This story was originally published by Fingers, an independent newsletter about drinking in America. Readers of The Food Section can score a discounted subscription to Fingers here.
People in the beer industry often fret about what the cannabis boom might do to sales of America’s favorite alcoholic beverage. But with federal legalization for recreational marijuana still a pipe dream, one weed conglomerate has flipped the script, muscling its way into the American beer industry by taking advantage of macrobrewers’ shifting priorities and craft brewers’ financial struggles.
With the Southeast’s growing population and staggering thirst for beer, it’s no surprise Tilray Brands’ shopping spree for American breweries began here. But its latest moves into the market suggest it may have bitten off more than it can chew.
In August, the Canadian cannabis giant announced plans to add another four American craft breweries to its burgeoning collection, acquiring Athens, Georgia’s Terrapin Brewing Company, Granbury, Texas’ Revolver Brewing, and two others from Molson Coors Beverage Company, the second-largest brewer in the country by volume.
If this all feels like déjà vu, you’re not far off. Almost exactly a year prior, Tilray struck a similar deal to take eight brands off the corporate hands of Anheuser-Busch InBev (ABI), which had been showing signs of backing away from its own adventures in microbrewing earlier that year, even before the Bud Light fiasco sent the whole company into a sales spiral from which it has yet to fully recover. That fire sale came just three years after Tilray kicked off its bargain-hunting run with the 2020 purchase of Atlanta’s SweetWater Brewing Company from TSG Capital Partners for around $300 million.
At just $85 million, the 2023 deal looked like a steal for Tilray. ABI had spent something like $730 million amassing its craft position over the 2010s. But the world’s biggest brewer clearly wanted out, and Tilray—armed with a maverick chief executive, familiarity with the recreational-drug market, and a small stable of breweries—swooped in to liquidate unwanted leftovers from the larger corporation’s craft-brewing acquisition bonanza.
The purchase unlocked distribution relationships in new-to-Tilray regions, through which the firm has been trying to route its other brands—particularly SweetWater, with the weed-adjacent positioning of its 420 Extra Pale Ale and Tropical High Hazy IPA offerings—ever since.
Is the latest deal for MC’s erstwhile craft brands potentially savvy, too? Sure… potentially.
The terms of the MC deal turned out to be even more favorable for Tilray than its 2023 acquisitions. The company paid around $23 million for its four newest breweries. Beer Marketer’s Insights crunched the numbers: the two deals turned Tilray into a mid-major American brewer for the bargain-basement price of $140 per barrel.
For reference, data from the Brewers Association suggests that when ABI acquired Asheville, North Carolina’s Wicked Weed Brewing in 2017, the per-barrel price was around $2500. In short, with beer sales soft and craft brewers struggling, Tilray is scoring serious discounts.
Operationally, Tilray gained entrée to millions of new drinkers in Texas and Michigan, and more scale in the Pacific Northwest and Georgia. The beer industry is “capital-intensive,” so firms benefit from the efficiencies of higher volumes and closer proximity to areas with large, thirsty populations, such as the Southeast—the country’s biggest beer-drinking region in raw volume, according to an April 2023 report from the National Institute on Alcohol Abuse and Alcoholism.
Even so, I’m skeptical of the Canadian firm’s strategy (or lack thereof) for its new purchases after watching it struggle to get its arms around its ABI acquisitions. Its margins have taken a hit, and the half-baked line extensions and new brands it’s launched suggest a lack of focus (and, frankly, creativity, too.) In September, it conducted layoffs; during its earnings call in October, its chief executive hinted at consolidating breweries and brands.
In other words, is the grass now greener for Georgia’s pioneering craft beers? Wait and see, man.
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