The Next Major Craft Brewery Acquirer? It’s a Cannabis Company

Cannabiniers, the company behind the Two Roots line of CBD- and THC-infused non-alcoholic craft beers, is on the verge of becoming the next major craft brewery acquirer.

On its quest to own 500,000 barrels of brewing capacity, the San Diego-based beverage, technology and brand management company has signed letters of intent to acquire four craft breweries, including a “top-20 privately held brewery based in California”

“It’s 99 percent of the way there,” said Kevin Love, Cannabiniers’ vice president of market activations.

That deal could be formally announced in the coming weeks, Love added.

Love also confirmed that Cannabiniers had signed letters of intent (LOIs) to purchase three other U.S. craft breweries, including a “top-40 privately held brewery on the East Coast” and a brewery in the Midwest.

In the meantime, Love said Cannabiniers had struck a deal to acquire Colorado’s Dad & Dudes Breweria. Terms were not disclosed, and the transaction is expected to close on February 12.

The Denver-area brewery only produced 827 barrels of beer in 2017, according to the Brewers Association, but it gained national attention in 2016 when it became the first U.S. brewery to gain approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB) for a CBD-infused beer.

“They were temporarily barred from manufacturing it, after the TTB awarded them they opportunity to create a CBD-infused beer,” Love said. “We have an opportunity to leverage what they have, and bring it to a scalable environment.”

In addition to the Dad & Dudes purchase, and the planned first-quarter acquisitions of the three other U.S. craft breweries, Cannabiniers is engaged in active conversations with numerous other potential sellers, Love said. The company could sign letters of intent to purchase as many as four more breweries, Love said, bringing its total brewing capacity to about 500,000 barrels.

“We are making pretty compelling reasons as to why they should partner up with us,” he said.

Last October, Cannabiniers negotiated a strategic brewing agreement with an undisclosed San Diego craft brewery that gives the company access to 50,000 barrels of beer production annually. It is currently making about 250 barrels per week with that company, Love said.

Earlier in 2018, the company acquired Helm’s Brewing Company in San Diego, where it is able to make about 2,000 barrels of beer annually, Love confirmed.

Cannabiniers makes five styles of beer using traditional methods and then strips alcohol from the product using European manufactured dealcoholization equipment. The liquid is then shipped to a secondary facility, also owned by Cannabiniers, where it is infused with THC.

Those 10 oz. products, which contain between 2.5 mg and 5 mg of THC, are sold for a suggested retail price $8 at about 25 dispensaries in Nevada.

Love said Cannabiniers has placed orders for additional dealcoholization equipment, and it plans to build three more processing facilities in San Diego, the Midwest and on the East Coast.

He added that Cannabiniers plans to compete in three verticals — traditional beer, CBD-infused beer and non-alcoholic THC-infused beer and beverages (the company also the “Just Society” coffee and tea products).

Though its products are currently only available in two states, Cannabiniers’ brewery acquisitions and strategic brewing arrangements will enable the company to expand distribution of its THC- and CBD-infused beverages into as many as 20 states.

“We want to be established as a force to be reckoned with in the future,” Love told Brewbound.

Cannabiniers has raised $25 million to date, he said, and it is currently in the midst of raising another $75 to $100 million as part of a Series C fundraising round. The company closed a previously announced Series B round early after the business was revalued.

Some of the money raised during its Series C will be used to make brewery acquisitions, Love said.

Those deals could also be structured so that brewery stakeholders exchange their equity for shares of the larger Cannabiniers entity, which is working toward an IPO on the Canadian Stock Exchange (CS) within the next six months, Love added.

“People may think we are a little crazy, but it is the crazy ones that change the world,” he said. “We have a first mover advantage that we have to capitalize on.”

In an effort to capture a piece of what the company expects to be a $23 billion market by 2022, Cannabiniers has also recruited top-level executive talent from the food and beverage industries. Victor Jerez, who departed William Grant & Sons last September and previously oversaw corporate strategy and M&A for Pernod Ricard, was hired as Cannabiniers’ chief operating officer and president on Monday.

Timothy Walters, who had been acting as Cannabiniers’ president and COO, will now serve as executive vice president of East Coast operations, according to Love.

“Since we are acquiring some of these businesses on the East Coast, he will be overseeing those initiatives,” Love said.

“We are bringing in people that don’t need to be working with us, but they see what we are doing, and they have watched this movie before,” he said. “And they know the ending.”

Last November, the company appointed former PepsiCo president Michael Lorelli to its board of directors. It also hired former Green Flash brewmaster Kevin Barnes in late 2017.

A press release with additional details about the rollout of Two Roots offerings in California can be found here.

Correction: An earlier version of this story stated that Brian Goldberg — a CPG executive who has invested in brands such as High Brew Coffee and Deep Eddy Vodka, and held numerous executive and board roles with Sweet Leaf Tea, Amplify Snacks, Kettle & Fire Bone Broth and Waterloo Sparkling Water — was added to the Cannabiniers board. The company was in discussions with Goldberg earlier this year, but the two parties didn’t come to terms.

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