viewHill Street Beverage Co Inc.

Hill Street Beverages Company capitalizing on demand for alcohol-free alternatives


The 14-year-old company is expanding its business model to include the production and the sale of potentially lucrative cannabis-infused beverages

Hill Street Beverage Co Inc. -

Quick facts: Hill Street Beverage Co Inc.

Price: 0.115 CAD

Market: TSX-V
Market Cap: $15.54 m
  • Toronto-based company makes alcohol-free beer and wine
  • Seeks to expand into potentially lucrative cannabis-infused beverages
  • Proven consumer products with nearly 2 million bottles of wine already sold into the market

What Hill Street Beverage does:

Hill Street Beverage Company Inc (CVE:BEER) (OCTMKTS:HSEEF) is a Canadian company that makes alcohol-free beer and wine, as well as adult-format beverages.

The company offers red, white, sparkling, and rose wines under the Vin(Zero) and Vintense brands. It sells beer under the Hill Street Craft, Designated Draft and MADD virgin craft brand names.

Hill Street’s beer and wine lineup have won numerous medals and accolades in North America, including three Gold, two Silver, and two Bronze Medals at the US Open Beer Championships, the Retail Council of Canada's Grand Prix award, and a prestigious Double Gold Medal at the San Francisco International Wine Challenge.

CEO Terry Donnelly has said about 90% of the company’s revenue comes from wine sales, even though ironically its stock ticker symbol is BEER. He also says its products can be found in about 4,000 grocery and retail stores in Canada and the US as well as through its website.

But Toronto-based Hill Street sees big growth opportunities beyond non-alcoholic wine and beer. The 14-year-old company wants to expand its business model to include the production and the sale of potentially lucrative cannabis-infused beverages -- and it is willing to pay big bucks to get a foothold.

How is it doing:

If Hill Street Beverage's most recent results are anything to go by, consumers are lining up for its beverage lines.

It reported fiscal second-quarter results that showed 85% year-over-year growth in sales over its fiscal second quarter, including C$973,710 in revenue, up from C$527,652 in the same period in 2018. Over the three months ended December 31, Hill Street’s net loss narrowed by 39% to C$882,000 from $1.4 million. 

The company credited the growth in part to holiday sales of its Entertainer's Pack, a gift pack of three bottles of Vin(Zero) alcohol-free wines. Going forward, Hill Street has made the pack available year-round and expects it to appear on more retail shelves.

Hill Street also noted a dramatic change in its strategy around cannabis-infused beverages. The company nixed its planned acquisition of OneLeaf Cannabis and a non-binding letter of intent to provide co-packing services for cannabis-infused beverages.

The shift away from owning a cannabis cultivation facility was based on turning investor sentiment away from cannabis cultivation along with major declines in the major cannabis indices over the past several months, the company said. 

Instead, Hill Street will focus on working with licensed co-packing production partners.

At the end of its second quarter, Hill Street Beverages also closed on a private placement of roughly C$800,000, which the company said will enable it to continue its operations in preparation for the launch of cannabis-infused beverages this year.

Inflection points:

  • Launch of cannabis-infused beer and wine in consumer retail shops
  • Grow relationships with leading Canadian retailers
  • Continued product innovation, including building upon a partnership with Lexaria Biosciences
  • Expand to adjacent US market and overseas as global regulations evolve

What the boss says:

Commenting on Hill Street’s 2Q 2020 numbers, CEO Terry Donnelly told Proactive: “We’re really excited about our revenue growth, because it really is the fruits of the labour we put into increasing the distribution of the alcohol-free portfolio that we already have. That’s helping us to make sure we have shelf space in all of the major grocery stores across the country. It’s also due in part to the growth of the category at large: lots of big brands coming into the space and the rising tide is lifting all boats.”

Contact Angela at angela@proactiveinvestors.com

Follow her on Twitter @AHarmantas

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on 20/11/20

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