Businesses are always looking for additional runway to help grow their sales. That's key to being able to continually attract investors. The Boston Beer Company (SAM 2.52%) is an example of a business that could certainly use a boost; its net revenue during the first three months of 2022 was $430 million and declined 21% year over year.
One industry that could unlock some growth opportunities is cannabis. Although in its early stages, the marijuana market possesses some attractive potential. And Boston Beer recently announced that it has a new line of products: Cannabis-infused iced teas.
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Cannabis-infused products to be available in Canada next month
On May 23, Boston Beer announced a new line of products under the name TeaPot. They will be available in July in select Canadian markets. The first product will be Good Day Iced Tea, which is a lemon black tea that will be laced with cannabis. Additional products will be unveiled in the months ahead.
Canada serves as an optimal testing ground for Boston Beer since marijuana is federally legal there (unlike in the U.S.). Launching products in U.S. states that permit cannabis would run afoul of U.S. laws and could jeopardize the company's listing on the New York Stock Exchange. Thus, Canada provides a more realistic option for trying out cannabis-steeped products.
In the press release announcing the new product line, management suggested that the U.S. market is eventually its goal for these new beverages: "As we await further progress on U.S. regulations, we'll continue to develop an exciting product pipeline in the federally regulated market of Canada."
Investors shouldn't expect this to be a game-changer for Boston Beer
Although Boston Beer is encouraged by the growth opportunities in cannabis, the reality is that this isn't a segment that's full of potential right now. Beverages account for less than 2% of the legal cannabis market in Canada. Through the first three quarters of 2021, there were less than 40 million Canadian dollars spent on cannabis beverage sales. And that's even with some big names already in the sector.
Constellation Brands, the beer maker behind Corona, has invested billions in cannabis producer Canopy Growth (CGC -0.66%). The two companies have brought multiple cannabis beverages to market and sales remain underwhelming. Canopy Growth reported its latest results last month, and it groups cannabis beverage sales along with edibles, topicals, and vapes. Even with so many different products included, that accounted for just CA$11 million in revenue for the three-month period ending March 31. That represented 10% of the company's total net sales.
Does this make Boston Beer a better buy?
In the past year, shares of Boston Beer have cratered nearly 70%, worse than the S&P 500's decline of 3% during that time. For the period ending March 26, the company's falling sales resulted in its bottom line going into the red, with Boston Beer's net loss coming in at just under $2 million (versus a profit of more than $65 million a year ago).
Boston Beer could use a catalyst to energize its growth. Unfortunately, cannabis-infused beverages likely won't be it. The sector has been underwhelming and another top brewer, Anheuser Busch, recently looked to have pulled the plug on cannabis beverages, at least for the time being. Meanwhile, cannabis hasn't exactly been a safe place to gain exposure these days either, as the Horizons Marijuana Life Sciences ETF has fallen 62% over the past 12 months.
This will be a good experiment for Boston Beer to see how well the iced teas sell in Canada, but investors shouldn't take it as much more than that. The sales the company generates from this new line of products likely won't give its top line a significant boost. This latest development shouldn't change your view of whether Boston Beer is a good investment or not, as cannabis beverages won't have a material effect on the business anytime soon -- if at all.
