Tilray Doubles Down on Craft Brewing’s Bargain Bin

To the extent that the industries of beer and high finance overlap at all, it’s usually more operationally than culturally. But here’s some wisdom from Wall Street that applies on Plank Road, too: Don’t try to catch a falling knife.

You don’t have to be a Master of the Universe to grasp the concept. Sometimes, a company’s stock — or a brewery’s brand — is struggling for reasons beyond its control, and is ripe for a comeback. Other times, the decline is well deserved, and anybody who intervenes hoping to engineer a turnaround is liable to get bloody.

Last week, Tilray Brands announced plans to acquire four craft breweries from Molson Coors, marking the latter firm’s total retreat from its half-assed “if you can’t beat ‘em, buy ‘em” strategy of last decade. If all goes according to plan, those brands will join the Canadian vice conglomerate’s stateside brewing portfolio by later this month. None are doing particularly well, and neither is that portfolio. The bull case — to borrow a bit more high-finance jargon — is that Tilray is scoring yard-sale prices that will allow it to earn out on assets that MC overspent to acquire in a hotter market. The bear case is: falling knife.

We don’t know the terms yet, but with both companies being publicly traded, we will soon enough. Other terms: MC is passing Hop Valley Brewing Company (based in Oregon), Terrapin Beer Co (Georgia), Revolver Brewing (Texas), and Atwater Brewery (Michigan) to Tilray. For those sick puppies keeping score at home, that means the Chicago firm’s corporate craft brewing division, Tenth and Blake, is now composed of the Jacob Leinenkugel Brewing Company, which then-separate Miller Brewing Company acquired from the namesake family in the pre-merger Dark Ages of 1988. That’s… pretty much it.

Did the country’s second-biggest macrobrewer biff its microbrewing buy-ins harder than its competitors in the American beer industry’s heavyweight class? Talk amongst yourselves, because we’ve got more pressing matters to address. We turn now to the buy side, and Tilray, and whether this deal marks its brewing unit’s continued rise, or threatens its demise.

It would be unfair to say MC ran the breweries in question into the ground before selling them off to Tilray. The firm just didn’t seem to know what to do with them, as journalist Kate Bernot laid out in a prescient report last year for Good Beer Hunting. As Tenth and Blake hands them over, their off-premise sales tell a tough story: Only Atwater is up year-over-year in dollars or volume (9.3 and 6.6 percent, respectively), according to NielsenIQ scan data for total off-premise sales through Aug. 20 reviewed by Hop Take. The other three are in the red, with Terrapin, the second-largest by volume, bringing up the rear, down 18.3 percent dollars and 20.7 percent volume. These are good enough brands, and they offer some regional #synergies to Tilray’s existing portfolio, plus entrée to Texas and Michigan, two major beer markets. And the off-premise isn’t everything. But there’s a lot of red ink on that spreadsheet at the moment.

Your humble Hop Take columnist must confess, covering Tilray has been a breath of fresh air. It’s taking risks at a scale few are able to, at a time when the craft brewing business is anything but a sure bet. The cannabis firm, under CEO Irwin Simon, shook up the status quo in 2023 by acquiring seven beer brands from ABI’s own stable (plus a mothballed energy-drink brand, seemingly as an afterthought.) That purchase followed a mini-shopping spree that started with SweetWater Brewing Co. in 2020. Once the MC deal closes, Tilray will have cobbled together some 20 beer brands, all with distribution relationships and most with attendant brick-and-mortar breweries, in just four years. Expect its ranking on the BA’s annual production list to be at least a notch higher, maybe two, than its No. 6 spot in 2023, when the trade group does its next refresh.

Mergers and acquisitions are not inherently interesting. Tilray’s craft brewing acquisitions are, because they’re sort of… all over the place. Did SweetWater’s 261,00 barrels and $22 million of EBITDA catch Tilray’s eye in 2020, or was it the Atlanta firm’s weed-referencing 420 brand and same-named fest? Was Montauk really the right brand to try to take national after snagging it for $35 million in January 2023, or was it just the one that was available right then? Surely, Tilray didn’t pick up Breckenridge Brewery off ABI last summer just because it already owned the unrelated Breckenridge Distillery… right? Brewbound’s Justin Kendall floated that question to Simon last summer as part of a discussion about why the exec had initially asked ABI about buying the Colorado brewery. “The distillery and the brewhouse and Breckenridge and stuff like that. And we have a Fort Collins facility. It just made sense,” Simon said. Ah. Well.

Tilray is even more fun to watch on the innovation front. It has left alone some of its acquired breweries’ portfolios, like Montauk, which is boring for me, but probably smart for business, considering some of the brands have extant and cohesive value propositions. Big Juicy Ballard, the 9.5 percent alcohol-by-volume hazy honker Tilray added to Redhook’s Big Ballard brand family earlier this year, is a good enough bid for some of Voodoo Ranger’s scraps in the convenience store channel. Some of these moves have straightforward merit as incremental plays. Snooze.

Others look like so much spaghetti being chucked at walls. It… kinda rocks? Shock Top rolled out a hard tea called Liit, which I thought was a pretty weird name until a tipster pointed out that it’s just a reskinned version of Blue Point’s LIIT — Long Island Iced Tea. Sure, whatever! Tilray owns both, so it’s not trademark infringement so much as a reshuffling of the corporate PowerPoint deck. How about a little line-extending on 10 Barrel’s Pub Beer? Yes! Earlier this year the firm rolled out Pub Cerveza, a not-Mexican lager targeted at DuoLingo users (I guess?), and Pub Ice, for all those discerning Smirnoff Ice drinkers out there (???) looking for a more artisanal experience. Everybody knows Athletic Brewing Company is posting some of the most eye-popping growth in the craft brewing industry these days with a non-alcoholic lineup painstakingly developed over the course of years and a powerful advantage as the first zero-proof craft beer to really break through to the mainstream. Tilray knows, too. Behold the “new-to-world” (ahem) brand Runner’s High, aimed at the “truly athletic mind,” as Prinz Pinakatt told Brewbound in March. Reader, I chuckled.

Last time I wrote about this scattershot approach, I got some flak from folks in the trade who thought I was looking too kindly upon the willy-nilly extend-o-rama and naked copy-catting. Tilray may be a little less subtle about ripping off finding inspiration in its peers’ portfolios, but it’s running the same corny do-as-they-do playbook as all the rest.

(The stakes are considerably higher for Spokane’s No-Li Brewhouse, which alleges that Big Juicy Ballard is infringing on its “Big Juicy” trademark, which it has held since 2016. “This is our biggest-selling brand,” No-Li’s owner, John Bryant, told the Spokane Journal of Business in late April, after filing suit against Tilray in district court. “This is literally jeopardizing 90 jobs.” Tilray introduced the beer right as my previous column was going to press, and the suit was weeks from being filed. Here’s hoping the parties find an amicable resolution.)

Far more important than my enjoyment is whether Tilray’s bargain bin-novation works out. Drinkers — not this reporter’s cynical sense of humor — will decide. Scan data suggest that whatever plan the company may have had in place at the beginning of its ‘20s craft-brewery tear hasn’t clicked. At least, not in the off-premise, where a big, distributed portfolio like Tilray’s must. Pub Beer maker 10 Barrel has notched a little over 3 percent growth in year-over-year dollars and volume through Aug. 20; every other craft brand in Tilray’s portfolio is red across the board (2–22 percent in dollars; 6–24 percent in volume.) The firm is still posting big year-over-year gains because it has yet to lap the big shot in the arm of its ABI purchase, which closed Oct. 2, 2023, even as its margins have eroded. The MC acquisitions will give Tilray another big boost and push an apples-to-apples progress report on the firm’s overall brewing portfolio another year down the road. But by the looks of things, any turnaround story is still pre-turn.

One more thing: weed. As far back as its SweetWater purchase (from TSG Consumer Partners, the same private-equity firm that’s elbow-deep in BrewDog, by the way), low-information commentators knowingly intimated that the company was stringing together a national sales network so as to be ready to go in the event of federal legalization of recreational cannabis products. Which, sure, developing expertise for how this country regulates the commerce of controlled substances was probably part of the plan, and ditto learning how to market to this country’s vice consumers. But this vague prognosis ignores the reality that federal recreational legalization ain’t coming any time soon with Congress gridlocked and the Supreme Court captured by right-wing ideologues. Among other things, this means Tilray’s breweries have to succeed as breweries for the foreseeable future. Simon, the company’s chief executive, understands this full well — as does Wall Street.

🤯 Hop-ocalypse Now

If Illinois’ governor JB Pritzker is upset that the rumors earlier this summer that Vice President Kamala Harris might pick him as her vice-presidential candidate didn’t pan out, he’s been keeping those feelings close to the vest in advance of the Democratic National Convention in Chicago. Also close to his proverbial vest: a pair of beers. The billionaire hotel heir and large adult politician was spotted earlier this month at the city’s Centennial Crafted Beer and Eatery with two “JBeers” in hand made by Chicagoland’s Sketchbook Brewing and Alter Brewing specially for the party’s party this week. Thinking ahead here… does Quinnipiac have any favorables ratings on double-fisting governors?

📈 Ups…

The National Association of Black Brewers awarded donations from Russian River Brewing Co. and Optimism Brewing to Cajun Fire Brewing and Montclair Brewery, respectively… A newly signed law means New York cidermakers will be able to direct-ship within the Empire State, and to customers in six others by this holiday season… Hard kombucha-and-more producer JuneShine has a new president from Boston Beer Co. … Hop Take was selected last week as a finalist for the 2024 International Association of Culinary Professionals awards…

📉 …and downs

Anheuser-Busch InBev is laying off ~200 workers at its wholly owned distributorship outside of Boston in advance of its sale to an independent distributor… New Belgium Brewery laid off seven employees, six of ‘em on the sales team, as part of a consolidation of its internal business divisions… The International Longshoremen’s Association is threatening a labor strike on several East Coast ports come Oct. 1, so beer importers beware… Circle K made 7-Eleven a “friendly” buyout offer; we love retail consolidation, don’t we folks?!…

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