The brewer of Corona Beer, or Constellation Brands, is gambling $4 billion dollars on its belief that consumers want more than booze and beer. The company is spending this money to increase its stake in Canopy Growth, a marijuana business. Constellation owns a large wine business too, as well as Casa Noble tequila and SVEDKA vodka.
Last year, Constellation bought a 10 percent stake in Canopy Growth as its first investment. On Wednesday, it increased its holding to 38 percent, and it leaves the option open to buy a controlling majority share of more than 50 percent. On the news of Constellation’s new $4 billion investment, Canopy shares, which trade on both the Toronto Stock Exchange and the New York Stock Exchange, surged over 25 percent.
In response, other cannabis businesses that trade publically, including MedMen Enterprises and Cronos, rallied in Canada and the United States. However, after announcing the investment, Constellation’s own stock fell almost six percent. Rob Sands, CEO of Constellation Brands, said during a conference call on Canopy’s earnings on Wednesday morning that this is a very exciting time to get in on the weed market.
“This could potentially be one of the most significant global growth opportunities for the next decade,” Sands insisted. Bruce Linton, CEO of Canopy Growth, told CNN’s Richard Quest on Wednesday in an interview that having Constellation on board gives a great deal more credibility to Canopy. As legalization spreads across states and countries, Constellation sees much potential.
It may well start launching more marijuana-based alcoholic beverages. In speaking to Quest, Linton gave the example of a drink devoid of calories, yet able to fight depression as just one possibility. “Constellation gets it,” Linton said. “This is happening globally.” He also added that Constellation could benefit from being the first to get cannabis-based drinks to market.
Linton mentioned the advantage over other companies still trying to find a way forward in a new global marketplace. Even though marijuana is legal in California, Vermont, Colorado, and several other states, it is still illegal under federal law to buy and possess marijuana. You could go to jail for the crime. However, companies are plunging ahead with plans for a worldwide cannabis industry.
An analyst with Wells Fargo, Bonnie Herzog, says that she expects Constellation to collaborate with Canopy on “drinkable cannabis products, given the enormous growth opportunity ahead” on a global scale. She also claimed, “There is an expectation that marijuana will eventually be legalized in the United States.”
It seems that it may just be an issue of when, not if, Constellation will be able to sell marijuana-laced beverages across America. According to Constellation, the company has no plans for such a product just yet. Kevin Murphy, CEO of Acreage Holdings, a weed producer that has on its board former U.S. House Speaker John Boehner, sent an email to CNN Money.
In the email, Murphy said that he expects that more beverage companies, as well as Big Pharma businesses, will take a much closer look at also developing cannabis products. One drug maker in particular, GW Pharmaceuticals, already has a cannabis-based medication, called Epidiolex, for the treatment of epilepsy. Recently, it became the first ever cannabis-based product to get approval from the U.S. Food and Drug Administration. Everyone is jumping on board the weed wagon now.