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

Snapshot

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: 0.1 CAD

TSX-V:BEER
Market: TSX-V
Market Cap: $13.51 m
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  • Toronto-based company makes alcohol-free beer and wine
  • Expanding 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.

A wholly owned subsidiary, Hill Avenue Cannabis Co, was created to manage its business in the legal cannabis segment. Under a three-year-long agreement with Molecule Holdings will include both formulating and manufacturing beverage products using proprietary infusion technologies provided either by Molecule or Hill Street’s joint manufacturing partnership with Lexaria Biosciences, once Hill Street’s cannabis processing facility has been licensed by Health Canada.

CEO Terry Donnelly has said about 90% of the company’s revenue currently 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:

Hill Street Beverage's most recent results highlight the company’s steady performance in the face of the coronavirus pandemic.

During the quarter, the Toronto-based company signed a milestone deal with Lexaria Bioscience to acquire the latter’s THC assets, which will propel Hill Street’s plans to launch Cannabis 2.0 related products. The firm also struck a manufacturing deal with Molecule Inc ahead of a planned launch of its (V)ia SPRIZA cannabis-infused beverages brand in December.

For the quarter ended September 30, 2020, Hill Street reported revenue of C$274,712, down from $329,000 in 1Q 2020, and significantly narrowed its net loss to C$476,000 – a 69% improvement on the $1.5 million figure in the year ago quarter. The company's focus on cash control resulted in a 55% reduction in expenses, according to a release.

In December 2020, Hill Street strengthened its portfolio with the acquisition of Lexaria Bioscience Inc’s (CSE:LXX) THC-related assets in a C$3.85 million deal. The transaction gives Hill Street exclusive global rights in perpetuity to Lexaria’s DehydraTECH technology to make products that contain THC and other psychoactive cannabinoids.

The agreement also expands Hill Street’s license with Lexaria HempCo to make products that contain CBD on a global basis for 10 years. Hill Street and Lexaria also agreed to replace previous agreements with a global non-exclusive license that gives Hill Street the right to produce non-pharmaceutical CBD products with less than 0.3% THC using the DehydraTECH technology for a period of ten years in exchange for a yet-to-be determined royalty to Lexaria.

Inflection points:

  • Completion of construction on joint manufacturing facility expected in spring 2021
  • 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:

CEO Terry Donnelly told shareholders that Hill Street is gaining full ownership of the joint manufacturing partnership created last year, and positioning the company to become an early leader in the global market for cannabis 2.0 ingredients and products.

“Our cannabis processing facility is designed specifically to produce shelf-stable ingredients using DehydraTECH for the Cannabis 2.0 market,” Donnelly said. “With a significant portion of the consideration in shares and future payments, this transaction demonstrates Lexaria’s faith in Hill Street to unlock the value of their innovations for their shareholders based on our success.”

Contact Angela at angela@proactiveinvestors.com

Follow her on Twitter @AHarmantas

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Hill St acquires Lexaria’s THC business as they look to ramp up their...

Hill Street Beverage (CVE: BEER) CEO Terry Donnelly joined Steve Darling from Proactive with news the company has acquired the primary non-pharmaceutical cannabis-related division of Lexaria Bioscience Inc. Donnelly telling Proactive this acquisition provides Hill Street with the exclusive...

on 20/11/20

4 min read