Brewer AB InBev partners with Tilray to tap cannabis drink market

TORONTO (Reuters) - Anheuser-Busch InBev ABI.BR, the world's largest brewer, and Canadian pot producer Tilray Inc TLRY.O are partnering in a $100-million joint venture to research cannabis-infused non-alcoholic drinks for the Canadian market, the companies said Wednesday.

FILE PHOTO: The logo of Anheuser-Busch InBev is pictured outside the brewer's headquarters in Leuven, Belgium February 25, 2016. REUTERS/Yves Herman/File Photo

The alliance, the latest in a string of deals by global alcohol and tobacco giants in Canada’s cannabis sector, comes amid booming demand for cannabis and a long-term decline in alcohol consumption and smoking.

AB InBev’s Labatt Breweries of Canada, which makes such brands as Labatt Blue and Budweiser, will work with Tilray’s Canadian cannabis subsidiary, High Park Co, which develops and sells cannabis products in Canada, the companies said in a statement.

Canada, which became the world’s first major country to fully legalize the recreational use of cannabis in October, is expected to approve cannabis-based products including beverages and edibles in October 2019.

“It’s too early to know how big cannabinoid-based beverages will be but we think it’s a massive opportunity and it’s something we’re interested in investing aggressively in,” Tilray’s Chief Executive Officer Brendan Kennedy told Reuters on Wednesday.

AB InBev and Tilray said they each plan to invest up to $50 million to research drinks with cannabidiol, or CBD, a component of cannabis that does not cause intoxication, and tetrahydrocannabinol, or THC, the substance that makes people high.

Discussions about commercialization are likely to follow, and Tilray’s objective is to have beverages ready when they become legal in Canada, Kennedy said.

A gradual increase in legalized recreational use of cannabis for adults in U.S. states and in medical cannabis around the world has sparked investment and partnership deals for Canadian companies.

On Tuesday, Tilray said it will work with Sandoz AG, a unit of Swiss drug company Novartis AG NOVN.S, to develop and distribute medical marijuana world-wide.

Tilray is also exploring opportunities to make acquisitions in 2019, both within and outside the cannabis space, Kennedy said.

In the cannabis industry's largest investment, Corona beer maker Constellation Brands STZ.N added $4 billion to its $200 million investment in Canopy Growth WEED.TO in August to help fund the Canadian cannabis producer's global expansion.

In a more modest deal that same month, Molson Coors TAP.N, the No 2 beer maker in North America, struck a Canadian joint venture with marijuana producer Hexo Corp HEXO.TO to make cannabis drinks.

In the tobacco industry's first major foray into cannabis, Altria Group MO.N said this month it would invest $1.8 billion in Cronos Group CRON.TOCRON.O for up to 55 percent of the Canadian cannabis producer.

Reporting by Susan Taylor and Nichola Saminather in Toronto; Editing by Cynthia Osterman