In the latest episode of Civilized's new podcast 'Cannabis & Main,' host Ricardo Baca spoke with Patrick Oland - Chief Financial Officer at Moosehead Breweries. Ricardo and Patrick discussed the liquor industry's reaction to cannabis legalization, the possibility of more beer makers entering the marijuana market and the future of cannabis-infused beverages.
Transcript, 'Cannabis & Main: Cannabis & Beer'
Ricardo Baca: Hello, hello, and welcome to Cannabis & Main, a Civilized podcast where we extract one sliver, one tiny little slice from today's cannabisscape and go deep. I'm your host Ricardo Baca, founder of Grasslands and The Cannabist. It's great to be with you today. Of course, you can learn more about this show alongside the marijuana news and cannabis lifestyle coverage you crave from Civilized found on the worldwide web at civilized.life.
Now, this week we're going to shine a light on cannabis and beer. Yes, I know, two of your favorite things. We're going to do this with a guest who is an executive at Canada's oldest independent brewery. The subject of cannabis and beer is not a new one, but it's also not an old one. It's especially interesting given the tumultuous history these two industries, alcohol and marijuana, share.
Voiceover [from a WBUR Boston report on the Massachusetts marijuana movement]: Campaign finance record shows the vast majority of funding in opposition to legalization came from the health care and alcohol industries. The wine and spirit wholesalers of Massachusetts contributed $50,000 and the beer distributors of Massachusetts kicked in $25,000. Neither organization returned calls for comment.
Pam Wilmot of the campaign finance watchdog group Common Cause says it's not unusual for industries to make contributions based on economic self-interest.
Pam Wilmot [recording]: You can see that with the liquor industry. Clearly the question for approval could be a competitor and they want to keep them out of that role.
Ricardo Baca: Now, some major players from both industries have made headlines worldwide by announcing their work in creating different non-alcoholic, cannabis-infused beer products. Many of us know about the Constellation-Canopy deal, which brings the distributor of Corona into the world's largest cannabis business. Others are out to get their piece of the pie too.
The man who created Blue Moon, a very popular beer is now working with cannabinoid science company Ebbu to create a marijuana-infused beer under the brand name Ceria. Molson Coors Brewing Company has also partnered with Hydropothecary Corp to create a non-alcoholic cannabis beer of their own for the Canadian market.
What is a large but independent brewery's concerns about entering this marijuana beer market at this important time? Producer, Vince, let's find out. My guest today is Patrick Oland who is chief financial officer at Moosehead Breweries up here in beautiful Canada. Patrick, thank you so much for joining us on Cannabis & Main.
Patrick Oland: Thanks Ricardo. It's great to be here.
Ricardo Baca: Moosehead is Canada's oldest independent brewery.
Patrick Oland: It is. Yes. Yeah. 151 years old this year.
Ricardo Baca: This is your family's business up here.
Patrick Oland: It is. Yeah. We're located here in Saint John, and we're very proud to be New Brunskwickers and Saint Johners.
Ricardo Baca: You guys are a beer company and a very old, historic beer company at that. How lovely is it and how crazy is it that hops and cannabis are ultimately part of the same family, part of the same plant family?
Patrick Oland: Well, it's a great point. We've taken a lot of time to think about this issue, because I guess if there's one thing we can pride ourselves on being such an old company is we've been able to adapt and evolve over the years. We've been through prohibition. We've been through things like that. We're keeping a very open mind. We're just trying to really understand the whole cannabis industry. We want to understand how consumers are approaching it, how producers are approaching it, and how if at all it fits within the alcohol beverage industry in general.
Obviously there are other companies that have dipped their toe in quite heavily. As a smaller, family-owned company, we're not in a position necessarily to be what we would call a leader in that front, but we're watching very closely.
Ricardo Baca: I got to ask straight out, Moosehead, are you guys contemplating getting into the industry? Where exactly is that conversation internally?
Patrick Oland: We have no plans to get into the industry. We are just evaluating its impact on the beer business and trying to understand what will come of it, how will it affect beer consumption, how will it affect the consumers' tastes and preferences, how it will effect the retail landscape. The taxation of cannabis versus alcohol is a very big subject and as well as the workplace.
In terms of beer, we know that there are brewers out there that are looking at cannabis as potentially either a secondary or primary ingredient in beer. We know one of the models that's been looked at is non-alcoholic beer infused with cannabis. I want to be careful of my terminology, but infused with the THC, if you will.
I think one thing we pride ourselves on in beer is that beer - because it's a beverage, like wine - it's a social thing. And there's something about something that you drink and something that you consume that there'll always be a need for that. There'll always be a need for thirst quenching, for the social aspect of that. We'd be naive to believe that there won't at some point in time be a time when drinkable cannabis may be part of everyday society. We're obviously a long way from that.
If that plays a role in beer - if beer drinkers' tastes evolve - then we have to watch that.
Ricardo Baca: I can even speak from the world's oldest regulated marketplace, Colorado, where we've had legal adult use since late 2012 and sales since early 2014. The beverage part of the edible sector is still pretty small. People have the sodas. People have the drops that you can put into a sparkling water - a La Croix type beverage or something. I think that also means that it's potentially primed for growth.
Inevitably you have the coffee products and the tea products, and so it has been fascinating to watch that expand. I was at a wedding last year where there was a non-alcoholic, cannabis-infused sparkling wine served. Then there was the normal Cava or champagne version too. Would it surprise you if a cannabis-infused product was in the future for Moosehead?
Patrick Oland: I wouldn't rule anything out. We are certainly evaluating everything. I think that, again, one of the reasons we've been around is the fact that we've been able to adapt and respond to changing tastes. One thing we've always stuck to is that we're a brewery, and that's something that is at our heart. That beer DNA will always be with us. To the extent that drinkable cannabis becomes a reality more in the beer sector, I think that's where it gets particularly interesting. Outside that, maybe it's a little bit more removed.
Ultimately I think it'll come down to the innovation, the creativity, the technical aspects of those kinds of products. I think there's a big social question too. There's a big social question as well that we have to be comfortable with that answer. We sell alcoholic products. Alcohol is the drug - so to speak, if you will - that we make. Moving towards a cannabis-infused product that has a different effect on the human body, that's a big step for us. I don't know ultimately if we would ever get there. We're going to evaluate it and see.
Ricardo Baca: I think it's a big step for anybody. Any alcohol company choosing to get into this. It is a big step, because it's a different substance. We talk about it as if it's a new substance. Of course, it's not. It's ancient, but it is newly legal.
Especially in the edible space - you have to take that into consideration, because vaporizing or smoking cannabis is one thing. You know exactly where you are a couple of minutes into the experience, whereas edibles, as you know, can take anywhere from 30 to 90 minutes to really settle in. That is complicated. It's complicated for new consumers, but it's very complicated for the manufacturers of these products.
I've talked to a lot of mainstream brands about their potential entry into this market, and that's one of the things that certainly has them afraid of it or at least respectful of it. I'm guessing that's something that you guys have talked about internally.
Patrick Oland: Absolutely. We just don't understand enough about how it works, how it's processed, how it's made to even begin to understand the potential. As I said, we're trying to understand where the puck is going, where is the market going, so we can if necessary be ready for it. You mentioned the Constellation deal, that was a watershed moment, I think, for the alcohol beverage industry. They're widely regarded as the smartest operators probably in the alcoholic space.
Ricardo Baca: Really? They have that reputation?
Patrick Oland: Absolutely, yeah. The way they've grown that business - particularly on the beer side and wine side - from a family-owned business originally. They probably don't always get the attention that the big multinationals do. They don't do anything without a big long-term plan. I think they also probably have the skills and the agility to do it probably in a way that maybe some of the multinationals don't. That was particularly interesting. Really curious to see where that goes.
Are they looking at it just as a simple diversification? Is this another consumer space that they can play in? Are they looking to reinforce their alcoholic beverage lines? Obviously they've got a broad portfolio. We'll see over time, but they're just too smart to just ignore what they've done. There's a lot of buzz right now in the business. "Who's next, which company will be next, who wants to jump in?"
Then, ultimately, where do the big, big global, multinationals stand? Where do they look at this from a marketing, from a commercial, from a legal, from a social perspective, political perspective? It's really a fascinating time.
Ricardo Baca: You said one of the things that Moosehead and you and your colleagues are looking into is how will legalization impact beer sales and consumer preference and, ultimately, the bottom line. Inevitably we have some interesting data points out of these early adopter markets that you can extrapolate and maybe apply to your demographics and your local markets up here and see how is that going to work.
I'm curious what you're seeing. Because I know that we have seen some interesting data points in the small town of Aspen in Colorado where suddenly the cannabis taxes started to outpace their alcohol taxes. That's not definitive one way or the other, because those are two completely different tax structures. I think it was more just interesting, like, "Oh, okay. Small resort town. Cannabis can bring in more money than alcohol."
Then we've seen general sales trends, but I'm sure you're more up-to-date on those than I am. What are we seeing in these early adopter markets?
Patrick Oland: Well, there's evidence that it's affected alcohol consumption in Colorado initially. It's early days yet, but there's some evidence there. Obviously in Canada it's too early to tell. You mentioned taxation. One of the main differences between Canada and the US, of course, is that our alcohol in Canada is taxed at a very high rate. Used to be called sin taxes to pay for the hospitals and things like that. Effectively alcohol is taxed at basically a well over 50% of the retail price of beer, of beer or any alcohol is tax. It's almost 60% through a combination of local, provincial, federal excise taxes.
That's the reality. As Canadians we've grown up with that, and every Canadian loves going to the US and buying inexpensive beer. It's considered kind of a treat. The federal and provincial governments have collaborated on a taxation strategy for cannabis. Obviously the mandate behind cannabis legalization is really a social one. It's really trying to get it out of the closet and in a regulated structure. Obviously they're starting from an existing starting point in terms of where the pricing is and where the market price is.
In effect the taxation on cannabis is at a fraction of the taxation on alcohol, on a percentage basis. That's just reality in terms of what the marketplace will bear for price. It's a great disparity, again, versus alcohol. I think over time you're going to see a debate about why would cannabis receive a much lower tax rate than alcohol. If you were starting from scratch obviously would you take a different approach?
Obviously there's a lot of precedent for that and a lot of history, but for the alcoholic beverage business, it remains a big issue. Last year, for example, the federal government raised excise taxes for the first time in a long, long time. That created a significant issue. The cannabis taxes are almost a counterpoint to that. A lot of debate in Canada. If you want to talk about Canadians, get them upset, ask them about beer taxes. It's a big issue.
Ricardo Baca: It makes sense. I know my first time up here as an adult my mind was blown. I think I was trying to buy a fifth or something. I was dumbfounded. I was like, "I don't think I took out enough cash from the ATM to take care of this purchase."
Patrick Oland: Yeah. Even in Canadian dollars.
Ricardo Baca: What's the Canadian alcohol industry's outlook on this new substance that's about to become just like beer, as legalization approaches? Are they nervous?
Patrick Oland: I think they're a little bit nervous. We have some data points as you mentioned from some of the markets. There's been some discussion. I think we're just watching it very closely. We'll watch the sales in the fall, and I think we'll see pretty soon what the impact is initially at least. I wouldn't say it's fear as much as a little bit of concern and some wonder about what's going to happen.
Ricardo Baca: Patrick, here you are a veteran of the substance industry, a member of the family that has brought Canadians this venerable beer brand for more than 150 years. If we're looking into the crystal ball 10, 15 years in the future, what do you think the recreational substance landscape looks like in Canada at that time? Will cannabis be normalized by that time like beer, like alcohol?
It seems like Canada's already surpassed a lot of areas in the US as far as the normalization and the acceptance that, "I use marijuana, and that just happens to be one of the substances I turn to when I want to relax after a long day." What do you think that looks like 10, 15 years down the line?
Patrick Oland: If I had that kind of crystal ball then I'd probably be selling a lot more beer. No, it's a great question. It's just so hard to know. I think that there's a whole young millennial generation coming up and the generation beyond that that we've already seen how attitudes have changed amongst a lot of social issues even in the last five or ten years. I think it would be naive to think that there's not going to be a more acceptable acceptance of it, regardless of legalization.
How that's consumed, how it's used, boy, I guess we'll have to see. It's an interesting journey. In some ways it's a little bit like, just listening to the speakers this morning, all the talk about the what ifs, what ifs, it reminds me in a tiny way of a little bit like when the internet started taking off and it was this big thing, but nobody really quite knew who was going to be successful, how you were going to be successful, who's going to make money, what was going to happen to the big guys and the small guys.
There's a lot going on from a business point of view, and I think the society aspect is a big question too.
Ricardo Baca: One of the most gratifying things about being a journalist and following this implementation going back to November of 2012 when Colorado and Washington voters said yes, and started making these choices, is just finally having the data that shows us this is exactly what happens to a community, to the demographic of teenagers, to whatever when a community chooses to legalize this substance. Of course, we only have three or four years of that knowledge and experience and we need 10, 20 to make more definitive judgments and statements and learn a lot more.
I, for one, am very excited to see where this takes you and your fellow countrymen. I so appreciate it. Patrick Oland, the chief financial officer of Moosehead Breweries, thank you so much for joining us on Cannabis & Main. We really appreciate you sharing your expertise with us.
Patrick Oland: Well, thanks for having me on.
Cannabis & Main is a Civilized podcast. Our executive producers are Ricardo Baca and Derek Riedle. We are produced by Katie Labrie and Vince Chandler, along with Civilized, F420 Films, and Grasslands. We are hosted by Ricardo Baca and directed by Vince Chandler. Interact with Vince on Twitter @VinnyChant or Ricardo @bruvs and Civilized @CivilizedLife. Our music is by Johann Glossner and thank you very much to Moosehead Brewery CFO Patrick Oland for joining us on this episode of Cannabis & Main, Cannabis and Beer.