Tilray Brands is buying several beer brands, and its operations and transactions are not over

Tilray Brands (TLRY 3.21%) is no stranger to acquisitions. This has been a key part of its growth strategy and a way for it to expand its operations over the years. This allowed it to increase its sales without having to rely on competition in a saturated Canadian cannabis market, where margins are low and profitability is difficult to achieve. At the same time, instead of waiting for the US to legalize marijuana, it expanded into other segments, such as alcohol.

The company recently announced that it is acquiring several beverage brands to support that area of ​​its operations. It’s a big move for the company, but investors shouldn’t be surprised if more acquisitions follow.

Tilray buys four beer brands from Molson Coors

On August 13, Tilray announced that it was acquiring four craft breweries from Molson Coors: Hops Valley, Terrapin Beer, Revolver Brewing and Atwater Brewery. These brands are based throughout the US, including Oregon, Georgia, Texas and Michigan. This adds to Tilray’s already formidable number of beverage brands, including SweetWater Brewing, Montauk Brewing and more.

Last year, the company acquired eight brands from Anheuser-Busch InBevin a move that Tilray said would make it the fifth largest brewer in the US market.

Beverages are an increasingly important part of Tilray’s business. In the company’s most recent quarter, which ended May 31, its liquor segment was the largest, bringing in $76.7 million in sales and accounting for a third of the top line. Cannabis revenue was slightly lower at $71.9 million. The company also generates sales from its distribution and wellness segments as its diversification has been a key part of its growth strategy.

Investors should expect more trades

By acquiring more brands, Tilray is paving the way for more growth opportunities, particularly in alcohol. But that doesn’t mean the company is happy with where it is now. Tilray is still eyeing more acquisitions on the way beyond this recent one. CEO Irwin Simon said “this will not be our last deal”, in a clear sign the business remains firmly in acquisition mode.

Given the company’s focus on expanding into the US market and becoming a major craft brewer, it wouldn’t be surprising if it continued to add more craft beer brands to its growing portfolio. While Anheuser-Busch and Molson Coors may be willing to part ways with slower-growing brands, for Tilray, these may still be good moves for the business. The more diverse the company becomes and the less it relies on low-margin cannabis products, the better position it will be in terms of being able to consistently generate a profit.

In the company’s most recent quarterly results, its net loss fell from $119.8 million a year ago to a loss of just $15.4 million — largely due to its growing business of alcohol.

Is Tilray Brands stock a buy on this news?

Tilray is diversifying its operations, which is a great sign for investors that the business is moving in a positive direction. It would be much more difficult for her to have any hope of turning a profit if she simply went deeper into the Canadian cannabis market.

But a company that is heavily focused on acquisitions can also be a risky one to invest in because there are many moving parts and inefficiencies to address along the way. While the acquisitions may give a boost to the company’s top line, it may only be temporary. Investors should note that these transactions may not result in sustained organic growth over the long term. Molson Coors, in this recent deal, says the sale of these breweries will allow it to focus on faster-growing brands, suggesting that the brands Tilray purchased may not have very high growth potential.

As a result, it can be difficult to determine what Tilray’s true organic growth rate will be given its constant pursuit of acquisitions. For now, investors are still better off taking a wait-and-see approach to the cannabis stock, at least until the dust settles from all its time and trades and there’s a clearer picture of the company’s financial position.