Constellation Brands Takes a $191 Million Risk on Cannabis Industry

The distributors of Corona beer, Constellation Brands, recently purchased a 9.9{f1d755e3d686d84b3fba3fb9da3bc25d6eb08724c18385fd50146d58c836a6dd} stake in Canopy Growth Corporation, the largest publicly traded cannabis company in the world. It seems logical that the alcohol industry would eventually get involved in the cannabis industry, however it is interesting that Constellation Brands has elected to do so before nationwide legalization has occurred. Many marijuana enthusiasts have been mixing alcohol and cannabis to make homemade drinking concoctions and also tinctures like green dragon alcohol for a long time, so there should certainly be a market for cannabis infused alcoholic beverages.

The owners of Constellation Brands expressed a strong belief that national legalization of marijuana would happen in the U.S. relatively soon. Until then, they would not be marketing here in the U.S., but would consider marketing in Canada should national legalization occur there as planned next year. Are you sure enough that marijuana will become federally legalized here in the United States that you would consider risking $191 million?

U.S. drinks company Constellation Brands has agreed to buy a near 10 percent stake in Canopy Growth Corporation, the world’s largest publicly traded cannabis company.

Constellation, a beer distributor that owns Corona, is reportedly planning to work with the grower to develop, market and sell cannabis-infused beverages.

The agreement, confirmed in a press release Monday, is $245 million Canadian dollars ($191 million) in exchange for a 9.9 percent stake in the Canopy Growth Corporation.

It is seen by Constellation Brands President and CEO, Rob Sands, as an anticipation of a nationwide legalization of marijuana in the United States.

“We think that it’s highly likely, given what’s happened at the state level,” said Sands in an interview with the Wall Street Journal.

In 2018, California is set to legalize the cultivation and selling of recreational marijuana, but Sands said his company didn’t plan to sell the product in the U.S. until marijuana was legal nationwide.

He added that Constellation would look to starting selling in countries where recreational marijuana is legal and Canada could be an option if, as scheduled, legislation there is relaxed next year.

Constellation Brands is a listed on the S&P 500 and posted record net sales of $7.3 billion for its fiscal 2017 results.

Canopy Growth is the world’s largest publicly traded cannabis company, with a market valuation of 2.2 billion Canadian dollars. It is listed on the Toronto Stock Exchange.

Constellation said the transaction is expected to close during the Company’s third quarter of fiscal 2018.

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