Alcohol giant buying stake in firm that sells medical-marijuana goods

Alcohol giant Constellation Brands is making a foray into marijuana, a precedent-setting move for an industry that has mostly stayed on the sidelines during the cannabis boom.

Constellation will pay about $191 million for a 9.9 percent stake in Canopy Growth Corp., a Canadian seller of medicinal-marijuana products. The deal kicked off the biggest rally in nearly a year for Canopy, which trades on the Toronto Stock Exchange under the ticker WEED.

The legalization of marijuana in Canada and a growing number of U.S. states is opening up a huge potential market — just as demand for alcohol is slowing. Still, pot remains prohibited at the federal level in the U.S., meaning companies have to tread carefully.

Constellation, based in Victor, N.Y., said it has no plans to sell cannabis in the U.S. or other markets until it’s legal “at all government levels.” For now, it’s more a matter of identifying markets with growth potential, said CEO Rob Sands, whose company sells Corona beer, Svedka vodka and other brands.

“Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction,” he said in a statement.

The deal values Canopy at more than $1.7 billion, catapulting the business into the highest echelons of the marijuana industry. Constellation would be the company’s biggest shareholder.

As part of the Constellation agreement, the two companies will collaborate on cannabis-based beverages that can be sold as adult products — but only in places where the products are legal at the federal level.

Canada plans to legalize recreational marijuana by July 2018, but the initial product offerings such as edibles and cannabis-infused beverages will be limited, Canopy CEO Bruce Linton said. Such products will be phased in as Canada moves to extinguish the black market in the coming years.