Earlier today we heard from Athletic Beer side about intriguing investment from Keurig Dr Pepper but not from KDP itself. So what was rationale of soda giant in moving into nascent but fast-growing space? "Athletic Brewing is a winning brand in a rapidly growing beverage segment," said KDP exec chmn Bob Gamgort in press release. "Our investment reflects our interest and ability to move into exciting white spaces, including in the blurring of the alcoholic and non-alcoholic categories," he added. The $50 mil it invested barely makes a dent in $20 bil war chest KDP claims to be able to wield for right M&A opportunities. But it also marks 2d intriguing deal it did this fall, both seemingly out of the blue, following distribution deal with Red Bull in Mexico. In Athletic's case, as its cofounder Bill Shufelt informed us, intro between parties was made some time back by innovation-oriented exec who straddles both beer and NA worlds, LA Libations principal Danny Stepper. Tho Danny's best known these days as Molson Coors' guide in navigating NAs, he's got innovative brands seeded in all the major US-based strategics on both beer and soft drink side and, recall, also helped put Coca-Cola and Molson Coors together on what so far has been very successful launch of hard Topo Chico.

There was the usual red ink to acknowledge, butCanopy Growth c-suite positioned cannabev giant's fiscal Q2 as "a key inflection-point" as it pursues recently unveiled "comprehensive plan" to fast-track entry into US cannabis mkt thru new holding co, Canopy USA, and divestiture of its Canadian retail ops (BBI, Oct 25). While the cannabis conglomerate in which Constellation Brands still holds minority stake beat estimates for revs and gross profit, it missed on EBITDA and continues to burn cash. But non-infused BioSteel hydration brand continued to show promise and will be investment focus, even as co navigates US CBD market in "asset-light" fashion until regs evolve, ceo David Klein told investors this morning. Canopy reported net revs of $118 mil (Canadian) in its fiscal Q2, up 7% from prior qtr but off 10% vs year-earlier period. Net loss came in at -$232 mil, adjusted EBITDA declined $78 mil and free cash flow at -$135 mil. Canopy pointed to net loss and adjusted EBITDA as improvements: up $216 mil and $85 mil, respectively, vs yr ago. Both were aided by cost-cutting measures and better gross margins, up to 10% on adjusted basis.

Time is running out to join us for this year's Beer Insights Seminar, with a reception this coming Sunday evening and program all day Monday, Nov 14 in midtown NYC. Our stellar agenda features a line-up of top industry execs and thought leaders. Learn the latest industry insights, dig deeper into hot topics during in-depth discussions and reconnect with other beer biz movers and shakers. Register for this year's Seminar today! We hope to see you next week in NYC.

Canopy Growth positioned its fiscal Q2 ended Sep 30 as "a key inflection-point," following recent announcements of its "comprehensive plan" to fast-track entry into US cannabis mkt thru new holding co, Canopy USA, and divestiture of its Canadian retail ops. But while the cannabis conglomerate (in which Constellation still holds minority stake) beat estimates for revs and gross profit, it missed on EBITDA and continues to shed cash. Canopy reported net revs of $118 mil (all figures in CAD) in its fiscal Q2, off 10% vs yr ago. Net loss came in at -$232 mil, adjusted EBITDA declined $78 mil and free cash flow at -$135 mil. Despite those losses, Canopy pointed to net loss and adjusted EBITDA as improvements: up $216 mil and $85 mil, respectively, vs yr ago. Both were aided by cost-cutting measures and better gross margins, up to 10% adjusted.

Among a series of intriguing election night twists, voters in a couple of states did not give convenience carte blanche. A handful of ballot measures in a couple of states proposed changes that, generally speaking, would have expanded access to alc bevs. And tho not all votes have been counted and some are still too close to call, the "no" votes are winning so far.

"Athletic Brewing is a winning brand in a rapidly growing beverage segment," said KDP exec chairman Bob Gamgort in press release. "Our investment reflects our interest and ability to move into exciting white spaces, including in the blurring of the alcoholic and non-alcoholic categories," he added. "We look forward to partnering with the Athletic Brewing team to help them scale the business." This barely scratches surface of $20 bil war chest that KDP has ready for potential M&A. But it also marks 2d very intriguing deal it did this fall.

In tuff environment for craft brewers, Montauk Brewing still able to garner solid valuation for its biz in sale to Tilray. Albeit below the go-go years of craft growth. Deal likely valued at over $50 mil, CBN understands. (Official $$ amount should come out in upcoming Tilray financial reports.) Recall, Montauk biz is unique, set up almost entirely with contract production, primarily via Wachusett in MA, plus some with Two Roads in CT. So its margins and earnings ain’t the same as a typical high-end regional craft brewer at 50K bbls that avgs nearly $50/case in tracked off-prem data.

But impressively, Montauk built a 50K-bbl brand staying impressively “lean and mean,” with just 3 wholesalers and 10 employees, co-founder Vaughan Cutillo underscored in chat with CBN. And now it’s got its sights set “much higher” with Tilray. “Lots of people build businesses…Montauk built a brand,” Arlington Capital Advisors’ JB Shireman shared in a written statement to CBN. “I know of no other brand, in ANY beverage category, that is #1 in price, volume and velocity in a major metro market and they did it without a strategic partnership or deep pockets. That is Brand Equity,” he concluded. (Arlington advised Montauk on the deal.)

Gotta note, Montauk had been exploring potential deals for years, including talks with cos like Artisanal Brewing Ventures and Molson Coors, we understand. That process extended thru Covid times, but Montauk performed well pretty much thruout, despite a hard seltzer-induced setback in 2021. And co ultimately landed with Tilray. In fact, deal came together fast, just 44 days after LOI.

Notably, Tilray CEO Irwin Simon has a house on Long Island, so had already “seen the brand” performing in its core mkt before deal talks, Vaughan noted. And they think the brand “has legs.” Co will “put that to the test pretty soon,” he said. Montauk will “rely heavily” on Terry Hopper’s natl sales experience as brand expands, as well as new sibling co SweetWater and Tilray’s new beer prexy Ty Gilmore (see last issue).

Filling out NJ, Hudson Valley, NY and Fairfield, CT remain easy targets for Montauk, as co “quite honestly pumped the brakes” on those mkts for 10 yrs. Co just launched package sales to northern NJ with Kohler in Aug and has yet to add a dedicated salesperson. But there’s also oppy in coastal mkts like FL and possibly CA with extended beach themes and “no frills” branding, Vaughan thought. They’re “going to learn a lot,” and Tilray has “big aspiration[s]” for the brand. There’s “a lot of open white space for us.” And Montauk has “no intentions of moving” from its current wholesalers, Boening, SKI and Kohler, Vaughan stated.

Bret Scores Again; Still “A Phone Call Away”; Production Moves Down the Road? Bret Williams, an early investor in Montauk Brewing shortly after selling Woodchuck Cider to C&C for a whopping $300 mil, found himself with the right brand in the right place at the right time once again, albeit on a smaller payout scale. Post sale to Tilray, Bret will remain “involved in Montauk” as the owner of co’s principal contract brewer, Wachusett, and just “a phone call away,” Vaughan pointed out. Co “still value[s] his opinion and strategy.” Asked about potential to brew at SweetWater’s sizable facility in GA or CO for western expansion, Vaughan said that he “can’t speak too much on the future of that,” but they’re well situated with Wachusett and Two Roads. At some point, Tilray’s gotta look at in-house production, tho shipping back up to NYC perhaps reduces cost savings.

Montauk Innovation & Focus is on Beer; Lighter Golden Ale & Variety Pks Comin’; Wave Chaser Growth Montauk’s innovation plan in 2023 is “pretty stacked” and “all beer-forward,” said Vaughan. Co “listened to our wholesalers and fans,” and “we believe in beer” in this “tumultuous time” in the industry. It will continue to focus on “approachable, quality craft,” lookin’ at launching a “lighter golden ale,” and its first variety pk outside of club stores as top new innovations in 2023. At same time, flagship Wave Chaser IPA is “a monster” that “keeps growing on a big base.” NYC is “coming back” and Montauk’s “selling a lot of draft.” So Montauk’s staying focused on the beer side, Vaughan underscored. Notably, Wave Chaser (35%) and Seasonal (44%) still make up nearly 4/5 of its portfolio in NielsenIQ for trailing 3 mos, according to Bernstein analyst Nadine Sarwat’s report. And even as Montauk hard seltzer’s declining steep double-digits, it still makes up 9% of off-prem revs. At same time, Tilray’s team members are “the experts” at cannabis and who knows what the future might hold on innovation if regulatory restrictions open up. Montauk’s “come as you are” tagline and “beach” branding could “lend itself pretty well” to cannabis category too, Vaughan thought.

“We Like” Tilray’s Alc Bev Strategy, Sez Nadine, but “What Does This Say” About Cannabis? Alc bevs were already about 13% of Tilray’s revs in its fiscal Q1 prior to Montauk deal. So alc bevs continue to rise in importance within the cannabis co’s portfolio. “We like Tilray’s expansion strategy into alcohol,” wrote Nadine in latest report, pointing to the “incredibly attractive” US mkt and oppy to generate cash flow from alc bevs “to support the cannabis segment until” cannabis mkt stabilizes and/or US federal legalization occurs. But Nadine also wonders what the increased investments in alc bevs sez about Tilray’s view of cannabis in “medium-term.”

Flow Beverage, under pressure to stop its cash burn, said it's reached definitive deal to sell its Virginia Tetra Pak plant to BioSteel Sports Nutrition for US$19.5 mil. But Flow will retain ownership of 144-acre artesian spring in Verona where plant is sited and has inked deal to have its boxed waters produced there by BioSteel, which now gains controlled facility just as it adds thousands of doors to its US retail presence. Purchase price is comprised of $13.2 mil in cash and $6.3 mil for repayment of debt and retirement of lease obligations.