The cannabis industry is one of the fastest-growing sectors in the world, and a number of alcohol giants are choosing to invest in legal pot rather than get pushed aside by potential competition. Constellation Brands, the U.S. distributor of Corona, Modelo, Svedka, and other imported beers, wines, and liquors, snapped up a 9.9% share in Canadian cannabis giant Canopy Growth Corp. last year for the cost of $191 million. This week, the company vastly increased their commitment to legal weed, announcing an additional $4 billion investment in Canopy.
Last year, Constellation said they would be working with Canopy to develop a range of non-alcoholic cannabis-infused beverages. However Constellation CEO Rob Sands told investors Wednesday that the two companies will now be working on “a full suite of products,” according to the Wall Street Journal, but these new offerings will not be introduced in the U.S. until the federal government gets around to legalizing weed. Sands also told analysts that around 30 countries were considering legalizing medical marijuana in the near future, creating what could become “one of the most significant global growth opportunities of this decade.”
Constellation will now own 38% of Canopy, and will nominate four directors to the canna-company's board. The massive investment caused Canopy's stock to surge by 28%, but the expanded partnership is but one of many factors shaping the Canadian company's recent growth. Canopy's sales grew 63% in the first quarter of this year, to a total of $25.9 million. Nearly $4 million of this revenue came from exports to Germany, where medical marijuana was legalized last year.
Canopy has also positioned itself to take a major role in the adult-use cannabis market that will go live in their home country this October. “With an estimated 36% of the total supply committed to date to the provinces and territories, we have secured by far the deepest channel into the Canadian recreational cannabis market,” Canopy Chairman and Co-CEO Bruce Linton said in a statement. “Considering our substantial inventory, large cultivation footprint in production, and the millions of additional [square feet] of greenhouses and our new state-of-the-art distribution centre that are ready and waiting for licenses, we remain very confident in our ability to succeed in capturing significant market share.”
The cannabis retail market is becoming increasingly attractive to the alcohol industry, particularly now that alcohol use appears to be on the decline. Millennials have been cutting back on drinking compared to older generations while opting for wine and spirits over beer when they do drink — choices which are cutting into American beer brewers' profits. Additionally, there is a growing body of evidence indicating that canna-legal states have seen decreases in alcohol sales and binge drinking.
Unwilling to concede defeat to the cannabis industry, many major alcohol companies are throwing their cash into kush. Earlier this summer, Molson Coors Canada announced a joint venture with Canadian cannabis firm The Hydropothecary Corp. to develop a new cannabis beverage, and Lagunitas Brewing Company, a Heineken subsidiary, has already debuted a new THC and CBD-infused sparkling water at select U.S. dispensaries. Some alcohol industry leaders — from Jim Beam heir Ben Kovler to executives at Budweiser and Blue Moon — are abandoning the booze industry entirely in order to focus on new enterprises in legal cannabis.