RE:Interesting remarks from Molson/Coors earnings call Part 2/
Kevin Grundy
Just as a follow-up question for Fred (President and CEO - Molson/Coors Canada) on the cannabis strategy. And Fred, I think the comment was you expect to gain meaningful share. So two questions here. Number one, what’s the level of investment we should anticipate without putting an exact number, but just sort of order of magnitude that’s going to flow through the Canadian segment as you support this effort? And then, two, with respect to strategy because, of course, your key competitors are going to be there and look to capitalize on the significant TAM as well. Can you give us a sense of how many products perhaps you intend to launch? How you handicap competitive positioning, product superiority? And as we sit here today, what gives you confidence that you’ll indeed be able to succeed given what appears to be likely a crowded market? So thanks for that.
Fred Landtmeters
Yes, the first one, Kevin, the level of investments, as you know, the cost of the Truss JV are consolidated in our Canadian results, but we’re not commenting on the specific investments we’re making in the JV. I think it’s appropriate to say that the JV is properly funded. We’re confident that we made, together with our partner, HEXO, the right level of investment to deliver a strong portfolio on day one of legalization. And I’ll leave it there in terms of details to disclose.
Now the products to be launched in the marketplace, I mean, we’ve got a very entrepreneurial team in place. They’re working hard to get in the portfolio ready. There’s a lot of emerging ideas. And I think we’re in the stage now of confirming what the brands portfolio is going to look like. But we said from the beginning, you should probably think broadly in terms of beverages that can be infused with cannabis. And at this stage, we don’t have many more details to disclose about specific products to be launched.
Mark Hunter
Yes, I think it’s fair. It’s probably around the middle of this year, we’ll be in a position where we can as we start to talk to route-to-market customers, then we’ll to be in a position to share more broadly the shape of our portfolio. So if you can just bear with us on that, clearly, we don’t want to show our hand too early. I think it is worth just reminding people, Kevin, of the estimates around the size of the cannabis market in Canada. So anything from $7 billion to $10 billion beverages, anything from 20% to 30%. So if you take the low end estimates of that, there’s a potential over time for that market to be worth around $1.5 billion. So I think with our position and knowledge of the Canadian market and the great partner we have, we’re well positioned to be on the playing field from day one and to compete very effectively, and we know how to compete effectively in Canada.
Kevin Grundy
Thank you. And just the quick follow-up, a point of clarification will be it seems like you do not anticipate either further OpEx or elevated OpEx or further investment into the JV in order to support the initial rollout. Is that how we should think about it at least for 2019?
Tracey Joubert (CFO)
Yes, I would say that to Fred’s comments not significant. We went into this joint venture really having a look at the cash required and the investment required, and we feel comfortable with the level of investment that we are going to make and the operating expenses that we’re going to include. But they are not significant.
Mark Hunter
Yes, and very good.
Mark Hunter
Mark, it is not available until October probably of this year. So the impact on Q4 would, I think, be relatively small. And 2020, then you’ve got full year of revenue up against the full year of costs as well. So look, I think we can give more detail once we get into the marketplace, and we can see what kind of consumer reaction we get.