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Huge Play in Cannabis-infused Beverage Market

Dave Jackson Dave Jackson, Stockhouse
1 Comment| May 1, 2019


Click to enlargeFor months, the cannabis consumables and infused beverage market has been gearing up in anticipation of Health Canada’s proposed draft regulations coming October 2019. Companies are betting big on cannabis beverages. The stakes are high. And the payoff is an industry predicted to be worth approximately $5 billion in the US and Canada by 2022. Now, a deal has been struck that’s turning heads in this competitive space. In a big way.
 
Canada’s fourth largest brewery has entered into a massive Joint Venture (JV) with an industry leader in cannabis delivery systems. Sproutly Canada Inc. (CSE: SPR, OTCQB: SRUTF, Forum) and New Brunswick-based Moosehead Breweries Ltd. announced they’re teaming up to develop a line of non-alcoholic “rapid onset and offset” beverages.
 
On April 30, 2019, the two companies entered into “a definitive agreement to develop, produce, and market non‐alcoholic cannabis-infused beverages in Canada using Sproutly’s proprietary, naturally-produced water-soluble cannabinoids known as Infuz2O”.
 
Moosehead Chief Executive Officer, Andrew Oland, commented on the Joint Venture with Sproutly:
 
“With the anticipated legalization of edibles in Canada later this year, Moosehead has made the strategic decision to enter the cannabis beverage market. As one of the oldest brands in Canada and a leader in the beer category, we believe we are uniquely positioned to be a leader in the cannabis beverage category.”
 
The CEO went on to explain why Moosehead saw the partnership with Sproutly as mutually beneficial:
 
“As a 152 year old company spanning six generations, we are very selective about new business opportunities. After a significant amount of due diligence on Sproutly’s APP technology and Infuz2O water-soluble cannabinoids vs other competitive technologies, we are excited to announce this joint venture. With their advanced technology and our long-standing product development experience, we expect to bring to Canadian consumers cannabis beverages that address the major issues currently limiting appeal of this category in other markets; a beverage that: 1) actually tastes good; and 2) provides an immediate and controllable cannabis experience lasting up to 90 minutes.”
 
Keith Dolo, CEO and Director of Sproutly, had this to say about the significance of the agreement:
 
“This partnership with Moosehead marks an important milestone in Sproutly’s mission of delivering a safe and consistent whole plant experience from cannabis, with a lead position in the beverage market. We have developed a relationship with Moosehead built on trust and our shared vision of creating safe, responsible and high-quality cannabis beverages and we look forward to making this a reality for Canadian consumers.”

 
Terms of the Joint Venture
 
Moosehead and Sproutly will each hold a 50 percent interest in the new venture and will have the right to nominate three directors. The companies expect to form the new entity before the end of May 2019 with the aim of getting product ready onto retail shelves when edibles and beverages are expected to become legal in Canada in October.
 
Sproutly will provide Infuz20 exclusively to the JV in Canada for the purpose of producing non-alcoholic cannabis beverages (excluding hemp) for a period of five years, with the Exclusivity Period being subject to a potential extension based on the Joint Venture reaching certain revenue targets.
 

(Click image to enlarge)


(Click image to enlarge)

Cannabis-infused consumable products, including drinks, have been authorized for sale in Canada no later than October 17, 2019. Health Canada released draft regulations in December 2018 outlining how these products will be able to be marketed and sold in the country, with a final set of regulations expected to be released shortly.
 
Recently, cannabis beverage makers and distributors formed a lobby group, criticizing the draft regulations as being too onerous. The Canadian Cannabis Beverage Producers Alliance (CCBPA) wants them amended to allow for improved branding and marketing to consumers. For example, certain terms related to alcoholic beverages are also prohibited from use in connection with cannabis-based drinks under the draft regulations.
 
For its part, Moosehead will be providing infrastructure support including R&D, operations, procurement, and distribution. Sproutly will be the cannabis technology supplier producing, refining, and formulating “the world’s first natural, truly water-soluble cannabis solution.”

Drinks that are not water soluble have a timed delay in the effects of oil-based cannabinoids which bind with fat in the human body before they’re absorbed. That means that they are not felt for 90 minutes or more. In contrast, a water-soluble solution such as Sproutly’s, that truly stays dissolved with other liquids, provides better control to feel the effects, with a rapid onset time of 5 minutes and offset lasting up to 90 minutes.
 
For both retail and institutional investors, this JV offers some unique opportunities – an iconic, century-and-a-half-old brand partnering with a leading-edge supplier of natural water-soluble cannabis solutions and bio-natural oils to the emerging beverage and consumables market.
 
Executives at the two companies plan to address questions about the JV via a conference call on May 1st.

 
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.



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