Constellation Brands has further distanced itself from its failed multi-billion dollar investment in a Canadian marijuana company by converting its shares in Canopy Growth to non-voting and non-participating exchangeable shares and removing the three directors Constellation placed on Canopy’s board.
“While we remain supportive of Canopy’s strategy, this transaction is expected to eliminate the impact to our equity in earnings and is aligned to our intent to not deploy additional investment in Canopy as we’ve previously stated in our capital allocation priorities,” said Bill Newlands, Constellation’s president/CEO.
That’s quite a reversal from 2017 or so, when cannabis legalization in the U.S. looked like the biggest thing since the end of Prohibition – especially to alcohol companies. Over the span of the next few years, Constellation sunk at least $4 billion, maybe more, into Canopy Growth, hoping to market beverages containing CBD, and ultimately THC, in the U.S. However, national legalization in the States hasn’t happened – although it did in Canada – and the investment has annually dragged down Constellation’s financial results.
Constellation wasn’t alone. Lagunitas Brewing Co. and Harpoon Brewery launched beers with CBD and THC, and Molson Coors in 2022 ended a deal with a Canadian marijuana producer that created the joint venture Truss CBD USA.
Nor was it just alcohol companies. Ben & Jerry’s expressed interest in CBD in mid-2019, and about the same time Mondelez’s CEO told CNBC, “We’re getting ready, but we obviously want to stay within what is legal and play it the right way.”
Constellation’s stake in Canopy Growth was at least 40% at one point, maybe more, but the U.S. supplier of Mexican beers, Mondavi wines and Svedka vodka in several steps has sold off and written-down its investment.
“Constellation has no other present plans or future intentions that relate to Canopy,” the American company wrote on its website. And it noted it may dispose of its converted shares whenever “U.S. domestic sale of marijuana could not reasonably be expected to violate the Controlled Substances Act, the Civil Asset Forfeiture Reform Act (as it relates to violation of the Controlled Substances Act), and all related applicable anti-money laundering laws.”
