When Canada legalized recreational marijuana in October 2018 there was a race to ramp up production and capture market share among those lucky companies with existing licenses already producing medical marijuana. Canada’s market is small compared to the vast opportunities in the United States and the rest of the world. Individual states here have begun legalization and the federal government will move in this direction given the dominant sentiment and trend (plus potential for enormous tax revenue). That eventual federal decision will spark a new Green Rush of the major marijuana companies of Canada creating fierce competition: Canopy Growth ($15.17B), Aphria ($5.37B), Tilray ($4.59B), Cronos Group ($4.36B), Aurora ($2.46B) and HEXO ($907M).
In any commodity based business — which marijuana certainly falls within — how does one differentiate to stand out? There is of course dominant quality leading to brand recognition, but what about the problem of the black market because, as the term “weed” suggests, anybody with seeds can grow this in his or her backyard. Also many people are averse to smoking and wouldn’t try it in any form except through edibles and beverages. This is where one of Canada’s smaller marijuana operators looked ahead and forged a partnership early to secure market share in the burgeoning cannabis beverage market: HEXO. Working with the multinational Molson Coors they formed a joint venture (ha ha) in 2018 to create Truss Beverage Company. Their drinks were released in Canada September of last year and the response has been very good. Then in December Truss offered its first CBD drink in Colorado, which is the tip of the spear for entering the American market.
Molson Coors has the experience of massive beverage production capabilities and, most importantly, an existing worldwide distribution network to move quickly when states and countries legalize. HEXO’s founder and CEO Sebastien St-Louis demonstrated great forward thinking and applied his experience (both successes and failures) to position HEXO for this inevitable jump forward by developing strategic partnerships, like the one with Molson Coors. And with a relatively small market cap of under $1B, this presents a great opportunity for retail investors who want to make a value play in the growing sector.