Beer Makers Look to Cash in on Legal Cannabis Market
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The investment deal sees Constellation Brands purchasing 104.5 million shares in Canopy Growth, giving Constellation Brands approximately 38% ownership of the cannabis company. The purchase of the shares, plus some additional warrants, will give Canopy Growth immediate access to approximately $5 billion CAD ($4 billion USD), making it the largest investment in the cannabis market to date.
Canopy Growth says that the investment will be used to supercharge their growth as a brand, enabling them to reach a global scale across the 30 countries that are considering or have passed, a legal medicinal cannabis program.
“Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner,” said Robert Sands, the CEO of Constellation Brands, speaking in a press release issued by Canopy Growth. “Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy’s market-leading capabilities in this space. We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”
The investment from Constellation Brands brings with it their wealth of knowledge on consumer trends and preferences, and a proven history of creating the strong and recognizable brands that have enabled them to become a Fortune 500 company. Canopy Growth brings to the table exceptional market-specific expertise within the cannabis sector, proven by its market value of $8.9 billion CAD which is forecasted to rise further once recreational cannabis is made federally legal across Canada in mid-October.
In the press release, the Chairman and Co-CEO of Canopy Growth, Bruce Linton, also expressed his satisfaction with the deal. “Our business can now make the strategic investments required to accelerate our market position globally. Constellation’s expert capabilities in brand-building, marketing, consumer insights, and M&A will be a huge benefit as we look to expand our portfolio in Canada, the United States and emerging cannabis markets around the globe.”
Will beer and cannabis firm mergers become the next big trend?
While the monetary sum of the investment from Constellation Brands is unlike any seen before in the cannabis market, strategic relationships between cannabis and beer companies are not a new phenomenon.
With sales of beer in the US declining, and the North American cannabis industry expected to boom in the next decade, it isn’t uncommon for beer companies to view new cannabis brands as a risk to their business. In its annual shareholder report, Molson Coors, the company behind the world-famous beer brands Coors Light and Molson Canadian, identified the growing cannabis market as one of their biggest competitors. The report notes that the legalization of medicinal and recreational cannabis in a growing number of regions across North America “may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer.”
In order to deal with this risk to their business, some beer companies are choosing to ‘get in on the ground floor’ with the expanding cannabis market. One of the ways in which they are doing this is by creating cannabis-infused non-alcoholic beverages in partnership with established cannabis brands.
The cannabis beverage market in North America
Before this most recent investment, Constellation Brands had also invested a smaller amount in Canopy Growth with the aim of creating a THC-infused sparkling water. The beverage is predicted to hit the Canadian cannabis market in July 2019, which is the estimated date by which Canada is expected to allow the sale of commercially produced cannabis edibles. Molson Coors has also partnered with the Quebec-based cannabis producer Hydropothecary to bring to market their own THC-infused beverage by the same date.
In the United States, THC-infused beverages are already available for sale. Lagunitas Brewing Company, a Heineken brand, in partnership with CannaCraft’s AbsoluteXtracts have created an IPA-inspired sparkling water that is already available at a number of Californian cannabis dispensaries. The beverage, named “Hi-Fi Hops” is available in two doses, one containing 10 mg of THC, and one with a blend of 5 mg THC and 5 mg CBD.
“We have come to realize that our passion for hops is a big part of our passion for beer. We often dream of hops and their cannabis cousin partying together at their family reunion,” jokes Jeremy Marshall, the Brewmaster at Lagunitas, speaking in a promotional piece for Lagunitas’ website. “We wanted to bring this party to life in a drink. We believe that it’s high-time that good beer inspired a provocative yet refreshing tasting non-alcoholic alternative – bubbly, aromatic, bitter, fruity and herbaceous with no gluten, no carbohydrates and a smidge of California sun-grown cannabis in every sip.”
With the legalization of medicinal and recreational cannabis being considered in a growing number of countries, it is hard to dispute Marshall’s optimistic approach to combined beer-cannabis firm ventures. Financially, beer companies are looking for a means of expansion and cannabis firms are looking to enter the global stage. Socially, the general public in America is largely in favor of legalizing cannabis use, and in Europe many countries are introducing or considering introducing laws that would decriminalize cannabis, echoing the more tolerant public attitudes regarding cannabis use. Taking all these factors into account, there could well be potential for a budding new market at the intersection of the two industries.