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“California is North America’s largest beverage market. Plus it’s the continent’s largest cannabis market,” says Jeff Maser, founder and CEO of The Tinley Beverage Company (TNY.C).

Maser knows drinks. Raspy and dry as a Manhattan, Tinley’s CEO rattles off factoids about sticker placement and the importance of shelf height which would seem more at home in Psychology Today than an issue of Business Week.

Tinley operates within California, and with good reason. In 2018, analysts with Cannacord Genuity projected the U.S. market for cannabis-infused drinks could become a $600M market by 2022.

As the cannabis and beverage centres of North America, it was only a matter of time before cannabis drinks, the kind Tinley manufactures, found their way onto store shelves in the Golden State.

Customers are starting to understand as well. Tinley products, like their cannabis-infused, margarita-inspired and other cocktail and liquor-inspired cannabis beverages, have been met with high praise. But the company is in a fast restart mode after an unexpected regulatory nightmare in late 2019 left much of California cannabis industry, including Tinley, in stasis.

With production halted and with roughly $200K in product sitting in a warehouse waiting for repackaging, Tinley and Maser turned their focus inwards. Instead of languishing on the sidelines, the company built an expanded bottling line, added fast-acting nanotechnology, developed 4 additional products and significantly advanced the buildout of its crown jewel – a 20,000 square foot, further expanded bottling facility in Long Beach, California.

Tinley 2.0

While massively upgrading the infrastructure, technology and product lineup, the Company also bolstered its already-all start team by bringing in Rick Gillis to run the company’s West Coast USA operation. Rick previously served as president of the Western USA’s second-largest alcohol distributor, Young’s Market Company. At Young’s, Rick oversaw US$3 billion of sales, thousands of employees and a large fleet of trucks. Prior to Young’s he was General Manager of Coca-Cola Enterprize’s Southwest Region, a US$2 billion operation. So he knows how to drive drink sales. His plan is to leverage the same techniques to turn Tinley into a similarly large-scale operation. We challenge anyone to name a cannabis company that has an executive of this pedigree serving in a full-time role. We believe it’s a confirmation of the infrastructure, products, science and team that Tinley had built thus far, as well as the massive opportunity in the cannabis beverage sector.

As strong as the reviews have been on Tinley’s products, Tinley’s founder says the even bigger opportunity is in co-packing. He and fellow director Ted Zittell, previously worked at Cott Corp (BCB.T), a company which has quietly carried the distinction of being the third largest drink manufacturer in the world after Coca-Cola (COKE.Q) and Pepsico (PEP.Q), for many years.

Contract manufacturers contract out excess production capacity out to smaller companies.

“There’s a lot of excess bottling capacity on North America. That’s why you can buy a beer for a buck in many stores. The problem is that there’s a big shortage of cannabis-licensed bottling infrastructure, which is where we come in,” Maser said.

“There’s also a gulf between traditional cannabis distributors and the types of services offered by mainstream beverage-specific DSD distributors,” said Maser. “Drinks are much larger and heavier, and require frequent stocking and merchandising visits.”

This is where Rick Gillis’ 35+ years of beverage distribution leadership comes in. He’s already created a service that enables traditional cannabis distributors to add beverage-specific DSD services, so that these distributors don’t need to overhaul their existing trucks or network of drivers.

The ground game

The drink sector is mean bush. If chips or candy bars are the equivalent of the invasion of Granada, beverages are the raid on Entebbe.

Drinks are confined to refrigerators, and every inch counts. From shelf height and proximity to eye-level to sticker placement to promotion dates, nothing is wasted in the fight for consumer dollars.

Listen: Equity.Guru podcast – Tinley Beverage Company (TNY.C)

Back on track

With the regulatory freeze behind them and the $200K of product delivered to its various distributors, Tinley is ready to bring beverages to the Californian cannabis market like never before.

Plus, it has also announced the completion of its 20,000 square foot bottling facility in Long Beach. With a purpose-built line imported from Italy, Tinley is now poised to realize its aim of becoming the “Cott of Cannabis,” as Maser quipped.

Former Cott President Ted Zittell, who also works with the company, stated, “With a first-class production and sales team in place, Tinley is well-positioned to help third-party CPG and lifestyle brand owners extend their offer into the growing cannabis beverage market,” said Tinley director Ted Zittell.

Maser says drinks are the last major frontier in the recreational cannabis space. But far from venturing into the unknown, management’s experience in bringing lifestyle drink brands to the public means there’s a proven business model in place for Tinley to replicate.

Maser described his company as proudly not vertically integrated. That’s how Coke does it and that’s how Tinley will too. Manufacturing and distribution is where the company puts all of its energy, and there’s an argument to be made for this approach.

If the price of cannabis falls due to inevitable oversupply, Tinley would stand to gain from cheaper raw materials.

Tinley is focused on California for now, but the company is well capitalized for expansion. Tinley closed Q2 with $6.77M in the bank and no debt on their balance sheet.

When asked what was next for his company, Maser replied “Canada and Nevada. ”

Then, presumably, the world

Full disclosure: The Tinley Beverage Company is an equity.guru marketing client.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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Steve
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Is Tinley familiar with BevCanna at all? Potential to collaborate? Asking for a friend…