Beer Gut to Pot Head - Beer Makers to Cash in on Marijuana
Constellation Brands, Inc., the maker of Corona Beer and Robert Mondavi Wine, just made what has been labeled as the biggest deal yet in the booming market in legal marijuana. It is investing $3.8 billion to increase its ownership in Canadian cannabis grower Canopy Growth Corporation.
Canopy Growth’s home country, Canada, will on October 17 become the first G7 country to make recreational marijuana use legal. While in the U.S. multiple states including Colorado and California have also legalized marijuana, federal law still blocks legal sales of the drug, making everything from banking to nationwide distribution a challenge. That is why the selection of Canada and major provider Canopy Growth is smart strategic investment for Constellation Brands.
Canopy Growth ‘grew’ its experience in the marijuana field through cultivating and distributing medical marijuana within Canada. It can build on that experience as the as-yet-unknown recreational demand for the drug takes off.
According to U.S. research firms Arcview Market Research and BDS Analytics, expected global consumer spending on cannabis products could hit $32 billion in 2022. That is triple the current revenues in this area. It also employs a lot of people, with the U.S. legal cannabis industry – even though fragmented – currently employing over 200,000 workers.
For Canopy Chief Executive Officer Bruce Linton, the new investment from Constellation “is rocket fuel”, as he said in the company’s earnings call on August 15. “We’re going to be way more global.”
With Constellation’s backing, the combined companies could also be getting into something else their competitors are currently exploring. Molson Coors Brewing Co., also with a very strong presence in Canada from the beer side, recently launched a joint venture with Hydropothecary Corp. to create non-alcoholic, cannabis-infused beverages for the Canadian market. Lagunita, Heineken NV’S craft brewing label is even further ahead. It just started production on its own non-alcoholic drink brand featuring THC, the active ingredient in marijuana known to cause cognitive impairment.
As part of the Canopy deal, Constellation will be able to name four of Canopy Growth’s seven directors. While Canopy will still be led by existing management, this shift in board power will help provide focus on the new product and distribution strategies in the consumer field, something Constellation knows very well.