Another Cannabis-Beverage Deal Announced: Could More Be on the Way?

Why it might not be a bad idea to buy Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) today.

| More on:

We’ve heard rumours of more beverage makers looking to partner up with cannabis, and this week we learned of another one that was announced: industry-giant Anheuser-Busch InBev SA will be working with Tilray Inc. The announcement came on Wednesday in what’s being called a “research partnership” between the two companies. Both will invest US$50 million into the joint effort to research non-alcoholic beverages that contain tetrahydrocannabinol (THC) and cannabidiol (CBD)

Labatt Breweries of Canada will be working closely with Tilray on the research. However, it’s important for investors to note that this does not suggest any deal beyond a research partnership, and it doesn’t guarantee that the brewer will produce drinks will Tilray if the research proves to be encouraging. In the news release, Labatt’s President, Kyle Norrington said that “We intend to develop a deeper understanding of non-alcohol beverages containing THC and CBD that will guide future decisions about potential commercial opportunities.”

While the two companies will certainly benefit from any knowledge gained during the process, this is not a commitment beyond research and shouldn’t be compared to the deal that Canopy Growth Corp has with another beer maker, Constellation Brands, Inc.

However, this partnership does give Tilray a leg up on its peers that don’t have a deal with a big brewers, putting it in a good position to secure one with Anheuser-Busch should the research go well. This puts a bit more pressure on other cannabis companies, such as Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) to find a partner sooner rather than later.

Is Aurora in danger of falling behind?

Aurora was supposedly in talks with The Coca-Cola Co. regarding a beverage deal, but nothing came of that. With edible marijuana expected to be legalized sometime in 2019, there’s not a whole lot of time for Aurora to find a partner, develop and research drinks, and have them ready when cannabis beverages will be permitted for sale. Edibles are going to be the next big craze in the industry, and Aurora needs to find a partner soon at the risk of losing investors to companies that are ready to go.

It is more than just beverages, however, as a strong partner can help fund and grow the cannabis business, which can be especially challenging as we see pot stocks continue to post big losses and bleed money amid rising growth.

Should investors take a chance on Aurora before a deal is announced?

Tilray’s stock got a big boost on news of this deal, although it wasn’t more than plans to research cannabis beverages.

With Aurora’s stock being down 25% year to date, it might be a good time to buy, especially if you expect the company to secure a deal sometime over the next few months. I wouldn’t expect the company to be sitting idle, and it may only be a matter of time before we see Aurora announce its own deal. If that happens, the stock could take off and generate significant returns for investors. Securing a position before that happens might not be a bad idea.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

rising arrow with flames
Investing

2 Riskier Stocks With High Potential for Canadian Investors in November

Risky stocks such as Well Health Technologies have the potential to provide life-changing long-term returns.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »