SweetWater Brewing Co. has built its brand around the outdoors, leisure and not-so-subtle references to cannabis culture, hosting the signature 420 music festival and offering its 420 brew, a recent “strain” of which mimics the smell of marijuana through the addition of hemp and terpenes.
But an association once deftly implied via marketing has now been made explicit with Canadian cannabis firm Aphria Inc.’s purchase of the Atlanta brand for $300 million, $50 million of which will come in the form of stock in the publicly traded company.
“We are excited by the opportunity to join a leading global cannabis company and build a successful future based on the strengths we both bring to this combination. Our 420 brand offerings and SweetWater 420 Fest complement Aphria’s cannabis business and create mutual opportunities for accelerated expansion into other cannabis- and beverage-related products in the U.S. and Canada,” said Freddy Bensch, SweetWater’s founder and CEO, in a news release.
Aphria, which makes medical cannabis products and also vape pens and cartridges along with “dried bud” for adult use, sees SweetWater as a way to enter the U.S. market in a profitable way while eyeing eventual federal legalization of recreational marijuana use.
The plan is to introduce its family of brands such as Broken Coast, Riff and Good Supply through beverages in the U.S., while also importing SweetWater 420 to enter the beverage category in Canada.
In a news release, Aphria said it was attracted to SweetWater’s track record of innovation, as well as its on-premise events and tasting business at the brewery on Otley Drive, its distribution infrastructure and its recent targeting of the millennial demographic through entry into the hard seltzer market. SweetWater is also sold on Delta flights nationally and to 50 countries across six continents.
On revenue of $66.6 million, SweetWater posted earnings of $22.1 million before taxes in 2019, growing barrel volume by 7 percent to 261,000 in a down year for the broader industry. The company is the 14th largest craft brewer in the country, with availability in 27 states and Washington D.C. via 29,000 retail locations. The Atlanta brewer has also made limited forays into the international market, exploring countries where its unique story fit the consumption culture.
With the SweetWater purchase, Aphria said its revenues and profits would grow to CAD $650-$675 million and $65-$70 million respectively.
The announcement of the deal was timed for the day after election day, as five states passed ballot measures legalizing marijuana for recreational use, bringing the total number of states with similar regulations to 15. Thirty-four states allow it for medical use.
SweetWater, which employs 125 people, will continue to operate under the same management as a wholly-owned subsidiary, with Mr. Bensch continuing to serve as CEO, reporting to Aphria Inc. CEO and Chairman Irwin Simon.
Read the news release here.
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