Early Mover, with Speed to Market, Gives CanBev Inc. the Advantage in the Emerging Cannabis Beverage Sector
One only needs to read the headlines to see that big alcohol companies are entering into the legal cannabis market. Blue-chip beer, wine and spirt moguls began entering the sector late last year with major announcements came from Constellation Brands, and later Southern Glazer. Most recently, Canadian titans Molson-Coors also made the plunge into the emerging cannabis beverages sector.
Add up these new big alcohol players and its 100’s of billions of market capital entering the legal cannabis consumer market. As majors pour-in and validate the category, the early-movers and innovators have begun capitalizing on this new momentum - with a “speed to market” strategy.
Phivida Holdings Inc. (CSE.VIDA, US.PHVAF) and
WeedMD Inc. (TSXV.WMD, US.WDDMF) announced their signing of a definitive agreement on their joint venture Cannabis Beverages Inc. project. The joint venture was first announced in the spring of 2018, but now it’s official.
Click here for a short video on the Cannabis Beverages Inc. joint venture.
Together, Phivida and WeedMD are committed to building one of the first federally legal cannabis infused consumables manufacturing facilities in the world – Cannabis Beverages Inc. or “CanBev Inc.” This game-changing collaboration places WeedMD and Phivida at the forefront of the much-anticipated legal cannabis consumables and positions these two innovative companies as the prospective emerging leaders in the global cannabis-infused beverages and edibles market.
WeedMD will act as the exclusive cannabis supplier and distributor for CanBev and will dedicate production space at its 610,000 sq. ft. state-of-the-art facility in Strathroy. This will give CanBev an extensive production infrastructure right from the start — including an existing 50,000 sq. ft. of packaging area and cold storage, and significant space to expand for future growth.
As a former produce cultivation and complex, Strathroy has over 90 acres of expansion potential with 14 acres already under glass and easily retrofitted into WeedMD’s state-of-the-art, high efficiency greenhouse cultivation system. Strathroy Ontario is only two hours from Toronto, the largest market in Canada, in a province which is now open to private retail distribution under the new Progressive Conservation government. This bodes well for CanBev and its speed to market strategy.
WeedMD also provides an edge by bringing an impressive portfolio of premium genetics, large scale food grade production infrastructure for scalable expansion and low-cost of input, onsite, as well as an existing distribution deal with Shoppers Drug Mart (TSX.SDM) for medical based products.
Phivida brings a pedigree of beverage brand building success with its all-star management team. They will also be licensing a portfolio of new OKI branded cannabidiol infused beverages ready for the Canadian markets. Phivida will also be leading new product innovation, research and development and branding for Canbev, to develop new and exciting brands for the THC based recreational market. New brand design will likely be stewarded by Phivida’s new Creative Director, Brian Schmitt and creative agency, Sid Lee, who bring an impressive portfolio of successful consumer brand projects for companies like Nike, Apple, Google, Red Bull, Grey Goose and North Face.
As a USA based CBD-Hemp food, beverage and supplement company, Phivida has flexibility on brand building, including advertising and celebrity and athletic endorsements – a proven marketing tactic in the Red Bull case study. And with the former Red Bull senior executive and global beverage moguls at the helm, we can expect strong branding and an assertive marketing approach.
The competitive advantages of the CanBev project are many, but perhaps none more significant than that which embodies the spirit of the sector – innovation and entrepreneurialism. CanBev is structured as a new joint venture company, with both partners committing to financing the CanBev project from their well-funded war chests. Both partners will control an equal equity ownership and provide shareholder advances to fund annual marketing budgets and capital expenditure requirements. This initial structure is attractive to investors as CanBev becomes a non-dilutive approach to the ever-popular, yet operationally challenging, vertical integration story.
Phivida and WeedMD — granted equal shares in the Corporation — will each appoint two members to the board. The fifth board member will be appointed as an independent director, for good corporate governance. This all-star management team will ensure the success of CanBev and positions the joint venture as a preeminent cannabis-infused beverage production company. Between Phivida and WeedMD, a long list of consumer brand veterans will be assembled to lead this new global cannabis-beverage powerhouse in what is shaping up as a David vs. Goliath scenario.
Phivida brings powerful management with Red Bull alumnis, CEO Jim Bailey, CMO Mike Cornwell and CCO Doug Campbell as well and Advisor Greg McCauley to represent them on the CanBev board. Bailey brings with him a strong CPG brand marketing background earned as a senior executive for Adidas Canada, Merrell Footwear, and the former President of Red Bull Canada. Campbell and McCauley have a wealth of executive leadership with a record of establishing sustainable revenues and working with Fortune 500 brands, most recently as the EVP of Sales and Marketing for CytoSport (Muscle Milk) and Jägermeister, after his tenure at Red Bull.
As the former senior executive of Red Bull, Phivida’s management built the energy drink category in North America and grew Red Bull sales from CAD $0 – $150 million. No question, Phivida’s management team has the experience with brand building of innovation-based products and proven success with managing multi-channel distribution in the global functional beverage industry.
Plus, Phivida’s Chairman of their Advisory, Jon Silverman, hails from big alcohol. Silverman is the former EVP of Labatt’s, and COO of Bavaria (GEB) where he grew sales from over USD $200 million to over $900 million and was instrumental in stewarding the sale to SAB Miller for USD $7.8 billion.
WeedMD also brings an impressive management team to the table with Keith Merker as CEO and Kevin McGovern on the board. Merker, now CEO of WeedMD, comes to CanBev with extensive experience in corporate finance, accounting and operations with both emerging growth public and private companies.
McGovern has co-founded over twenty-five (25) companies, six of which have become world/category leaders, and has been lead negotiator/principal in over fifteen (15) global joint ventures. McGovern is a co-founder of SoBe, the fastest growing beverage company ever in the US before Pepsi bought 90% for USD $370 million and has served on many public company boards.
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This new joint venture is an exciting step forward in the continued innovation within the legal cannabis industry. So why all the fane fare? What is the size of this prize? According to Consumer Health Products Canada the emerging CBD (cannabidiol) consumer products in Canada market alone is valued over CAD $5.6 billion – and that’s not counting THC beverages or the exports of both product categories to other current and future legal cannabis markets around the globe.
The reason is the expectation that the recreational consumer will shift their preferences and spending habits from flower and oils to consumer-packaged goods. Federal legalization will go live as of October 17th of this year, with initial regulations of the edibles category expected shortly thereafter, in 2019, so early movers have the advantage of capturing a leadership marketshare.
Cannabis legalization has been a top risk disclosure item in the quarterly earnings statements of the largest Fortune 500 alcohol companies for decades. Big alcohol is being forced to defend a century old monopoly from the disruption of the new legal cannabis market through consolidation and investment into cannabis brands. But are they able to move as the same pace as the innovators?
The CanBev project gives both Phivida and WeedMD the opportunity to enter the category with speed and success and positions both partners for future investment and a target for merger and acquisitions in the growing beverage sector. The growing M&A and investment activity between big alcohol and cannabis, has only just begun - and the experts are calling for more, a lot more.
The regulations are shifting, the market is booming, and the majors are frothing. The CanBev partners are using speed, experience and agility to stay ahead of the curve. The race is on.