Constellation Brands, Inc., the $42-billion company behind Corona and Modelo beers and Svedka vodka, announced Oct. 30 it had agreed to purchase a 9.9-percent minority stake in the $2-billion Canadian medical marijuana company Canopy Growth. The stake is worth about $191 million, though Constellation says it will have the option of purchasing additional stakes in the future.
The deal comes at a time when some consumers may be cutting back on alcohol usage in favor of cannabis. Using Canopy’s expertise, Constellation expects to create cannibis-infused drinks, reported the Wall Street Journal after interviewing Constellation's CEO. Constellation may soon sell a marijuana drink product in Canada, where legalization of edible and drinkable cannabis products is expected by 2019. But it points out that it also wants to maintain focus on its core total beverage alcohol business, and says it has no plans to sell any cannabis products in the U.S. or any other market unless or until it is legally permissible to do so at all government levels.
“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Constellation Brands president and CEO Rob Sands. “Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”
Founded in 2014, Canopy Growth Corp. was an early commercial player in Canada’s legal cannabis market. The company is currently traded on the Toronto Stock Exchange (TSX) under the symbol “WEED,” and has a market cap of more than C$2 billion. Canopy owns a collection of diverse brands serving customers in Canada and international markets where medicinal cannabis products are legal. In conjunction with this investment, both companies intend to enter into an agreement to exchange knowledge and expertise, Constellation states.
“We are thrilled to have the backing of such a well-established and respected organization such as Constellation Brands,” added Bruce Linton, chairman and CEO of Canopy. “We look forward to working with the Constellation Brands team to access their deep knowledge and experience in growing brands as we continue to expand our business.”
The investment is expected to approximate $245 million (Canadian), plus warrants that give Constellation Brands the option to purchase an additional ownership interest in the future. The deal is expected to close during Constellation Brands' third quarter of fiscal 2018.
