ricardo Baca | mg Magazine)
The very real marketing challenges faced by brands are extensive, but advertising is where the struggle really hits home. Until the plant is completely descheduled by Congress and positioned like tobacco and alcohol, major platforms like Google, Facebook, and LinkedIn will not take dollars from any brand deemed to be promoting “illegal drug use.” In 2021, Google’s ad revenue hit $209.5 billion, but cannabis brands did not contribute to that figure. And while Twitter recently became the first social media platform to allow cannabis ads in the U.S., it remains to be seen how effective access to that platform will be.
ANALYSIS: As mentioned by Ricardo, part of the problem is that nobody even fully understands what the rules are. Shadowbans are one of the more frustrating aspects of posting about cannabis on social media, as it’s unclear what causes some content to get the ban hammer while other content slips though. Even Burn After Reading’s social media has been impacted by this, despite the fact that I’m obviously not using this platform to sling weed.
MONTANA MARIJUANA OWNERSHIP RESIDENCY REQUIREMENT LATEST TO BE CHALLENGED (MJBiz)
The suit is the latest in a string of challenges to cannabis industry residency requirements across the country.
In two lawsuits filed in federal and state court in July, father-and-son plaintiffs Tom and Jerry Reed claim Montana’s marijuana business ownership residency requirements violate the U.S. and Montana constitutions, the Helena Independent Record reported.
ANALYSIS: I know I should probably use this space to discuss the big implications of lawsuits targeting cannabis license residency requirements, but I can’t get over the fact that a man named Tom decided to name his child Jerry. Now I’m picturing a cartoon about a cat and mouse that operate a dispensary.
BIDEN ADMIN HAS NO RECORD OF MARIJUANA LETTER CITED BY DEA HEAD IN CONGRESSIONAL TESTIMONY (Kyle Jaeger | Marijuana Moment)
At a House Judiciary Committee hearing last month, DEA Administrator Anne Milgram told Rep. Matt Gaetz (R-FL) that the president “had sent a letter to the secretary of HHS and to the attorney general to ask for the scheduling—descheduling process to begin.”
Attorney Matt Zorn filed a Freedom of Information Act (FOIA) request for a copy of that letter, and HHS sent him a response last week stating that it “conducted a search” that determined “there are no records responsive to your request.”
ANALYSIS: It seems unlikely that the head of the DEA lied to congress over something so trivial, but never underestimate the federal government’s most incompetent law enforcement agency.
Regular readers know that I’m a pretty big fan of efforts to improve the lives of cannabis workers, so I’m happy to help bring some attention to the upcoming North East Regional Cannabis Symposium being held in Worcester on August 30th and 31st. If you’re a looking to grab an individual ticket, use the code BAR150 for $50 off.
This week’s welcome distraction is going for a simple walk in the park.
The unrelenting heat wave had me mostly confined to my apartment, but the humidity finally lifted in recent days, allowing me to venture out into the real world and enjoy all the offerings of Worcester’s Green Hill Park.
I’m not sure if I’m just suddenly more aware of my surroundings, or if the pandemic allowed the region’s wildlife to flourish, but I’ve been blown away by how many critters I’ve seen. Despite being surrounded by urban sprawl, just in the past few days I’ve seen a ton of deer, turkeys, rabbits, hawks, and other animals that I rarely spotted just a few years ago.
So take a moment to relax this weekend with a nice stroll. You’ve earned it.
This week it’s Vinegar, who looks like he just remembered that he left the stove on. He’s available for adoption at Baypath. Shelters across the country continue to struggle with low adoption rates, so strongly consider bringing this guy home.
