Constellation Moves Into Marijuana With $191M Stake In Canada’s Canopy GrowthOctober 30, 2017
Constellation became the first major drinks marketer to make a play in the cannabis category over the weekend, agreeing to take a 9.9% stake in Canada-based cannabis company Canopy Growth Corp. for about $191 million. Constellation cautioned 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.” Eight U.S. states and the District of Columbia have legalized cannabis for recreational use and nearly 30 have sanctioned it for medicinal purposes, but the substance remains illegal at the federal level, and the current administration is showing little appetite for removing those regulations.
Still, Constellation sees opportunity for the future of the category, telling the Wall Street Journal, “We’re obviously trying to get first-mover advantage.” Euromonitor projects the legal marijuana market to hit $10.2 billion in the U.S. next year, with the Canadian market estimated to reach $7.5 billion.
While Constellation told the Journal it doesn’t plan to lobby the U.S. government on the issue, the movement to decriminalize cannabis has gained strength in recent years, with about 60% of Americans favoring legalization. In the meantime, Constellation said it would work with Canopy to develop non-alcoholic cannabis drinks for the Canadian market, where the substance is expected to be legalized by 2019, as well as in other countries.
Canopy Growth Corp., which is traded on the Toronto Stock Exchange and has a market cap of about $1.7 billion, is the largest publicly traded cannabis company worldwide. Constellation has an option to roughly double its stake in the business looking ahead. The initial transaction is slated to close before the end of November. —Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning. You will also receive the Cannabis edition as part of your subscription.