Cannabis: Tilray CEO explains why the company isn't waiting for U.S. legalization 'lottery ticket'

Tilray CEO Irwin Simon joins Yahoo Finance Live’s Julie Hyman to discuss the cannabis industry, why the company is pivoting to food and beverage brands, weed legalization in the U.S., and the end of a partnership with Budweiser.

Video transcript

JULIE HYMAN: Tilray Brands got a lift last week after the company reported earnings, also rebranded as Tilray Brands following a number of acquisitions and transitions. Irwin Simon is the CEO, and he's joining us now. Irwin, it's always great to see you. You guys-- you're basically trying to make a pivot here and a transition to being seen more as a consumer packaged goods business, not just a cannabis business, right?

And talk me through the sort of thinking behind that. Is it, in part, to make you more resistant or agnostic to legislative changes or regulatory changes, for example? What's the thinking behind it?

IRWIN SIMON: So good morning, Julie. And nice to see you. Nice to be with you again. You know, as you know, I'm about building brands and building businesses focused on brand-- and brand equity, brand equity, brand equity. And I don't care, as you and I talked earlier whether, you're at home, your office, traveling. You know, we're still out there enjoying brands today.

And if you look at valuations and multiple, brands are what consumers will pay for. And you look at deals being done, brands are what get the highest multiple. So you know, I just don't want Tilray to be a cannabis company. But you know, the foundation of Tilray will be cannabis, but adjacencies to cannabis.

And you know, one of the big things here is regulation. And being controlled by regulation is difficult sometimes to build a business. We have a strong business in Canada with 12 brands. And with that, legalized-- cannabis is legal-- adult use, medical use, edibles, and drinks. But Canada is 37 million people in size, and there's only so much you can build in Canada.

So we will build out a nice, strong business in Canada in cannabis, and drinks, and edibles, and stuff like that. In regards to Europe, Julie, we see some big opportunities in Europe. We think Germany will legalize in the next three to four months. We think France has a possibility of legalizing, Portugal. And we have a great foundation in those markets.

When it comes to the US, listen, you know, last year this time with the Biden administration coming into play and lots of discussion around cannabis, we thought legalization or safe bank could be around the corner. And that doesn't look like it's going to happen. And we could see a change in the House and the Senate come November of this year. So with that, what I want to ensure we do is, hey, have a diversified company.

And what I wanted to do in the US is build our business around spirits business, beer business, and food business, which can be adjacencies one day once legalization does happen in the US. So that's why we changed the name to Tilray Brands. But the important thing is in the cannabis world is to build brands, not just a pre-roll a joint, not just flour, not just oils.

It's our brands-- whether it's our Rip brand, our Solei brand, our Good Supply brand, our Chowie Wowie brands. So it's important that you build brands out there. And that's how you bring consumers into the marketplace.

JULIE HYMAN: So, Irwin, I want to get back to legislation and policy for just a second. As you said, there was no Safe Banking Act for the industry last year, disappointing some who thought that that was on the cusp of coming to fruition. So what-- so if I heard you correctly, you said maybe September we could see that happen. If we do get that, if we do get federal legalization, what does that unlock for the company?

IRWIN SIMON: So, listen, if [INAUDIBLE] unlocked the company is this year. You know, we just bought Breckenridge Bourbon. There's no reason we cannot have a bourbon that's infused with THC instead of alcohol. And we would have two businesses, a drinks business that contains THC and a drinks business that contains alcohol.

The other thing which it unlocks for the company, Julie, is this here-- we would be able to own cannabis businesses in the US. Today, we cannot touch cannabis businesses in the US because we trade on NASDAQ, trade on the Toronto Stock Exchange. So we do not own anything that touches cannabis in the US. You can buy options, and we did that with Medmen back in September of this year.

But there's no revenue and there's no EBITDA. And you're in essence, to some degree, buying a lottery ticket waiting for legalization to happen. But when you buy great brands and great businesses like our 420 Sweetwater Beer, our Breckenridge Bourbon, our Manitoba Harvest food products that are infused with hemp, they're businesses that can grow. And ultimately, their great adjacencies to the cannabis business.

BRIAN SOZZI: Irwin, count me on the list. I'm open to trying a bourbon infused with THC. And to that point, you know, a lot of experts say the drink market in cannabis is the next big thing. I'm a little surprised that Budweiser would cancel that deal with you. What happened there?

IRWIN SIMON: So I agree with you. And you just saw Monster get into the beer business. You've talked about Coke getting into the business. You've talked about Pepsi. Budweiser did not cancel the deal with us. It was mutually agreed that both of us would go our own ways.

That deal was done with Tilray. It was not a great deal for Tilray. And ultimately, with us being in the distribution business with Sweetwater, we could go ahead and do our own beer distribution and ultimately do it on its own. I think, you know, there's concerns with THC. And we can do THC drinks in Canada. So with that, it was a mutual separation.

We all left on amiable terms. Actually, we still are co-packing for Budweiser in our Canadian facility. So they didn't cancel. Everybody's happy. Everybody's going their way. And we have our mission and vision and they have theirs.

JULIE HYMAN: Irwin, I got to come back to this idea of THC-infused bourbon for just a moment. I mean, talk about something that's going to put you in the couch. You know, I'm just curious, as you guys think about the development of products like that, that have both alcohol and THC, not just CBD but THC, like that-- that would pack a punch.

IRWIN SIMON: Well, first of all, you would not have alcohol and THC. You would substitute the alcohol with THC. You're right, if it was alcohol and THC, Julie, it would hit you with a punch. But again, you know, with THC, you don't have the calories, you don't have the hangover, and, actually, you don't have some of the health issues that could come with drinking a lot of alcohol.

And I have you been there on research and have seen products, and same with some beer-- there's a lot of beer products out there today that don't have alcohol, that have THC. I've tasted some wine products. And they are wine, but it doesn't have alcohol, it does have THC. And back to the point before-- you know, one of the things I've stepped back and look at, you look at the size of the spirits business, you look at size of the beer business, you look at the size of the beverage business, where is that big opportunity?

Ultimately, it's in the beverage business with THC-infused drinks. And that's why we've put our flag down in spirits and beer. And by the way, Diageo doesn't get such a bad multiple out there being in the spirit business either.

JULIE HYMAN: Yeah, definitely not necessarily a bad business. Irwin, finally, I want to ask you-- you know, at Hain, your former company, you were known as somebody who built that company by making a lot of acquisitions. You've made some acquisitions, obviously, at Tilray Brands also.

Where do you see further adding? Is it going to be cannabis? Is it going to be beverage? Is it going to be both? Is it going to be something that you guys aren't even in yet?

IRWIN SIMON: So really good question. You know, listen, a big part of since I've been at Tilray, we've done well four or five acquisitions-- our reverse merger with Tilray, Sweetwater, our bourbon business, we bought some other-- Breckenridge Bourbon, bought some other beer businesses. Listen, I think you step back for a second, and, again, it's about brands.

But cannabis is something that's adult use and medical use. So there's a lot of opportunities in the whole medical area for us. There's lots of opportunities in topicals. There's lots of opportunities in regards to products for sleep, for anxiety, for pain. I really like the spirits business, I like the beer business, I like the beverage business, you know, I like the food business.

In Europe, there's lots of opportunities. So there's a lot of acquisitions. And, listen, built Hain into a $3.5 billion company, and it was built around acquisitions that were integrated. And that's the big thing here-- how do we do the right acquisition with, ultimately-- with the mission and vision being adjacencies to the cannabis business, which can go medical, which can go adult use, which can go drinks, which can go foods, which can go infused snacks, et cetera.

And if you look at who's using cannabis today, it's millennials-- they're beer drinkers. They're bourbon drinkers. So I want to look at, how do I cross-promote among my users and consumers? And that's why, Julie, brands are so important. You want consumers that will buy brands in cannabis and spirits that they can trust, that's gone through all the regulatory, and is what we put on the labels either in the bottle, or in the pre-roll, or in the flour, et cetera.

JULIE HYMAN: A lot of different directions to go. Irwin, it's always good to get some time with you. Tilray Brands CEO Irwin Simon, thanks so much.