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Tinley Beverage Company (CSE: TNY) (OTCQX: TNYBF) Manufacturing Cannabis-Infused Beverages and DSD Services for California Distributors

Pure-play cannabis-infused beverage manufacturer Tinley Beverage Company (CSE: TNY) (OTCQX: TNYBF) recently announced that it has completed the buildout of its permanent bottling facility in Long Beach, California. The company is currently producing its five alcohol-inspired cannabis beverages via a temporary manufacturer, making it one of the only publicly traded companies and the only pure play that now has cannabis beverages in the market.

Tinley’s 20,000-square-foot, state-of-the-art-facility is purpose-built for cannabis beverage production, and the company reported that its line is capable of producing at least one million bottles per month, with a space plan for two additional lines that would accommodate additional formats such as shot bottles and cans. The company’s products currently retail for between $6 and $45 per bottle, suggesting revenue capacity that exceeds $100 million, even if not fully utilized.

Leveraging the experience of its president, Rick Gillis, who was previously the president of the second-largest alcohol distributor in the western U.S. (Young’s Market Company, which generates $3 billion annually in sales), Tinley is offering a suite of beverage-specific DSD services to existing California cannabis distributors. This enables such distributors to offer the additional merchandising and other services that beverage DSD distributors offer that typically aren’t required for other consumer product categories. This enables existing cannabis distributors to offer these additional services without having to invest in a reconfiguration of their sales forces or fleets for beverages.

Another heavy-hitter on Tinley’s team is Ted Zittell, who was previously a president of Cott, which at the time was the third-largest beverage company in the world after Coke and Pepsi. Cott’s core business was offering co-packing, branding and merchandising services to help consumer and lifestyle brands extend their offerings into the cola business. Tinley’s team has done this for 100+ such brands and intends to use the same process for helping mainstream beverage and other consumer brands create cannabis beverages. This service effectively positions Tinley to provide a full-service solution for any such companies that want to create offerings in the cannabis beverage industry.

Completion of Tinley’s production site comes on the heels of the company providing the keynote presentation at the first-ever Cannabis Drinks Expo, which recently took place in San Francisco, California. The expo was organized by the internationally recognized Beverage Trade Network, representing the increasingly mainstream standing of the burgeoning category.

Tinley discussed how the science of infusing cannabis into beverages is no longer a challenge, thanks to the multitude of companies that now offer these solutions on competitive terms. These solutions enable beverage companies to provide consumers with an enjoyable full-flower effect, comparable to vaping, with rapid onset times and no trace of cannabis taste.

With science no longer a challenge, Tinley indicated that the next hurdle is infrastructure. Consumers of mainstream alcohol and health beverages are accustomed to lower prices and elaborate drink shelf merchandising, largely as a result of the extensive beverage infrastructure that has been installed across the country over the past 100 years. Cannabis beverages remain more expensive than comparable single-serve alcohol products like beer and wine coolers, largely because the country’s beverage infrastructure isn’t cannabis-licensed. Further, dispensaries don’t typically give premium shelf space to beverages, given the nascency of the category.

Overcoming the price and merchandising hurdles requires scaled bottling facilities, as well as the addition of the type of merchandising services that are typically provided by traditional beverage DSD distributors. The completion of Tinley’s large-scale, purpose-built bottling and DSD facility solves this problem.

With science and infrastructure now “solved,” Tinley expects 2019 to be a “breakout” year for the cannabis-infused beverage industry. MolsonCoors CEO Mark R. Hunter was quoted as saying that he felt cannabis beverage could grow to 20-30 percent of the cannabis industry. There are a lot of ‘ifs’ to make this happen, but, if science and infrastructure are indeed fully solved as they now appear to be, this large market share might not be that much of a stretch as mainstream consumers seek to enter cannabis without having to smoke.

Hunter’s forecast suggests a $1 billion beverage category growing to $3-5 billion in California alone as the state’s cannabis industry grows (and 10-times that as cannabis becomes legal across the country). At minimum, beverage should hit the 11 percent share that mainstream beverages have in retail stores – the largest single category in grocery stores – which suggests a $300 million to $3 billion opportunity in California. Of course, it requires availability in lounges and other on-premise locations to truly soar (in addition to the at-home channels that are currently available), but these kinds of lounges are rapidly opening up in California and Nevada, and no doubt other states and Canada will follow. On that note, Tinley is well on its way to opening up shop in Canada, where Cott is headquartered, which should attract a whole new wave of visibility and opportunity.

The company indicated that it is committed to remaining a pure-play cannabis beverage company so that it remains an effective vehicle for public market investors looking to participate in this fast-growing subcategory within the cannabis industry. As a pure play, it is unaffected by changes in cultivation, extraction, edibles or other product categories, so its returns should be reflective of the growth that’s expected from beverages. The company’s investors will benefit from economics not only from the company’s own Tinley-branded products, which have received spectacular reviews and awards in their own right, but also from a diversified (and presumably large) lineup of beverages from the company’s co-packing clients.

For more information, visit the company’s website at www.DrinkTinley.com

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