Constellation Brands just became the first big brewer to enter the cannabis space.
It’s a move that’s been long anticipated in the cannabis industry. For years, a number of brewers, vintners, distillers, and distributors have sniffed around the cannabis industry, considering legal marijuana both as an investment opportunity and a potential marketplace rival. But none had actually broken through and invested–until now.
Constellation Brands, based in Victor, NY, may be best known as the American distributor of Corona beer. The company’s portfolio of alcohol brands includes Svedka vodka, Charles Smith and Robert Mondavi wines, and Casa Noble tequila.
The company’s investment in Canopy Growth amounts to C$245 million (US$191 million). Canopy Growth is based in Smith Falls, Ontario, about 45 miles south of Ottawa. Formerly known as Tweed Inc., Canopy is one of Canada’s leading licensed producers of medical cannabis, and is the world’s largest publicly traded cannabis company, with a Toronto Stock Exchange market valuation of C$2.2 billion (US$1.71 billion).
'We're obviously trying to get first-mover advantage.'Rob Sands, CEO, Constellation Brands
The Journal reported that Constellation plans to work with Canopy Growth to develop cannabis-infused beverages, in anticipation of Canada’s adult-use legalization expected by July 2018.
The Journal also reported that Constellation had been seeking a toehold in the cannabis industry not just for the Canadian market, but in anticipation of wider legalization in the United States. From the Journal report:
“We think that it’s highly likely, given what’s happened at the state level,” Rob Sands, chief executive of the Victor, N.Y.-based beer, wine and spirits company, said in an interview. “We’re obviously trying to get first-mover advantage.”
Constellation–flush with cash after posting a 13% increase in beer sales in its latest quarter-is interested in developing drinkable cannabis products that don’t contain alcohol, he said. Products currently on the market in U.S. states where they are legal include buzz-inducing sodas, coffees and fruit elixirs.
Constellation doesn’t plan to sell such a product in the U.S. before marijuana is legalized there nationwide, Mr. Sands said, but could sell it in Canada, where edible and drinkable cannabis products are expected to be legalized by 2019, or other countries where recreational marijuana is permitted.
The Constellation investment represents Canopy Growth’s second splashy deal in as many months. In September, the company announced that it had entered into a partnership with the Spanish pharmaceutical giant Alcaliber, S.A.
Last month, Canopy made a controversial deal with Alcaliber SA, Spain's opium-producing pharma giant.
Alcaliber has been granted a license to cultivate, produce, manufacture, export/import, and commercialize cannabis for medical and scientific purposes by the Spanish Agency of Medicinal Products and Medical Devices. As part of the agreement, Canopy Growth will supply Alcaliber with certain strains and seeds to grow at the company’s facilities in Spain. That deal was seen as controversial in parts of the cannabis industry, as it represented the first collaboration between a pure cannabis company and an established pharmaceutical player–and one of the world’s largest producers of opium products.
“Entering this agreement with a large, well-recognized European partner like Alcaliber, with a proven background in controlled substances and an ability to produce plant-based medication solidifies our commitment to diversified production capabilities not just in Canada, but also new and emerging cannabis markets,” Bruce Linton, Chairman & CEO of Canopy Growth, said at the time of the Alcaliber deal last month. “This agreement gives us additional resources to aggressively enter the European market where federally permitted by law, while we continue to work to establish our own complementary production footprint for cannabis cultivation, value-add oil extraction and Softgel production in the European Union.”
Leafly investment columnist Alan Brochstein reported (on his New Cannabis Ventures website) that Canopy Growth recently posted an all-time closing high of C$13.78 on October 11th, and closed Friday at C$12.79.
Canopy Growth CEO Linton recently spoke about the company’s current strategy, during the New West Summit conference in Oakland. “Canopy Growth is now in six provinces and six country,” he said. The company is not yet profitable, “but we don’t want to be.”
“Now is not the time to be” profitable, Linton said, adding that he’s focused on expanding into rapidly opening markets like the European Union, as well as Canada’s coming recreational market.