PKP expands agreement with beverage producer St. Peter’s for an additional 500,000+ units annually

Our THC drinks Investment Peak Processing (ASX:PKP) just announced it has expanded a manufacturing agreement to produce an additional 500k-700k beverages annually in Canada.

PKP is our way of getting “pick and shovels” exposure to an industry that we think will grow over the medium term - THC infused drinks.

Today PKP has expanded its manufacturing partnership to cover Green Monke and Cookies product portfolios, with the expansion of its partnership with St. Peter’s Beverages.

This is a multiyear agreement to be dated back from the start of this year for 2 years which can be extended by mutual agreement.

PKP will be the exclusive Canadian manufacturer for these 2 renowned drink lines and other lines owned by St. Peter’s.

Currently St. Peter’s is expanding where it is selling its drinks in the USA, expanding its sales into 10 additional US states. (source)

This is expected to be an expansion of 500,000 drinks into over 5,000 stores (source), so perhaps no wonder St Peter's is looking to free up some of its existing US capacity…

The announcement today increases the SKU count for PKP from 4 to 14, and comes with an expected incremental annual production of 500,000 to 700,000 units.

This figure perhaps all too conveniently seems to match the numbers from the expansion of St Peter’s into more US states, mentioned above.

All of the new SKUs will utilise PKP's patent-pending Envision Emulsions platform and give PKP increased exposure to US market opportunities through established brands of Green Monke and Cookies.

Why we Invested in PKP

THC-infused drinks are one of the fastest growing consumer industries in the USA - becoming more popular as a replacement for alcoholic drinks.

THC (tetrahydrocannabinol) is the main psychoactive compound found in the cannabis plant -

in other words it's the substance in marijuana that gets you high.

PKP’s manufacturing division (Peak Processing Solutions) holds a ~33% share of the Canadian THC-infused beverage market, representing around 28% of all national brands.

AND last year PKP opened a manufacturing facility in Florida (USA), looking to replicate the success and growth shown from the Canadian market.

(Source)

Our Investment in PKP comes off the back of a macro background of alcohol sales reducing, with the same article above stating a 23 year low in beer consumption (despite a 23% population increase) with younger generations drinking less alcohol per capita than baby boomers.

So there is a gap in the market that THC beverages in particular are looking to fill.

The 11 reasons we invested in PKP

We Invested in PKP back in July last year at 2.5c per share.

For those who haven’t read it yet, check out our most recent note: PKP: New name. New (big) customer. New alternative to drinking alcohol - cannabis beverages.

Here is a quick overview of the 11 key reasons why we are Invested in PKP. These are all in our most recent coverage linked just above.

11 Reasons why we Invested in PKP

1. Consumer drinking habits are changing, THC drinks to replace alcohol?
2. PKP is the biggest manufacturer of THC beverages in Canada
3. Canadian business has capacity to grow even further
4. PKP has just entered the US market - the fastest growing market for THC Beverages
5. PKP is adopting a Coca-Cola style distribution model in the US
6. PKP already has deals with major companies like Boston Beer Co.
7. PKP also has its own brands… one could go “viral”
8. PKP has just gone through a restructure
9. Big Alcohol has invested in THC drinks - will they do it again?
10. PKP can make, design and produce THC versions of ANY existing and popular drink
11. THC drinks could have a “popularity” wave