Cannabis-based drinks in the sights of large breweries

A Constellation Brands, maker of the well-known 'Corona' beer brand, announced an investment of 245 million Canadian dollars (approximately 165 million euros) in the purchase of a cannabis cultivation company that will allow it to develop drinks enriched with cannabis.

The announcement was made by Constellation Brands Inc.., one of the largest companies in the world in the alcoholic beverage market, during a Press conference and reported by The Wall Street Journal.

With more than 100 brands in its portfolio, Constellation Brands employs more than 2 people and has just reached an agreement to acquire a minority stake in Canopy Growth Corp., a Canadian company based in Ontario, with a market value of over XNUMX billion Canadian dollars on the Toronto Stock Exchange (TSX) with the symbol “WEED”.

An employee of Canopy Growth in Smith Falls, Ontario. Photo: LARS HAGBERG/Getty images

Constellation Brands thus joins the group of shareholders of Canopy Growth, with the acquisition of 9,9%, positioning itself in the emerging market for products in the cannabis-enriched beverage industry.

In addition to the 245 million, this deal provides for the guarantee of a purchase option of another 9,9% until the third quarter of 2018, thus reaching Constellation Brands almost 20% of participation in Canopy. CEO Rob Sands wants to be a pioneer in this industry, because in his opinion legalization at the federal level in the coming years “is very likely”.

“Canopy Growth has an experienced leadership team with an understanding of the legal, regulatory and economic landscapes regarding an emerging market that is predicted to become a significant consumer category in the future.”

Bruce Linton, CEO of Canopy Growth, valued Constellation Brands' experience in alcohol distribution, which will help Canopy distribute recreational cannabis, leaving a message for other institutional investors: “[Canopy is] a company in the industry of cannabis that complies with the legal framework and all regulations, so it will be a good place to invest”.

A worker pruning medical cannabis at a facility in Canada where recreational use will be legalized in 2018. Photo: James MacDonald/Bloomberg News

Given that the sale of cannabis-derived products is not yet possible at the federal level in the United States of America, “we have no intentions of commercializing in this market for the time being”, said Rob Sands, leaving, however, the intention to enter the recreational market. from Canada once the regulation, scheduled for mid-2018, is complete. However, the possibility of also entering other markets that arise in other countries is not ruled out.

The business that echoed in the markets deserved Comment de Bonnie Herzog, an analyst at Wells Fargo — an American financial consultant —, who cemented and reaffirmed his preference for Constellation Brands. “Overall, our opinion is that this deal makes a lot of sense. There is currently concern about the negative impacts on beer, wine and spirits sales with the legalization of cannabis, which has already taken place in several American states, which gives Constellation Brands a clear advantage in ensuring that it is not only a leader in area of ​​alcoholic beverages, but also in the joint market of alcoholic beverages and beverages with cannabis in their composition”.

On the other hand, several executives in the American brewing industry have been debating the impacts of cannabis legalization on their sales, even after a report which demonstrates that beer drinkers switch to wine and spirits. Some experiments were carried out with cannabis infusions in beer, without any psychoactive content (without THC), but just the cannabis flavor.

In response to the report, Ronald den Elzen, CEO of Heineken USA, called for joint action with beer distributors: “Wine and spirits are not stagnant and cannabis is being legalized in several states. We have to act now and we have to do it together.”

For his part, Constellation Brands' Rob Sands doesn't see cannabis as a threat to beer, but says that if consumers can choose between a beer, a glass of wine, a shot of a spirit or an elixir based on cannabis, wants to be able to offer them all four.

“Could it be a threat? Yes, I think it will.” confessed Sands. "But we're not going to stand still and cross our fingers." Medicinal use has been legal in Canada since 2001 and regulation of recreational use is expected in July 2018, without edibles and beverages, whose regulatory expectations are expected in 2019. However, “our company does not plan to lobby or for or against legalizing cannabis in America,” concluded Rob Sands.
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Featured photo: Mitchell Maglio