After years of disappointing or flat returns, Constellation Brands is backing away from its investment in a Canada-based cannabis company.
Constellation, which markets the Corona and Modesto beer brands in the U.S., had taken about a one-third share in Canopy Growth Corp., one of Canada’s leading producers and marketers of cannabis. Constellation announced Oct. 25 that it will convert its common shares of Canopy stock into “exchangeable shares,” meaning that it is giving up its rights to name members to the board, see financial data and help determine company strategy.
In addition, the American assets of Canopy Growth will be organized as Canopy USA, an entity that will be 100% owned by third parties.
Constellation bought a nearly $4 billion stake in Canopy Growth in 2018, hoping to market beverages containing CBD, and possibly THC, in the U.S. However, the investment didn’t pay off. Two years later, Canopy closed two greenhouses and laid off 500 employees as Canadian cannabis sales fell below expectations. Canopy’s cannabis-related sales in the U.S. fizzled also, despite introducing CBD-infused fizzy water last year.
Constellation announced a $1.1 billion writedown on its Canopy investments at its earnings call earlier this month.
