Tilray Brands Inc TLRY

Tilray Brands - failed growth by acquisition strategy

[Keeler]

Irwin Simon stated he'll "make craft beer cool again".
THAT'S the comprehensive business strategy behind buying 8 failing craft brewers in a declining alcohol secor? THAT'S what you get from a $30 million a year CEO?


Anheuser-Busch Failed with Craft Beer. So Will Tilray.

Tilray management has talked about “expanding distribution significantly” to boost sales but this strategy is problematic for several reasons. For one, ABI, which hardly lacks distribution or marketing muscle, already tried this strategy with many of the very brands Tilray just acquired, and failed. ABI found that trying to expand 10 Barrel from Portland into California and Colorado, or trying to sell Blue Point away from the tri-state area, simply didn’t work – the brands did not resonate with consumers outside of local/regional markets. The value of a craft beer brand lies within its special connection to its local roots. Why would brands that suffered backlash after being sold to a large corporation such as Anheuser-Busch suddenly find going national easier because they are now owned by a multi-billion dollar Canadian weed company? Outside a few early success stories, a “national” craft beer is almost a contradiction in terms. According to a recent Slate article on the challenges confronting the craft beer industry, increasing competition from these “beyond beer” alternatives, in addition to a crowded field of smaller, more agile micro-breweries, is precisely why the worst place to be within the craft beer landscape is in the middle ground of regional/national breweries, i.e., where Tilray apparently thinks it’s prudent to expand. According to multiple former ABI executives we spoke with, topline challenges combined with a persistent inability to improve margins burdened by limited scale, raw material inflation, and competitive pricing resulted in the pulling of managerial and marketing support for the acquired brands. According to the ABI formers, EBITDA margins for the portfolio are only ~10-15%, well below broader beer industry averages of 30%-40%, with some brands (Square Mile, Blue Point) having little to no EBITDA margin at all. This means the ABI brands will likely begin life within Tilray as a significant drag on current beverage alcohol segment profitability. While renewed focus under Tilray ownership may help, driving sustained improvement in financial performance will be, as one former ABI executive put it, “a long shot” requiring considerable time and investment. One major challenge will be negotiating with distributors. The acquired brands all presently benefit from ABI’s near unrivaled reach and leverage with local/regional distributors. We were advised that whenever Tilray now approaches major distributors, without ABI support or any sales data that indicates booming interest in these beers, it will have a hard time negotiating favorable economics. Tilray will have to give on margin, supply its own salesforce, and spend its own marketing dollars to ensure successful distribution. These actions will only further reduce profitability, which is why we suspect Tilray declined to explain why the acquisition did not result in an automatic raise to FY 2024 EBITDA guidance on the M&A call.

[CaneIsAbel]

Sweetwater owned by Tilray Brands has been on a growth spur. We acquired the 8 breweries  still yet to be finalized. How does anyone know they are not a success we haven't reporting earnings with them under our belt yet?  Kelller what's your mission here?  Decorate it if your a shirt that's fine say it?