Cannabis Lobbying
The number of organizations that reported lobbying on issues related to marijuana or cannabis has jumped significantly over the last year. According to a POLITICO analysis of filings in the second quarter of this year, 142 groups listed marijuana or cannabis as an area of focus on their lobbying disclosure forms. That was up from 118 entities in the same period for 2020 — an increase of 16.9 percent. The most notable addition to the cannabis lobbying world is Amazon, one of the world's biggest companies. Amazon recently announced that it would push for the passage of the MORE Act, which would eliminate federal criminal penalties and expunge old marijuana convictions. In the last quarter, canopy Growth also dramatically increased its spending in D.C., reporting at least $290,000 spent lobbying for the MORE Act, cannabis banking, and other policies. But, again, that was up from $110,000 during the first quarter of this year.
Craft beer declines (TLRY)
We are not SHORT TLRY, but this is just another reason to rethink that position. In November 2020, the predecessor company, APHA, spent $366 million or 16.6x EV/EBITDA to buy craft brewer Sweetwater Brewing company. Shareholders were told that the acquisition of SweetWater would "provides a robust, profitable platform for future growth and development as we leverage their innovation, manufacturing and marketing distribution infrastructure in the Southeast, with expansion opportunities across all the U.S. for craft beer and upon federal legalization, cannabis products, and drinks, which is well over a $200 billion market????. In addition to acquiring a strong brand and an accretive business, this acquisition positions APHA/TLRY with a scalable infrastructure within the U.S. and enables us to access the U.S. market quickly in the event and when federal legalization happens. We're excited to build brand awareness for our adult-use cannabis brands in the U.S. ahead of potential federal cannabis legalization."
The issue with this strategy is while they wait for legalization to happen, they need to contend with a declining craft beer category.
Off-premise craft sales are down 5% YTD through July 10, according to Bump Williams. Q1 sales were up 7.5%, while Q2 sales declined 13.5%. Craft beer sales were $2.9B through July 10, ranking the category third behind domestic premium and imports. The overall beer category sales were only down 1.6% YTD in comparison. Between weeks 21 and 27 this year, “all other” craft beer brands outside the large and import brands comprised 56% of draft share, according to Fintech InfoSource. That represented a 16% point increase compared to the first 20 weeks of the year when “all other” brands had 40% of draft share. The biggest declines were seen at the largest craft brands, which have declined 11% in off-premise sales. Regional craft brands decreased 5.7%, local craft brands decreased 4.5%, and national craft brands decreased 1.8%. Hazy IPAs with a 7.8% share gained 1.5% points, the largest share gainer and ranking as the top growth category. Hazy IPA off-premise sales grew 17.4% to $230.1 M while total IPA off-premise sales decreased 7.4% to $775.2M. The IPA category has 26.3% of craft sales, the most of any craft style, but lost 0.7% points. Cans now have 57.9% of the dollar share of craft beer compared to 42% for bottles after cans grew 5% this year, and bottles decreased 16%. Sales of six-pack cans now outsell six-pack bottles (25.7% vs. 24.5%).
Legalization in NY
Cannabis cultivation in New York may be delayed for another growing season, as Gov. Andrew Cuomo and state Senate leaders have yet to establish an Office of Cannabis Management (OCM) and Cannabis Control Board (CCB). However, New York state Sen. Jeremy A. Cooney introduced a bill on July 20 to establish an "adult-use cultivator provisional license for cannabis growers," essentially speeding up the growing process. The bill would permit farmers to plant, harvest, and sell cannabis to retailers in New York until the OCM is fully operational. The measure also establishes the provisional infrastructure to allow growers to plant seeds by the 2022 growing season to prevent the economic benefits of cannabis legalization from being delayed another year.
