The cannabis growth industry could be pot luck for investors.

THE news pages over recent weeks have been full of excitement about Canada’s decision to reverse a 100-year ban on the selling of marijuana products.

Creative sub-editors the world over have been ‘wrecking each other’s heads’ in efforts to ‘space out’ headlines to include words like ‘stoned’ and ‘high’.

But the excitement has been travelling into the business sphere too and if investors have not been ‘high’, they have at least ‘turned-on’ by the idea that, all going well, there could be a new boom sector in ‘pot’.

A few months ago, a well-known US beverage and Fortune 500 Company announced that it was getting in ahead of the pack and had invested $4bn (€3.5bn) in a Canadian marijuana company.

The group, Constellation Brands, a medium-sized US beer, wine and spirits company, paid a hefty premium for the Canadian marijuana producer, Canopy Growth Corporation.

It was clearly mindful of the fact that Canada is not the only market opening up in that part of the world.

Today, about half of US states allow the use of cannabis for medical use and nine have dropped their bans on recreational ‘weed’.

Constellation is an interesting company, even without its ‘pot’ division. Based in Victor, New York, the group is the largest multi-category supplier of drinks with a large number of brands in its portfolio. It is also the third-largest beer group in the US, ahead of industry giants like Heineken.

Founded in 1945, it started off selling bulk wine to bottlers on the east coast of the US.

In 1951, it introduced its first wine brand, called Wild Irish Rose, and subsequently expanded rapidly through acquisitions.

It now has 9,000 employees in the US and Mexico, with a market value of $40bn.

A key trend in the US beer industry is that imported and craft beers are now growing faster than the mass-produced ones. As a result, the group is in a good space as the leading importer of Mexican beer into the US, with six of the top 15 imported beer brands.

It also has a number of well-known craft beers. Its Corona brand is the best seller of all imported beers and the fifth-best-selling in the US.

Interestingly, all of the company’s imported beer brands are produced in its Mexican breweries, located just 16km from the US border. Constellation sells wines in all categories – table, dessert, sparkling – and across all price points.

It operates 18 wineries, mainly in California, three in New Zealand and nine in Italy. The group accounts for 20 of the top 100 wine brands, like Franciscan Estates, Ruffino and Meiomi.

Its Swedish brand, Svedka is the largest imported vodka into the US and the company’s portfolio includes Black Velvet, a Canadian whisky, Casa Noble tequila and High West, a US whiskey.

Over the last five years, the company has shown impressive growth, with revenues rising almost 50pc to $7.6bn.

The increase in beer sales has been the main revenue driver, thanks to volume and price growth of its Mexican beers, and group margins are impressive at 30pc.

Net income increased by 50pc over the previous year, thanks to significant changes in US corporate tax.

Interestingly, its effective tax rate last year was a half of one per cent, in contrast to 26pc in the previous year.

Investors who followed Constellation in the last five years must be pleased, as the share price has moved more than fourfold to $210 today.

The shares are underpinned on beer growth and cannabis hope.

Its core business is performing well, with record cash flow helping its investment programme in its Mexican breweries.

However, investor excitement is focused on its marijuana investment – or its ‘weed and beer’ deal.

The ‘pot’ business is anticipated to quadruple to $32bn in the next four years and analysts are considering if this is a new global opportunity.

There are interesting times ahead for Constellation and it could be a ‘hit’. Nothing in this section should be taken as a recommendation, either explicit or implicit, to buy any of the shares mentioned.