Beer, wine and liquor company Constellation Brands Inc has jumped into the marijuana game by purchasing a nearly ten per cent stake in Canadian weed company, Canopy Growth. The move has caused a jump in Canopy’s stock price, which had already been ratcheting upwards over the past three months.
As announced earlier today, the makers of Corona beer, Svedka Vodka and Robert Mondavi wines has acquired a minority stake in Smiths Falls, Ontario’s Canopy to the tune of $245 million, representing a 9.9 per cent stake plus warrants to purchase additional ownership interest going forward.
The move is said to be the first venture by a major alcohol company into a marijuana industry still in its formative stages. Constellation is the largest alcohol producer in the US participating in the beer, wine and spirits categories and currently holds the third-largest market share among all beer suppliers. The company says the new investment fits with its aim of staying on top of consumer trends and evolving markets.
“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 Chief Executive Officer, Rob Sands, in a press release. “Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”
For his part, Canopy CEO Bruce Litton has said he’s “thrilled” to get the backing of the well-established and respected Constellation. “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,” said Litton in a statement.
The move is not just good for Canopy but for the whole marijuana industry in Canada, says Andrew McCreath of BNN. “Analysts are calling this a game-changer for the sector and it’s tough to argue that that’s not the case,” says McCreath on BNN’s The Morning Call. “Constellation is one of the largest liquor, spirits and wine companies in the world. Their blessing is very good news for the entire Canadian space.”
McCreath says it’s a unique win for Canopy, as well, as the number of legitimate suitors within the alcohol sector looking to jump into marijuana — a Schedule 1 Controlled Substance in the United States — is still relatively small.
“There’s little question that Bruce Litton has pulled a rabbit out of the hat and definitely gains first-mover status by getting arguably the biggest of the most likely players from the liquor and wine industry to play with his company,” says McCreath. “There aren’t a lot of other companies that could get involved with these marijuana companies. Constellation is about as big as you can get.”
Last week, Canopy Growth announced a partnership with Jamaican company Grow House JA Ltd to grow cannabis for Jamaica’s medical marijuana market, with the company planning to duplicate its Canadian-made production and formulation model in Jamaica.