Owner of Corona Buys Into Legal Cannabis
Written by Ammon J. Ford, Attorney at Gleam Law, PLLC.
In a big move for legitimizing the cannabis industry: Constellation Brands, one of the world’s leading beer distributors, announced plans to buy a 9.9% stake in Canopy Growth Corporation, the largest publicly traded cannabis company in the world.
The deal was confirmed via press release on Monday, October 30th. According to the press release, Constellation Brands will purchase a 9.9% stake in Canopy Growth Corporation for $245 million Canadian ($191 million U.S.). The deal is currently scheduled to close in the third quarter of 2018.
Both companies boast significant financial success. Constellation Brands is listed on the S&P 500 and earned $7.3 billion in fiscal 2017 results; Canopy is traded on the Toronto Stock Exchange with a market valuation of $2.2 billion Canadian.
Constellation will be working with Canopy’s lead cannabis grower to develop, market and sell cannabis-infused beverages—a smart move for two reasons. The first: beer companies stand to lose sales to recreational cannabis. According to a report by Cannabiz Consumer Group and substantiated by a Cowen & Co report, the beer industry could lose up to $2 billion in sales to recreational cannabis alternatives. The second: there is an increased demand for cannabis edibles and beverages happening in legal and medical states. In Colorado, edible sales grew 53% in 2016 and accounted for a third of overall marijuana sales.
President and CEO of Constellation Brands Rob Sands spoke with the Wall Street Journal about the company’s future product plans and his outlook on federal legalization in America. According to his interview, Sands believes legalization at the Federal level is “highly likely, given what’s happened at the state level.”
Despite his optimistic beliefs about federal legalization in America, it will be some time before we see Constellation’s infused beverages offered in the United States. Constellation is only interested in releasing their cannabis-infused products in countries that have legalized the plant on a federal level. The company is currently eyeing Canada as their first market, so long as the country’s plans to fully legalize and regulate cannabis next year stays on schedule.
This deal is further proof of just how far legalization and normalization of cannabis has come, particularly in North America. Support for cannabis legalization in America is at an all-time high with 64% of adults agreeing it should be legal. Further, for the first time in modern American history, cannabis legalization enjoys a majority of Republican support (51%).
Constellation will join the ranks of other big mainstream companies that have placed bets on legal cannabis, including Scott’s Miracle-Gro and Microsoft.