Steam Whistle in talks with pot firms
Steam Whistle Brewing Inc., maker of the popular green-bottled pilsner lager distributed across the country, is pivoting to cannabis.
Andy Burgess, president of the craft brewery, told BNN Bloomberg he is engaged in active discussions with several cannabis producers for a possible investment or joint venture with the company.
"This is about reinforcing the brand and how to build shareholder value for the long term," he said in an interview this week.
Discussions have included the possibility of producing cannabis-infused beverages and launching a Steam Whistle brand of cannabis, he added.
"The bottom line is that our brand and the building, our distribution, and the popularity of our beer is of interest to the cannabis space."
Steam Whistle was founded in 1998 and brews its distinctive pilsner at a facility based at Roundhouse Park, the former Canadian Pacific Railway Co.’s steam locomotive repair facility in Toronto located right across from the Rogers Centre and down the street from the Scotiabank Arena. The company is one of the country's largest independent craft brewers with distribution in Ontario, Alberta, British Columbia and, next year, Quebec.
Burgess described the discussions with pot players as still "in the early days," but said it appears likely that he would partner with a Canadian cannabis company to open a pot shop at the Roundhouse Park building.
Steam Whistle's flagship location, where it holds a long-term lease for its brewery, event space and eventually a restaurant, hosts 125,000 visitors annually, Burgess said.
"We really have a unique opportunity here to offer cannabis to the Toronto market in an approachable, educational and dynamic environment here at the brewery," he said.
Roelof van Dijk, Canadian market economist at the CoStar Group, said cannabis producers are paying premium rates on securing high-profile locations for legal pot shops. Partnering with an established company with a prime location like Steam Whistle could save a producer as much as 30 per cent in additional rent premiums.
"These producers would love to have these prominent locations in heavy tourist areas," van Dijk told BNN Bloomberg in an interview.
Cannabis is currently sold in Ontario online through a website managed by the province but will allow private sector businesses to sell legal marijuana in brick-and-mortar retail shops in April.
This isn't the first time that Steam Whistle has explored a tie-up with the cannabis industry. It was previously engaged in advanced talks to be acquired by Aurora Cannabis Inc. for about $150 million, but discussions broke off in early May, two industry sources familiar with the negotiations told BNN Bloomberg during the summer.
News of Steam Whistle's potential tie-up with Aurora Cannabis was first reported by The Globe and Mail. Burgess declined to comment on discussions with Aurora.
As well, Greg Taylor, one of the brewery's founders, left Steam Whistle to join medical marijuana producer Nuuvera Inc. as president in January 2018 before the company was acquired by Aphria Inc. several months later. Aside from being a shareholder, Taylor has no current role at Steam Whistle and is not part of any negotiations.
A potential tie-up between Steam Whistle and the cannabis industry follows other similar moves by major beverage companies to collaborate on future cannabis-infused drinks including Molson Coors Brewing Co., which formed a joint-venture with Hexo Corp., as well as Diageo Plc and The Coca-Cola Co., which have expressed interest in the sector.
Alcohol companies are increasingly eyeing the cannabis space to help buck declining sales as the legalization of recreational marijuana usage widens in Canada and dozens of U.S. states.
A recent report by Cowen & Co. found that Americans who binge drink, or drink at least seven drinks per sitting, consume far less alcohol in areas that have legalized adult-use marijuana. Meanwhile, IBISWorld released a report last month forecasting a steady decline in Canadian per capita alcohol consumption over the next five years.
"I do think that cannabis, over the long term, provides an alternative to alcohol that we have to be cognizant about," Burgess said.
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