Leading the Way in the Cannabis-Infused Beverage Market

Investors in the retail cannabis sector already know about the big cannabis LP mergers with the big alcoholic beverage producers – the Constellation-Canopy acquisition, Molson Coors Canada teaming up with HEXO, ABInbev’s Joint Venture with Tilray, the Moosehead-Sproutly JV, etc.

But what investors should know right off the top is that big beer and big pot are not necessarily a marriage made in heaven. And the red flag reason for this is simple – Health Canada regulations expressly forbid any beverage sold and marketed in Canada to contain both alcohol and cannabis, and an alcohol brand-name can't be used for a cannabis-infused beer. Period. So when cannabis-infused beverages hit the shelves this fall, who has a leg up in the market? Beverage companies that have the experience, know-how, and street cred to manufacture and market alcohol-free adult beverages, that is who!

Enter Hill Street Beverage Company Inc. (TSX: V.BEER, OTCQB: HSEEF, Forum) – producers of the “world’s first alcohol-free premium, craft beer”. The Company has won numerous international awards for its alcohol-free beers and wines. And, they have been at the forefront of a campaign to raise awareness of the health risks associated with alcohol consumption.

Having solely focused on producing world-class alcohol-free beer and wine since the Company’s inception in 2008 gives them a huge jumpstart over the big booze partnerships with cannabis companies. Thus, its decade-plus head start on positioning itself in this market and in developing market penetration strategies makes Hill Street truly unique to this space.

With the aptly monikered symbol ‘BEER’ on the TSX-V, this Hill Street doesn’t sing the ‘blues’ when it comes to making waves in this nascent cannabis-infused beverage market. Now that the Company has positioned itself as a true market leader in the alcohol-free beer and wine sector, it has now set it sights on a market segment that could reach $2.7 billion in sales by 2022, according to a recent report from Deloitte.


A Key Acquisition Adds the Ingredients To Win

As part of Hill Street’s aggressive market-penetration strategy, the Company recently acquired Regina, Saskatchewan-based OneLeaf Holding Corp. for $16 million. The deal will allow Hill Street to grow, extract, and infuse its own cannabis at OneLeaf's Saskatchewan facilities. Hill Street will add bottling and canning lines to the set-up, giving it the ability to develop new product lines and innovations in one location.

Hill Street’s Chairman and CEO Terry Donnelly explained what OneLeaf Cannabis brings to the table and how the strategic acquisition now makes the Company a truly vertically integrated ‘one-stop shop’:

“The OneLeaf team has built a world class 48,200 square foot facility, built to EU GMP standards, that will house growing, extraction, and infusion. It will house the infusion, bottling, and canning of our beverages under one roof. Their catalogue of over 700 distinct cannabis cultivars, which have been collected and cultivated by the founders, includes a collection of Cannabis Cup award-winning cultivars and a diverse selection of landrace varietals. We anticipate that OneLeaf's elite genetics, which include many cultivars not legally available anywhere else, will pair perfectly with our beverages to provide unique attributes and experiences for our consumers.”

Approximately 17,000 square feet of the newly-acquired facility will be used for cannabis production, while the other 31,000 square feet will be home to Hill Street’s canning and bottling lines. The beverage production lines are capable of producing more than 340,000 cases of cannabis-infused wine and beer which, if operating three shifts a day at 70% capacity to allow normal time for maintenance and cleaning, would generate in excess of $100 million a year.

As reported by Stockhouse on May 30, 2019, the deal accomplishes three important objectives for Hill Street and shareholders – vertical integration, a separate manufacturing site that is required under the Cannabis Act, and premium, craft cannabis for use in Hill Street’s beverages.



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The Hill Street Strategy: Getting Out in Front, First

Cannabis edibles and beverages were originally slated to begin rolling out in the Fall 2019. Health Canada’s draft regulations, originally released in December 2018, were met with over 7,000 responses including formal presentations from the Cannabis Beverage Producers Alliance, an industry association co-founded by Hill Street, and the Company itself. As a result, the final regulations released in June contained a number of critical improvements which will ensure the company is well positioned to meet the stringent requirements for packaging, promotion, and distribution of infused edible products, including beverages and other edibles.

Hill Street and the Cannabis Beverage Producers Alliance have been able to establish themselves in a very short period of time as credible participants with Health Canada to ensure the company and its competitors are able to conform with the law and government regulations, and still prevail over the black market. In fact, with PR support from Hill Street’s team, the launch of the CBPA generated over 55 million impressions across international and Canadian media, most of which featured Hill Street executives speaking on behalf of the organization.


Terry Donnelly, Chairman and CEO Hill Street Beverage Co.

Donnelly went on to explain how, through determination, enterprise, and a bit of luck, Hill Street was able to turn the tables on what appeared to be a grim situation:

“Hill Street’s response to the new set of regulations really demonstrated how well our team was able to pivot to meet what we expect to be a constant set of regulatory changes both now and in the future. This is simply a fact of life in the cannabis industry. For example, in Colorado, the regulations change an average of five times a year. If you don’t have a world class team who are able to pivot, adapt to the changes, still deliver a great product that generates revenue growth, you really shouldn’t be in this business. Thankfully, our team has met these challenges, taken them in stride, and carried on with our mission to produce the world’s best tasting cannabis-infused products, along with the world’s best tasting alcohol free wine and beer.”

Then, shortly thereafter, came the strategic OneLeaf purchase that put the Hill Street Beverage Company on track to production.

And while the Regina location might appear at first to be somewhat remote, the facility is a five minute drive to the new Global Transportation Hub, which includes a direct rail link to every major centre in North America and is the site of Loblaws largest distribution centre. Further, almost 70 percent of all cannabis dispensaries in Canada will be located in Western Canada for at least the next two years until the other provinces increase the number of stores licensed to sell cannabis.

Recent estimates project that Alberta alone could have over 200 dispensaries by the end of the year. It is entirely feasible that Hill Street’s entire production capacity from the OneLeaf facility could be sold exclusively in Western Canada due to the proximity of the retail outlets and distribution available to the company. Further, the OneLeaf building has unused square footage available which can used for increasing capacity, adding production lines for different edible products, or other new cannabis products being contemplated by the company.

Stay tuned to the next Hill Street installment coming soon! Stockhouse will be detailing how the acquisition of OneLeaf has helped build the momentum Hill Street has taken to the cannabis beverage marketplace, their partnership with one of the industry’s most innovative cannabis delivery technologies, and how the Company has positioned itself to offer investors a truly unique investment opportunity.


(Video courtesy BTV Business Television. Click image to play video)




FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.