Hill Street Beverage (BEER.v) CEO, Terry Donnelly on The Equity Podcast

Please use Google Chrome Browser for better experience. The Equity Podcast team recorded this podcast with  Terry Donnelly, CEO of Hill Street Beverage, on January 10, 2020. Hill Street Beverage is expected to launch Cannabis Induced Beverages in Summer of 2020. Below is the transcript. Read, share, listen the podcast and enjoy !!

Introduction.

Host

Hello and welcome to another episode of the equity podcast dot com and today we have a special guest on our podcast. He is a well-known face and a respected voice in the cannabis and non-alcoholic beverage industry and his company has won many awards for great tasting beers and wine. Let’s welcome Mr. Terry Donnelly the CEO of the Hill Street Beverage company trading in the Toronto Stock Exchange venture with the ticker symbol – BEER . Terry, welcome to the equity podcast.

Terry Donnelly

Thank you very much for having me. It’s a real pleasure to be here.

Host

First of all, Congratulations Terry. Cannabis 2.0 products are on sale in Ontario as of this week. How do you feel?

Terry Donnelly

Well, we feel great. And just you know Ontario is a little bit behind the rest of the country. The beverages don’t go on sale in Ontario till after February. But the first vaping products and edible products are on sale. So you know when you consider, you know the last century almost of prohibition it’s pretty momentous. So we’re just super pumped about. It’s you know it’s all getting real as they say.

Host

Before we dig in deeper. Could you please give us the elevator pitch of the Company (Hill Street Beverage)?

Terry Donnelly

Well, the perspective that we have, I mean, this is this is a momentous occasion in history.

I don’t know of any other potential product that will be legalized that has as much potential in our society as the legalization of cannabis. If you look at the alcohol industry the alcohol globally is a one point two trillion-dollar business and cannabis actually has the potential to be actually probably at least double the size of the alcohol industry.

So, there is a huge global opportunity. And Canada is the first country to federally legalize, well second actually. But the first G-20 nation the federally legalize and so it gives us this opportunity to be really at the vanguard of what will ultimately be a global trend that will become a global business and that that might take 10, 20, 30 years. But when you put it in the context of history it’s a pretty momentous moment. And so, we’re super excited about Hill Street’s role you know creating beverages that give consumers a socially acceptable format to enjoy the benefits of cannabis and to really enjoy all that this amazing plant passed off.

Hill Street Beverage – The Team.

Source: Company Website 1

Host

Well Said Terry and everyone is now talking about cannabis infused beverages. How is the company getting ready for this big opportunity?

Terry Donnelly

Well we are in the formulation phase. We’ve chosen the liquids that we’ll be using. We’re finalizing agreements with the CO Packers that we’ll be manufacturing the product. We’ve already announced our first Co packing agreement, but we have more to come. So, we’re really at that point of really you know it’s no longer about the science project of how you get cannabis into a beverage. It’s now we know how to do that. We know the formulations. We know the liquid we’re going to use. We’re finalizing which particular strains of cannabis we’re going to be aligning with which beverage flavor which is a big differentiating feature I think of what Hill Street is planning vs. what the rest of the market is doing.

And we’re really excited about kind of where we’re at because our (Hill Street Beverage) plan is to have the products in the market by the summer so that consumers can enjoy our products which I think will be very different than anything else on the market. And hopefully you’ll be enjoying our rosé and our cold beer all summer long.

Host

Yeah, we will wait for that day and would love to taste the new beverages. Now going back to the sales channel and the distribution, it looks like the distribution of cannabis products seems to be the biggest bottleneck. How is the company planning to overcome this hurdle?

Terry Donnelly

Well I don’t think you can overcome the hurdle you have to work within it. So, the most important thing is we’re not overbuilding. No, we’re not creating two hundred and fifty thousand square foot building that can produce as much beer as Molson. You know we’re working within the size and scale of the retail distribution that currently exists and then we’ll expand our manufacturing and distribution as retailers come on line. And I think that’s one of the big problems that faces a lot of big cannabis companies is that they’ve overbuilt, they have too much cannabis they can’t sell it, they don’t know where to sell it there is no place to sell it. And investors expected to see revenues that matched the size of the capacity. And we’re not doing that. We’re gonna be manufacturing to meet the size and scale of the retail footprint.

Host

I agree Terry and that is the way to do it. Now Hill Street Beverage is always known for the great taste. Will the company carry over some of the same taste over to cannabis beverages?

Terry Donnelly

Actually, we’re not going to carry them over we’re going to improve them . And that’s something we’re really excited about. The products that are in the retail marketplace you know grocery retail is a pretty slow moving business, especially retail investors you know they trade things on a day at a time where you know when you land a new client in grocery like Loblaws from the day you win the account to the day the product appears on the shelf can be over a year later, right. So you win the contract and you don’t see the product on the shelf for another year. It takes them that long to kind of digest the product to get it into their distribution centers get it spread out to all the regional distribution centers then getting it into the actual stores themselves.

So you know we’ve actually had products on the shelf for the last three years that are what the retailer wants to work with because they want a stabilized consistent product that they can manage for a period of time that we’ve been behind the scenes improving and working on formulation and coming up with the next generation of products and those products that are kind of a whole generation better than what’s in the retail stores now. That’s what’s going to be hitting the market with the cannabis infusion. So, we’re super excited about getting even better tasting product in the market.

The most important thing is not going to taste like cannabis. That’s the main thing is our cannabis infusion has absolutely zero impact on the aroma and taste of our beverages.

Cannabis Infused Beverages by Hill Street Beverage – Expected by Summer 2020.

Source: Company Website 1

Host

That’s good to know Terry and I do believe that taste will play huge part in Cannabis infused beverages.  Now, United States and Europe are two big cannabis markets apart from Canada. Is the company planning to reach those customers with Cannabis products too?

Terry Donnelly

Well I think our aspirations are definitely there. But you know the alcohol industry in Canada is at twenty three-billion-dollar business and we’re not looking to create an alternative delivery system for cannabis. We’re actually looking at creating an alternative to alcohol. So we’re not so much paying attention to the size of the cannabis business. We’re targeted on the, focused our efforts on disrupting the alcohol industry and capturing market share from alcohol for our beverages. So we’ve got a big business opportunity to create in Canada. And it’s still illegal to export from Canada into those markets.

And that’s what our strategy would be to make the product in Canada and then export into the international marketplace from here you know similar to a wine or beer company. So we’re going to be targeting probably Europe first and then the U.S. Second but we’ll be doing that from a successful base having built a great business here.

Host

We know that the current regulations don’t allow this. But in future do you see alcohol and cannabis products served together at the same location?

Terry Donnelly

Well we hope that they will be in due course. I think what’s got to happen is we’ve got to launch the products and we’ve got to prove to the regulator that the sky won’t fall in because cannabis and beverages or cannabis edibles are available. I think beverages have the best opportunity to be accepted in retail locations and especially in restaurants and bars places like that where intoxicating beverages are currently sold. We’re already seeing the mixing of cannabis in retail locations in places I think it’s New Brunswick or Nova Scotia where they have the same store I think it’s the Nova Scotia liquor commission has both alcohol and cannabis sold in the same retail location just sold in different departments.

So. So that’s the early indication of it. I think in due course you know it’ll take a few years for the regulators to digest it and to see that you know the market is responsible in how it’s handling these products and that we can control the access to only those people who are legally allowed to consume the product and we don’t send people streaming into hospital emergency rooms from overconsumption. I think all of those things will be well taken care of by the industry given the regulations that have been created. So I think it’s only a matter of time before you can go to your local pub, sit down, watch a hockey game and have cannabis infused beer while you’re doing so.

Host

I think majority of the population would be looking forward to that day.

Terry Donnelly

I think you just got to vote for the politician that will make that happen. That’s the way to do it.

Reasons for use of cannabis-infused edibles by current and likely users

Source – Deloitte 2

Host

Going back to the company Terry could you please tell us a bit more about the financial firepower of the company?

Terry Donnelly

Well we’re a start-up. We’re a small little company and we’ve got a tremendous amount of potential. So we’re very cash conscious. We don’t spend money we don’t have as I said we have no debt. So we’re very anti debt. And so we’re constantly fundraising to try and bring in the capital that we need to build a great business. But we’re very conscious about working within our limits. And so you know we’ve got cash in the bank. We just completed Eight hundred thousand dollar financing in December.

And so we believe we’ve got enough cash in the till to get the cannabis products launched into the marketplace . And the good thing is the cannabis products are much better margins than the alcohol free products. So we capture more margins on those brands. So we think we’re in a really good place right now. And but you know we’re going to work within our means and do the very best we can with the resources that we have.

Host

When do you expect the company to be cash flow positive, Terry?

Terry Donnelly

Definitely in 2020. You know we’re at a nominal level of burn right now because the sales of our alcohol-free products are growing. We’ve had a great second quarter we announced that orders for our entertainer’s pack with 300 percent better year over year which I think is great acceptance of that sample pack, variety pack at the major retail locations. So, we’ve had a good second quarter and that’s all leading into basically getting the company to break even in cash flow positive sometime in calendar 2020.

Host

Do you have some rough revenue projections or expectations from the cannabis product line, Terry?

Terry Donnelly

Well we don’t normally issue projections. But you know it’s a much better margin business and there is a lot less retail locations where we can sell it. So. So we’re expecting that we will have a much greater appeal for cannabis beverages than for alcohol free. You know the size of the market of consumers who are interested in cannabis beverages versus the size of market that are interested in alcohol free wine and beer. You know the cannabis product line appeals to about 30 times the population that alcohol free wine and beer appeals do.

So we’re addressing a much bigger market. But there’s only about 500 stores in the whole country to sell to. Whereas in the grocery business there’s about 19000 grocery and drug stores in the country that are addressable. We’re only in about 7000 stores right now but with cannabis will hopefully be in maybe 500 by the time we launch. So. So we have to temper our revenue expectations and make sure we make very good money on what revenue we do generate. And that’s the good news about the cannabis product is the margins are dramatically larger for cannabis than they are for the alcohol-free brands.

So we’re expecting that they’ll have a material impact on our bottom line.

Terry Donnelly seem excited in this Tweet.

Host

More margins, more profits. With that said what can we expect in the next six to twelve months.

Terry Donnelly

Well the next six to 12 months we hope to get the cannabis powder business up and running. You know we have this deal with Lexaria where we manufacture cannabis powder which converts from cannabis oil into this water-soluble powder using the Lexaria technology. So, we’ll start showing revenues from the cannabis powder business. We’ll start making drink mixes and tablets, compressed tablets both effervescent tablets as well as just cannabis extracts using the Lexaria technology and we’ll get our cannabis products into the retail marketplace and get it distributed. We’re also completing our licensing so we’re getting a building license where we’ll be able to manufacture the cannabis powder using the Lexaria technology and be able to warehouse and store our inventory of our beverages.

So it’s going to be a busy six months for us. Without question this is where the rubber hits the road is the first part of 2020. So, we’re going to be a very busy group of people and we’re having a lot of fun but we’re just super excited about what this next six months old. So, we think there’s big stuff on the horizon for Hill Street.

Host

So with that said we come to the conclusion of this podcast. Thank you Terry and we do hope to chat with you once again the new future.

Terry Donnelly, CEO of Hill Street Beverage

Please call anytime. We’re delighted to be part of it and thanks for the opportunity.

Host

Thanks again Terry.


P.S: Please inform us of correction(s), if any. Send an email to [email protected]

Disclosure:

The Author/Host is a shareholder of the company and bought all stock with own funds. May BUY more or SELL all. The Author/Host did not receive any compensation in any form for this Podcast and Transcript.

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Referenced Sources
  1. https://hillstreetbeverages.com/
  2. https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/c-and-ip/ca-en-consumer-nurturing-new-growth-en-aoda-may31.pdf
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