Tinley Beverage Company Inc (CNSX:TNY) THC Beverages Available in California

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Tinley Beverage Company Inc (CNSX:TNY) (OTCMKTS:TNYBF) (FRA:45T) produces liquor inspired, alcohol free, cannabis-infused beverages. CEO Jeff Maser discusses the evolution of the California beverage space and how new regulations in that state have impacted the company’s operations. While THC beverages are legal in California, the state also introduced new restrictions for beverage manufacturers that have impacted production. Maser explains that the company’s current product line features beverages with 10 mg of THC. Tinley is developing 5 mg versions with front-loaded highs as well. Maser notes that THC beverages currently represent 0.5 percent of the cannabis market in California but many expect that number to grow to 20 to 30 percent, creating a potentially lucrative opportunity for investors.

Transcript:

James West:   I’m joined now by Jeff Maser, CEO of the Tinley Beverage Company, trading on the CSE under the symbol TNY. Jeff, welcome back.

Jeff Maser:   Thank you. Good to be here.

James West:   This is not our first rodeo, is it?

Jeff Maser:   That’s true, it’s not.

James West:   You started this, what, three years ago?

Jeff Maser:   It’s been a few years, yeah.

James West:   And Tinley has been in business for probably one of the oldest cannabis beverage companies in the entire world.

Jeff Maser:   Might be. Just might be, yeah. It’s good to see you again.

James West:   So, tell me what’s happened in the last three years. How has the company grown, what products have you got? You’ve got some THC beverages here, which I’m assuming are not containing THC because we’re in Ontario.

Jeff Maser:   These particular ones don’t, unfortunately.

James West:   Right.

Jeff Maser:   But in California, they do. We have here what we call the Flying Mule; that’s a ginger beer with a little bit of kick to it; normally the alcohol version would have vodka in it. So you can’t mix alcohol and cannabis in California or really anywhere, for that matter, so this is just cannabis with a little bit of a kick to replicate the vodka sort of taste.

James West:   I see.

Jeff Maser:   This one here is a sort of margarita-inspired beverage. It’s got, it’s actually made by a California-based tequila formulator, so it is very similar to one of the national brand tequila brands that is out there, with the same extracts and flavours, ethers and spices, that you’d find in one of the national brand tequilas, but with no alcohol. So, mixed in with some lime.

This particular one is carbonated, and it has a nice, light dose of cannabis oil.

James West:   So in California, you can buy beverages that have THC in them now and consume them legally?

Jeff Maser:   Yes. There are several good beverages available; they’re all private companies, with few exceptions, and so, you know, we are obviously a public company that’s entered the space.

James West:   So what kind of sales are you doing in the state of California presently?

Jeff Maser:   We hit shelves sort of over the summer; we actually are re-launching this because of new regulations that came out that we have to comply with, so we are back ordered about $200,000 worth of back orders right now that we are furiously working to fulfill.

James West:   Right.

Jeff Maser:   That’s right down in Q1, then hopefully we’ll be able to recognize those, no guarantees. But we are working pretty feverishly, and that’s actually just on these two products; there’s a few others that you can see on our website that are in the pipeline.

James West:   Now, how much THC is in here? Like, is this equivalent to, well, it says 10 milligrams; so I know that if I consume 10 milligrams of I’m assuming it’s decarboxylated THC, so it’s in the THC Delta-9 format, that’s going to make me so silly that I just want to leave and not talk to anybody. Is there a lighter version of this?

Jeff Maser:   So, 10 milligrams is the standard for a single serving in the California market. It is a bit of a higher-dose market than other states.

James West:   Right, Californians. [laughter]

Jeff Maser:   Californians, right. So you know, your typical dispensary consumer would actually find 10 milligrams to be a somewhat light dose; however, all the new adult use consumers that have been entering the market since January 1st do, in fact, also find that to be a pretty hard dose.

So the whole concept is for it to be sort of like a single-serve, just, you know, a nice, light buzz like you’d get from a single serving of alcohol. So we’ve sort of made the decision as part of this re-launch to focus on those new consumers, which we think will someday be the predominant market. It isn’t today, but we think in the future will be. So we actually are dropping this to 5 milligrams per dose.

James West:   Oh, great. Okay, so, how many locations and what kind of locations do you sell this through right now?

Jeff Maser:   It’s entirely through dispensaries because of the cannabis content. There’s 50 stores anxiously awaiting their orders to be filled; there’s about 400 in the state, and that’s just sort of based on our first quarter of being in market.

James West:   Interesting. And obviously depending on what kind of regulations emerge in Canada, this will be available in Canada as well?

Jeff Maser:   We hope so, absolutely.

James West:   Right. Okay, now, beverages as a category in the State of California: what percentage of the total market do you think that THC beverages represent currently?

Jeff Maser:   Right now, it’s about one-half of one percent, the industry.

James West:   Wow.

Jeff Maser:   It’s a tiny, tiny category. Obviously there’s a lot of talk about it in the media as being something that could potentially become one of the predominant categories. I know that Molson-Coors CEO when they did the deal in Canada, said that cannabis beverages could grow to 20-30 percent of the overall cannabis market. So, it’s a lot of different sort of projections about how big the cannabis market could get, but most of them are obviously in the tens of billions, so 20 to 30 percent of that is a meaningful category.

And I just think that a lot of that is because of the complexity involved in making beverages, the need for a lot of capital and volume as well, which is what drives margins, ultimately. You know, our team comes with a lot of deep beverage background; our President is from Young’s Market Company, which is a $3 billion beverage alcohol distributor, one of the two predominant ones in the Western US. I have a past CEO of Cott and a past president of Cott on the team; a past key guy from Dan Aykroyd Wines and Crystalline Vodka and Patron Tequila as well, so there’s a lot of really deep experience that’s really necessary once you scale this up to a large degree.

That’s one of the key ones right there, is Cannabis Quencher on the second shelf, there. It’s a private company. So we’re hoping to achieve that scale.

James West:   Yeah. Is this going to, does the State of California envision offering this for sale in bars?

Jeff Maser:   So there’s about 14 licenses that have just been approved for West Hollywood for on-premise consumption; that’s really exciting news, obviously this would be a great fit for those kinds of venues. Right now on-premise is tolerated in some cities in California; thankfully, San Francisco is one of them, so that’s a pretty big market. But it’s just within dispensaries. So you literally have to go to the counter, buy a product, and then there’s sort of a lounge area off to the side. So it’s kind of fun, but it’s not the kind of place where you could actually have, you know, cocktails mixed, you know, a server bringing it to the table and all that.

James West:   Yeah, I’ve been to one of those dispensaries in Carmel, California, actually.

Jeff Maser:   Okay, okay.

James West:   So the, you know, the whole idea of consuming cannabis in a beverage format is, I mean, to legacy cannabis consumers like myself, it sounds like weird a bit, because, I mean, personally I enjoy smoking premium dried flower. But for the new generation of people who probably don’t want to start smoking anything, ever, because we’ve learned that it’s bad for us, this looks like it might be an interesting alternative.

Now, so is it conceivable that in the future, these will be available in even lower doses? Because I’m thinking, if you go out to a bar, and in the time frame of 2.5 hours you’re going to consume, call it one every 30 minutes, you’re obviously not going to want to consume 50 milligrams of THC or even 25 milligrams of THC in two and a half hours, because that will basically keep you high for anywhere up to 10 or 12 hours, in some cases. So, do you think that you will gravitate towards lower dosage products as the market evolves?

Jeff Maser:   Well, we’re starting to see 2.5 milligram products hitting the market in California, just for that exact same reason. The new re-launch actually has some really interesting science in it that in fact reduces bioavailability, which I know sounds counterintuitive, but the reality, is, people –

James West:   Not to me, it doesn’t!

Jeff Maser:   People [laughter] Well, you know, the truth is, people don’t want to be out of the, sort of, have the effect last for 8 hours, which is the typical length of an edibles effect. So we’ve actually found a way to sort of cut off the tail end of that so it lasts shorter, but the cannabis that otherwise would have been absorbed during that period effectively goes to waste. So of the 5 milligrams, you’re actually only getting a portion of that, so it actually feels a little bit lighter, but it’s front-loaded, so you feel it very quickly and it lasts for a few hours, basically, but then you kind of don’t have the effect beyond that. Which is kind of nice, because theoretically, you’re feeling all right to drive home, even.

But so the 5 milligrams, I actually think, feels a little bit less than that. So it gives you the nice, light buzz that I think people are seeking.

James West:   Okay. So we know that Canada is going to approve some form of consumable cannabis ex of extracts and premium flower. California is already there. What’s the status in the other 30-some-odd states that have cannabis? What’s the status in Europe, and what’s the status all over the world?

Jeff Maser:   It’s a mixed bag, really. Pretty much all the states that have legalized adult use, allow pretty much all forms. So they allow beverages, if there’s adult use that’s allowed, and a lot of the ones that allow, you know, for medical use only, also allow beverages, so it’s a little bit different; they haven’t sort of restricted on format. In fact, New York is the opposite; they’ve allowed everything except smokeable forms.

James West:   Oh really?

Jeff Maser:   Which is kind of smart in a few ways.

James West:   Sure.

Jeff Maser:   So it’s actually pretty open in the US in terms of what’s allowed out there. Europe is still very much a medical market, so it’s still pretty restrictive out there. You know, the truth is, you know, climate is really important in beverages. It’s very different from other cannabis categories. So one of the reasons we’ve started in California was because that’s a proven beverage market; it’s actually the largest beverage market in North America, so that’s where you see just a lot of conventional beverage start-ups, basically, and that’s because of the warm weather, you know, the big tourism, kind of an affluent, innovative culture. There’s a lot of wineries, so it’s got kind of a beverage alcohol culture, and so it actually really is important to have all those factors in place. And I do know some folks that are involved in dispensaries everywhere from San Diego all the way up to Vancouver, and they actually do say that there is more seasonality in cannabis beverages in the northern climates.

So we’re actually seeing sort of the same in cannabis that you’re seeing in mainstream beverage.

New York is the second-largest beverage market, so they don’t necessarily have the warm climate there, but they do have the large population within a small geographic area, as well as sort of the affluence and the innovative sort of culture out there.

So I would say those are the two priority markets. Obviously, Canada is where we trade, and a lot of us are based, and so it’s important for us to be here as well.

James West:   You bet.

Jeff Maser:   But, you know, obviously there’s some climates like that that sort of fit the bill in Europe, but I think really the focus is going to be the southern US and New York and Canada for us.

James West:   Great. All right, that’s a great catch-up, Jeff. Let’s leave it there for now; we’ll come back to you in due course and see where you’re at. Thanks very much for joining me today.

Jeff Maser:   My pleasure. Thanks, Jim.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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