AB InBev (BUD) Enters Booming Cannabis Realm With Tilray Deal

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Anheuser-Busch InBev SA/NVBUD , also known as AB InBev, recently announced a research partnership with medicinal cannabis manufacturer - Tilray, Inc. TLRY . This $100 million deal includes an equal investment by both the companies, enabling them to conduct joint research on non-alcoholic, cannabis-infused beverages. Notably, the alliance is confined to Canada alone, where marijuana has been recently legalized for recreational use. Commercialization of the beverages is to be decided later.

Budweiser maker, AB InBev, will participate through its subsidiary Labatt Breweries of Canada, while Tilray's cannabis subsidiary High Park Company will make the contribution. Labatt, being one of the major breweries in the country, remains focused on the evolving consumer trends and efficiently caters to their needs. Non-alcohol beverages will include tetrahydrocannabinol (THC) and cannabidiol (CBD).

We believe, this partnership will bolster AB InBev's position in the marijuana industry, courtesy of Tilray's excellence in cannabis. The cannabis maker will also cherish AB InBev's rich experience in beverages.

Markedly, AB InBev is not the first beverage company to dip its toes in the flourishing cannabis market. Change in consumer preferences has prompted the beverage industry to look for new and healthier drinks options, and cannabis-infused product has been the most lucrative solution for these companies. Leading alcohol companies like Constellation Brands, Inc. STZ and Molson Coors Brewing Company TAP have already entered this space. In fact, Constellation Brands has made a $5-billion investment in the marijuana biggie - Canopy Growth CGC .

We note that cannabis is getting officially approved in many U.S. states for recreational purposes besides its medical usage. In fact, this increasing acceptance has been propelling several brewers to put their step forward in the pot industry. This makes us optimistic about the prospects of marijuana and the companies foraying into the space.

On the part of AB InBev, we believe this latest partnership to help the company gain exposure in the cannabis along with the THC and CBD-infused products. This, along with the company's product innovations efforts will enable it to serve the drink enthusiasts with best product quality in this category.

Shares of AB InBev reacted little to the news yesterday. In the past three months, the stock has lost 24.6%, wider than the industry 's 21.6% decline.

Currently, AB InBev has a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Constellation Brands Inc (STZ): Free Stock Analysis Report

Molson Coors Brewing Company (TAP): Free Stock Analysis Report

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Canopy Growth Corporation (CGC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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