American spirits company Constellation Brands has immensely increased its investment in a Canadian cannabis company, betting that recreational cannabis will be a huge market when it becomes fully legal in Canada in two months.
Constellation, the $8 billion company behind Corona and Modelo beers and Svedka vodka, will spend US$3.88 billion to increase its ownership of Canopy Growth Corp. to 38 percent and will nominate four directors to Canopy's seven-member board, it was announced today.
Last October, Constellation first invested a mere $191 million in Canopy Growth, which already has sales of $2 billion. At the time, Constellation talked only of its interest in and potential for cannabis-infused beverages. But today's announcement includes the notation, "Canopy Growth’s future plans include pursuing various product formats in all cannabis channels."
While Canopy Growth is publicly traded on the New York Stock Exchange, Constellation's 104.5 million shares come directly from the company. The liquor company also will receive warrants that, if exercised, would provide for at least an additional C$4.5 billion to Canopy Growth. If Constellation were to exercise all existing and new warrants, its ownership would exceed 50 percent.
"This investment, the largest to date in the cannabis space, will provide funds which Canopy Growth will deploy to strategically build and/or acquire key assets needed to establish global scale in the nearly 30 countries pursuing a federally permissible medical cannabis program, while also rapidly laying the global foundation needed for new recreational cannabis markets," Constellation said in a statement.
“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space," said Rob Sands, CEO of Constellation Brands. "We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”
Founded in 2013, Canopy Growth has cemented itself as the industry leader in Canada’s legal cannabis market. Through its subsidiaries Tweed and Spectrum Cannabis, Canopy Growth has established a global presence in 11 countries.
Molson Coors Canada, the Canadian business unit of Molson Coors Brewing Co., early in August unveiled a joint venture with another Canadian cannabis producer, Hydropothecary Corp., to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization.
Canada's House of Commons last November passed the legislation legalizing recreational use of marijuana and cannabis. On Oct. 17, Canada will become the third nation in the world, after Uruguay and Georgia, to formally legalize the drug.