Hill Street Beverage Company Inc (CVE:BEER) (OTCMKTS:HSEEF) CEO Terry Donnelly is ecstatic about the company’s first quarter. Hill Street’s Q1 reporting showed the company’s revenue was up 100 percent YOY and the company is tracking 35 percent annual revenue growth for 2019. Donnelly discusses how Hill Street has used its line of non-alcoholic beer and wine to drive its brand recognition ahead of the legalization of infused beverages in the fall. Donnelly explains how Hill Street uses partner Lexaria Bioscience Corp’s (CNSX:LXX) DehydraTECH to create infused beverages. The technology allows for 5 to 10 percent greater availability of THC and ensures consumers feel the beverage’s full effect in 15 minutes. Donnelly suggests that this allows consumers to luxuriate over infused beverages in the same way they do with alcoholic beverages. Hill Street is the most awarded alcohol-free beverage company in the world and plans to be ready for legalization in the fall.
Narrator: Hill Street Beverage Company makes alcohol-free beer, wine, and adult format beverages. The company’s products include Hill Street Craft Brewed Lager, Designated Draft alcohol-free beer, Vin(Zero) wines, and VinTense wines. Hill Street also produces and sells cannabis-infused adult beverages as soon as the sale of cannabis edibles becomes legal in Canada in October 2019.
Hill Street has licensed a patented infusion technology from Lexaria Bioscience, which infuses cannabis into beverages to mimic the onset and duration effects of alcohol.
Hill Street Beverage Company is listed on the TSX Venture under the symbol BEER.
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Howard Glassman: It is good beer. Ed, I’m telling you, it’s a good beer.
Terry Donnelly: Would you like this one, Ed?
Howard Glassman: Yeah, Ed, come on over and get your beer.
Ed Milewski: You know what? I should just stand right here.
Howard Glassman: Just hang around.
Ed Milewski: I’ll just hang around.
Howard Glassman: It’s Friday. Hang around.
Ed Milewski: It’s great stuff.
Howard Glassman: Ed, they want you out of the shot. Here’s the problem: these young people that are taking it way too seriously.
Ed Milewski: You know what? These youngsters.
Howard Glassman: With me now is the CEO of Hill Street Beverage Company. It trades on the TSX-V:BEER.
Terry Donnelly: BEER. BEER is the ticker symbol.
Howard Glassman: Why does it say V:BEER.
Terry Donnelly: It’s on the Venture Exchange.
Howard Glassman: Oh, Venture Exchange. All right. Terry is a friend of mine, somebody I know, and he makes this product. This is called Designated Draft, and if you, like myself, I don’t drink alcohol, and I got the – I’ve known Terry for, I guess, a couple of years now. Terry is also, like me, from Saskatchewan.
Terry Donnelly: Melonhead. Watermelon head.
Howard Glassman: Nice. When I first met Terry, he told me he had 10 brothers and sisters. Is there 10?
Terry Donnelly: Yeah, it’s true. Yeah, yeah.
Howard Glassman: True story. Anyway, we became acquaintances, and Hill Street Beverage Company is quite a story. March 1, some news came out, reported your fiscal Q2 financial results.
Terry Donnelly: Yeah.
Howard Glassman: For investors, some interesting news.
Terry Donnelly: Yeah. Year-to-date, I think we’re up about 35 percent, something like that. Things are going very, very well. I mean, our first quarter we had a great first quarter; we were up over 100 percent year-over-year. Because of such a big first quarter, we had slightly compressed second quarter, but generally speaking, we’re tracking about a 30 to 40 percent raise over last year, which is just fantastic.
Howard Glassman: It is fantastic.
Terry Donnelly: And it’s really, you know, for us, the alcohol-free brands are really just a proxy for our cannabis products, right? So I actually expect the cannabis products will be the vast majority of our revenues when they –
Howard Glassman: Really?
Terry Donnelly: Oh yeah. When they finally come out, and we have this great platform, because there’s no prohibition on marketing non-alcoholic wine and beer the way there is marketing alcoholic wine and beer.
Howard Glassman: Oh, I see what you’re saying: that you’re not restricted in the same way that –
Terry Donnelly: No restrictions.
Howard Glassman: Well, Terry’s company, we spent a month together, Terry and David Pullara, his marketing genius. We did – because January was a big push for Hill Street in terms of getting people to try going basically booze-free for the month. I’ve been booze-free for a few years, and I can tell you – I want to get – two things I want to talk about. One is how good this tastes. Ed’s already drinking it, let’s try it. Because it’s not – cheers, Sir.
It’s not like some of that other non-alcoholic stuff that’s basically dank and heinous.
Terry Donnelly: Heinous. That was the word you used in January. It’s horrible.
Howard Glassman: This tastes like great beer.
Terry Donnelly: It’s great beer.
Howard Glassman: Because here’s what they did, and this is going to tie into cannabis. What they did at Hill Street, rather than make an non-alcoholic beer, they made a beer, a really, really good beer – it’s won awards – and then they took the alcohol out of it. Which is a huge difference in a lot of these companies that you’ve tasted, and they are shitty. But this tastes like great beer, it just doesn’t happen to have any booze in it.
So I learned, and we’re about to have Terry explain, that in the fall when edibles become legal in October of 2019, this company is going to be ready to sell cannabis-infused, non-alcoholic beer and wine. Now, when you first told me, I thought, that’s weird, it’ll just be like an edible, and you just get high. But it’s different.
Terry Donnelly: It is different.
Howard Glassman: Because the delivery system will allow the beverage to mimic –
Terry Donnelly: The effects of alcohol.
Howard Glassman: Talk about that.
Terry Donnelly: Yeah, so we did a deal with a company called Lexaria.
Howard Glassman: That’s right.
Terry Donnelly: Lexaria has had great accolades. They just got a $12 million or $13 million investment from Altria to continue the R&D that they’ve developed, because their technology not only works on cannabis, it works on nicotine. It works on non-steroidal anti-inflammatory drugs, it works on vitamins and all kinds of things that are really bad-tasting chemicals that are oil based, they’re not water soluble, and if you ingest them, they usually take one to two hours before they take effect.
Howard Glassman: Like a typical edible, 45 minutes to an hour.
Terry Donnelly: Exactly, right? And so what Lexaria’s done is, they’ve created this patented platform where you feel the effect usually within the first five minutes, you start to feel it.
Howard Glassman: Really?
Terry Donnelly: And you get the full effect within about 15 to 20 minutes, and the tests that we’ve done, we feel the effect as early as 5 to 6 minutes. You feel the full effect within about 15 minutes, and then –
Howard Glassman: It dissipates?
Terry Donnelly: And then it dissipates over about two to three hours.
Howard Glassman: Terry, just back up a sec, because I’ve talked a little bit today, a little bit this week…see, I didn’t realize that. When you guys told me you were going to do this in January, I went, okay. But what I didn’t realize is the technology, the Lexaria technology, can give you the feeling like you’re having a glass of wine, where you start to feel something. –
Terry Donnelly: As you’re drinking it.
Howard Glassman: As you’re drinking it, four or five minutes in, it peaks after 15 or 20 minutes, and then it dissipates.
Terry Donnelly: Yeah. And it actually, you know, when you think of a glass of wine, you don’t do, you know, –
Howard Glassman: Well, I used to, but normal people don’t.
Terry Donnelly: But normal people kind of luxuriate over it, right?
Howard Glassman: Yes.
Terry Donnelly: And so, so if you’re luxuriating over a beverage, you’re not really expecting like you do with a joint, you take a hit, and it’ll boom, you get the maximum buzz then and there.
Howard Glassman: Well, you get buzzed right away.
Terry Donnelly: Right away, whereas when you’re drinking a wine or a beer, you have this kind of luxuriating experience.
Howard Glassman: It’s insidious, it sneaks up on you.
Terry Donnelly: But it’s also a social experience. It’s a sharing thing, you know, and you’re doing it over a period of time. Like, you have a few beer while you’re watching a game, right? And so we’re creating that, only with cannabis instead of alcohol.
Howard Glassman: Well, let me ask you, because I’ve done a lot of thinking about this, being somebody that, you know, had some issues with alcohol – I don’t know if you people do, but I did. And being someone that is a daily user, in some form, of cannabis. What I’m curious about is this: so I know that when I was going through some of my worst drinking, I only drank high-octane booze. I drank vodka and scotch, and wine, which has higher elevations, elevated levels of alcohol. How are you going to do that with this? And what I mean by that is, is there going to be like, the beer will be like having a beer version of weed, the wine will be like having a wine version, and so on?
Terry Donnelly: Absolutely. That’s exactly what we’re creating. That’s another one of the features of the Lexaria technology, is it’s actually about five to ten times greater bioavailability of the THC than another edible. So a 2 milligram dose feels like a 10 to 20 milligram dose.
Howard Glassman: Oh, I see.
Terry Donnelly: A bottle of wine, which we’ve done our tests with 10 milligrams, which is the maximum Health Canada allows, 10 milligrams in a bottle of wine, and, like, it’s fantastic, because it feels like 50 to 100 milligrams. So you have one glass of wine, and you feel it. You have two glasses, you feel –
Howard Glassman: You feel it more.
Terry Donnelly: You feel it more, you feel great.
Howard Glassman: So you’ll be able to regulate it. So let’s say somebody – and by the way, again, I know you tell me you’re going to think oh, I’m just saying that because I know the company. But I had not had the taste of beer for three years and three months, until January, and I was blown away, because if you had poured this in a glass and gave it to me, I would say it’s got booze in it. So when it comes to the way these people make their beverages, they know what they’re doing. I’m excited because –
Terry Donnelly: We’ve actually three World Championships.
Howard Glassman: Three?
Terry Donnelly: World Championships, yeah.
Howard Glassman: Not one – most people got no World Championships!
Terry Donnelly: I know, exactly. We have been on the podium, like, when you look at the can, we show all those gold – like, that’s not just the design thing, that’s not some thing an art director made up – those are actual medals.
Howard Glassman: The most awarded alcohol-free beer company tout le monde.
Terry Donnelly: Tout le monde.
Howard Glassman: But listen to me: I will tell you this. I can’t wait for you to get this, because, you know, it’s interesting – because we’ll be able to go into a store, come back with your weed beer, and you want a little bit of a buzz, or if you want a bigger buzz, you have a glass of your weed wine.
Terry Donnelly: Or you just buy a few more beer.
Howard Glassman: Fine, buy more beer.
Terry Donnelly: Buy more beer.
Howard Glassman: This company on the TSX, BER.
Terry Donnelly: BEER.
Howard Glassman: BER.
Terry Donnelly: Just say BEER.
Howard Glassman: Why does it sound like I’m saying that wrong?
Terry Donnelly: It’s BEER.
Howard Glassman: BEER. Oh, two e’s.
Terry Donnelly: Beer. Yeah, because it’s beer.
Howard Glassman: All right.
Terry Donnelly: TSXV:BEER.
Howard Glassman: Listen, Terry Donnelly. Great news for the consumers. Hill Street Beverage Company.
Terry Donnelly: Yeah. We’re very excited about where this is going. We, you know, our goal is to be ready as soon as the product is legal to sell.
Howard Glassman: Which will be when.
Terry Donnelly: Which, God only knows.
Howard Glassman: I thought they’re shooting for October.
Terry Donnelly: Well, the latest I heard in Today’s Cannabis Professional, the latest is that the regulations will be dropped before October, or maybe by October, but they won’t legalize the product for months following.
Howard Glassman: Oh, my God.
Terry Donnelly: So, you know, it’s another scenario with the government where you have no idea, and it’s just – they’re just so –
Howard Glassman: Dumb. They just – we’re all out here waiting for these products, and tax revenue could be…
Terry Donnelly: And not only that, but like, you have to make cannabis in a completely separate place than we make our beer. We have to literally get a new building and entirely new production lines.
Howard Glassman: It’s expensive.
Terry Donnelly: Oh, it’s millions of dollars more.
Howard Glassman: All right.
Terry Donnelly: So it was a ridiculous – because, like, we can handle allergens in our facility and not kill anybody.
Howard Glassman: But they won’t let you handle –
Terry Donnelly: They won’t let you handle cannabis.
Howard Glassman: Well, we’ll keep in touch.
Terry Donnelly: Thank you.
Howard Glassman: It was a great experience getting involved with you guys for the month of January in your Dry January initiative, which I believe just – I’m doing this from memory, but it was two big charities.
Terry Donnelly: Yeah, the Prostate Cancer Foundation and Arthritis Society.
Howard Glassman: Amazing. And raised a lot of money.
Terry Donnelly: We had 6 million impressions, we had 2 million views of our videos. It was fantastic.
Howard Glassman: Crazy. By the way, these videos are hilarious. If you want to go check it out, go to Hill Street –
Terry Donnelly: Hillstreetbeverages.com.
Howard Glassman: Okay. Terry Donnelly.
Terry Donnelly: Howard.
Howard Glassman: Give my best to David.
Terry Donnelly: Thank you.
Howard Glassman: Good seeing you.