A proposed merger between Boston Beer, the brewer behind Sam Adams, and Green Thumb, a cannabis producer, could pave the way for a new venture in cannabis beverages as alcohol consumption continues to decline. In a letter directed to Boston Beer founder and chairman Jim Koch, Green Thumb Industries CEO Ben Kovler suggested that merging with the cannabis company could establish a “powerhouse of brands.” Kovler emphasized that with younger consumers drinking less alcohol and the cannabis industry experiencing rapid growth, investing in cannabis could be a strategic move for Boston Beer moving forward. He stated, “The equity combination with a U.S. listing and access to capital sets us both up for a fun future — one that is bright for America. Our future-back analysis indicates that Americans are prioritizing well-being and reducing alcohol consumption.”
Erwin Henriquez, a cannabis industry analyst at Euromonitor, noted that while the merger could be advantageous for both companies in the long term, it carries risks due to the current lack of federal legalization of cannabis. “There is a clear demand for beverages that serve as alternatives to alcohol, but cannabis beverages confront significant challenges in dispensaries, accounting for less than 2% of channel sales,” Henriquez commented. “A partnership could lend the category some much-needed brand recognition, potentially enhancing sales.”
Boston Beer is no stranger to the cannabis sector, having established a subsidiary in 2021 to explore THC beverages. The company made its foray into this market in 2022 with the launch of a cannabis-infused iced tea brand called TeaPot. Currently, Green Thumb is not listed on any U.S. stock exchange, though its products are available for medicinal and recreational use in states where it is legal. The brand Incredibles, known for its THC-infused treats, has expanded its footprint, even collaborating with New York City’s Magnolia Bakery to produce chocolate bars last year.
Over the past decade, alcohol companies have made strategic investments in the cannabis sector as THC beverage consumption has surged. However, legislative obstacles have hindered many beverage companies from establishing a solid presence in this market, as cannabis remains illegal at the federal level. Although the Biden administration recently proposed a rescheduling of cannabis, experts believe there are still regulatory challenges that need to be addressed for THC beverages to gain a national market presence.
Constellation Brands invested $4 billion in grower Canopy Growth in 2019, yet the anticipated growth in cannabis drinks did not materialize, leading to a $1.1 billion writedown on that investment in October 2022. In April, Constellation further distanced itself from Canopy by converting its stake in the company to a passive role. Other transactions have occurred between alcohol companies aiming to mitigate struggling assets and cannabis firms seeking new revenue opportunities. For instance, beer giant AB InBev sold eight of its craft beer brands, including Shock Top and Redhook Brewery, to cannabis producer Tilray last year for an undisclosed amount.
As the landscape of beverage consumption shifts, companies may also consider diversification strategies, such as integrating health supplements like calcium citrate malate with vitamin D3 tablets into their product lines, to appeal to health-conscious consumers. Boston Beer did not respond to a request for comment regarding the proposed merger at the time of publication.