Why ‘Hard Seltzer summer’ bodes well for cannabis beverages

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The Boston Beer Company, best known for its traditional flagship beer Samuel Adams Boston Lager, has had some tough years recently, as Americans continue to become more health-conscious. But they’re already getting in on where folks are heading, and it includes hard seltzer and cannabis drinks.

The folks at Nielsen said the hard seltzer category grew over 200% in the past year, and as much as 164.3% in July alone. During that wild bump in sales, Boston Beer’s Truly hard seltzer has carved out an almost 30% share of the marketplace. Given the fact that many cannabis beverage recipes simply involve adding cannabis isolate into sparkling water, one can presume the more Boston Beer puts into their seltzer infrastructure, the better prepared they will be when they flip the switch to become a pot company, too. And that time might not be too far in the future.

Boston Beer Company CEO David Burwick joined CNBC’s Power Lunch last Friday to talk seltzer, and eventually weed. CNBC asked Burwick if the company planned to hedge its bets in cannabis after going big on their exploding hard seltzer business where they are scaling up production, or go big like Constellation Brands (the makers of Corona) did with their $4 billion investment in the Canadian cannabis company Canopy Growth?

“I don’t think we have $5 billion to invest in a cannabis company,” Burwick replied with a laugh, “But right now we’re happy to grow double digits with the portfolio we have and we’re really happy with our performance.”

But then things got a bit more exciting.

“Having said that, of course we’re looking at cannabis developments,” Burwick said. “We’re not going to be the first one in, but we’re going to study and learn. At the right time, once the category actually develops, it hasn’t developed yet, then we’ll play at some point down the road.”

This is somewhat similar to their company’s tactic with hard seltzer. “Hard seltzer” products have been around since Coors’s 1993 seltzer Zima, but Boston Beer’s Truly only launched 4 years ago when the sector was starting to heat up — thanks to beverages like La Croix.

Regardless of when Boston Beer does decide to get in the cannabis industry, things are going pretty well already. Over the last year, on the back of the hard seltzer that will probably end up with a cannabis-infused instead of alcoholic option someday (most states do not allow cannabis-infused alcohol), Boston Beer Company’s stock has grown over 80%.

Other prominent beer companies are already setting well-publicized flags in the cannabis world with varying degrees of success. While Heineken-backed Lagunitas is doing well in California’s beverage market with their hop-flavored sparkling water HiFi Hops, on the flipside, Constellation Brands has had some rough earnings calls in recent quarters.

In July, Yahoo Finance summed up Constellation’s current concerns with their Canopy investment. Constellation had a $245 million loss in the second quarter of 2019, and the Canopy investment was specifically what kept them from having a profitable quarter. Constellation wasn’t happy with the overall results, though both Canopy and Constellation think they can hit $1 billion in annual revenue soon.

Lagunitas’s history with cannabis was a bit more tragic, but ended up on a high note.

Back in 2005, Lagunitas was hosting one of its weekly shindigs at its brewery north of San Francisco. (As you travel north from San Francisco, the industries go from wine, to hops and then to weed; Lagunitas is located in the heart of hops country.) The party started at 4:20 as usual. Not long after, in what is referred to as the St. Patrick’s Day Massacre, undercover agents busted out their badges and cleared the pot-smoking backgammon players after eight weeks of surveillance. Lagunitas was forced to shut down for 20 days, but they used the time to install their new bottling line.

Lagunitas brews the “especially-bitter” Undercover Investigation Shut-Down Ale to commemorate the event. In the end, Lagunitas would get the last laugh twice, now having their wildly popular THC-infused beverages in branded coolers at many big-name dispensaries.

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