- Canadian cannabis giant Aphria is expanding into the U.S. with its $300 million acquisition of SweetWater Brewing Company, according to a release. The deal is expected to close by the end of 2020.
- SweetWater's signature 420 branded craft brews use terpenes and hemp flavors combined with hops to replicate the flavors and aromas of cannabis. Based on volume, SweetWater Brewing is one of the biggest independent craft brewers in the U.S. Aphria has several medical and adult-use cannabis brands in Canada.
- More Canadian-based cannabis companies are making their way into the U.S. market. Canopy Growth announced last month it will launch cannabis-infused beverages in California and Illinois through its partnership with Acreage Holdings in 2021.
This acquisition will give Aphria already established manufacturing, marketing and distribution assets in the U.S. as cannabis gains momentum in the country. On ballot measures across the U.S. this week, Americans in five states voted to legalize marijuana for both recreational and medical use.
Aphria CEO Irwin Simon said in a statement that this is a "strategic and accretive acquisition" because it will give the company a foothold in the U.S. and put them in a strong position if the substance is federally legalized in food and beverage.
"I think there will be a time when there will be tetrahydrocannabinol (THC) drinks that will be legal in the U.S. and we want to be able to have a platform to jump onto that when this happens and this gets us there," Simon said on a call with analysts reported by the Canadian Press, which the company strategically held at 4:20 p.m. on Wednesday.
Although the 2018 Farm Bill legalized hemp and CBD cultivation, it remains federally illegal in food and beverage. The FDA held a public hearing about legalization more than a year ago, but the agency has since told manufacturers that cannabis is still not Generally Recognized as Safe for use in food and FDA is still working through regulation. Many CBD brands have still launched in states that have legalized. As a growing number of states make their own laws about cannabis legalization and clear a path for more food and beverages to be allowed with cannabis, additional companies could launch into the space.
In Canada, cannabis-infused food and beverage is now legal. That legalization sparked more partnerships with companies in the U.S. and Canada. Canopy Growth, which is backed by U.S. alcohol giant Constellation Brands, already sold more than 1.5 million cans of its THC-infused ready-to-drink beverages in Canada this year and is now planning its U.S. launch. Beer giants like Molson Coors and AB InBev have also made investments and developed partnerships to release CBD drinks in Canada.
This deal will give SweetWater, which is based in Atlanta, Georgia, the capital to expand as well. SweetWater's Founder and CEO Freddy Bensch said in a statement this deal creates "mutual opportunities for accelerated expansion into other cannabis- and beverage-related products in the U.S. and Canada."
SweetWater, which was founded in 1997, has distribution across 27 states and Washington, D.C. In 2019, Aphria said its 420 Strain G13 IPA was the top new craft brand in the U.S. Last year, SweetWater Brewing saw a net revenue of $66.6 million and its production volume jumped 7% year-over-year to almost 261,000 barrels. Its growth rate is double that of the craft beer market nationally, according to the Brewers Association and cited by the company. That growth was likely attractive to Aphria.
But this year may not have been as lucrative for the brewer since it had to close its taproom. Many in the craft brewing industry are struggling because of COVID-19. Craft distillers lost 41% of their sales, or $700 million in revenue, because of the pandemic, according to a recent study. But the Atlanta Journal Constitution reported that even as draft beer sales drastically dropped, big breweries like SweetWater were able to meet the increased demand for grocery and retail sales. As it deals with the pandemic, this deal could be coming at a optimal time for SweetWater.