Alcohol producer Constellation Brands is venturing where no major booze merchant has dared to go, with a play intended to captivate the taste buds of marijuana enthusiasts and bust into new markets.
The owners of the popular beer brand Corona announced this week they’ve invested in Canadian medical marijuana company Canopy Growth Corporation, the world’s largest publicly traded cannabis producer. The stake, worth USD$191 million, comes ahead of Canada’s marijuana legalization plans expected for summer 2018, and is an opening salvo into the expanding cannabis-infused beverages market.
Canadian-based financial analyst Jason Zandberg noted in a Bloomberg interview why the pairing of the two companies is a good bet. “We have a culture of drinking our intoxicants,” he said. “That will be a big product winner. Having a beverage is very social, and it’s what a lot of people are used to.”
Beyond The Beer Buzz Backsliding
The Constellation purchase coincides with reports over the past few years of slipping beer revenues across US states where cannabis has become legal. Dwindling sales have brewers evaluating new trends and scrambling to create products intended to recapture those vanishing dollars. And cannabis is the obvious choice.
Constellation president and CEO Rob Sands echoed that attitude this week in a Wall Street Journal article. “Could it be a threat? Yes, I guess it could be,” he said. “We’re not going to stand around twiddling our thumbs.”
Other beer retailers have identified the trend toward cannabis, too, but none have gone all-in like Constellation. Earlier this year, Lagunitas Brewing Company (recently acquired by beer behemoth Heineken International) dipped its toe into the weed waters with pot-themed beers — including The Waldos’ Special Ale and SuperCritical — both nods to 420 culture. But neither drink contains the psychoactive compounds present in cannabis, only terpenes that convey marijuana’s flavors. Constellation’s weed-infused drink concept (sans alcohol) signals the first publicly traded Fortune-500 liquor company ready to take the dank dive into full-blown cannabis sales.
“Our company’s success is the result of our focus on identifying early stage consumer trends,” said Sands in an official statement, “and this is another step in that direction.”
Why Is Constellation Brands The First Booze Company To Move Into Cannabis?
The core reason no other publicly traded alcohol company in the US has dared to make the push into cannabis sales has largely to do with marijuana’s federal prohibition status as a Schedule I drug, and its gray-market condition whereby the substance is legal to some extent in 29 US states and the District of Columbia, but federally illegal nationwide. Constellation made clear in a statement this week that it has no plans “to sell any cannabis products in the U.S. or any other market unless or until it is legally permissible to do so at all government levels.”
But right across the border in Canada is a market primed for the emergence of new pot products, as that nation inches steadily toward legalized recreational usage by mid-2018, and edible and drinkable products set to be legalized in 2019.
It’s a match made in high heaven — the world’s largest producer of legal cannabis teaming up with the distribution and logistical might of the juggernaut behind Corona, Ballast Point and Modelo beers.
Canopy Growth Corp CEO Bruce Linton shared with the WSJ that Constellation’s know-how when it comes to alcohol distribution and packaging will be advantageous to Canopy as it expands its reach into the growing cannabis industry. Linton also said that he believes the arrangement could signal to institutional investors “that a cannabis company that fully complies within legal jurisdictions would be the right place to invest.”
Financial analyst Zandberg puts a finer point on it: “There’s a threat on the horizon. If they don’t get into the game, they’re going to be left behind.”