Constellation Brands is upping its investment into Canada’s top cannabis producer in a big way. The
Victor-based company announced on Wednesday that it will invest another $4 billion in Canopy Growth Corporation.
The deal follows the initial investment Constellation made last year when it acquired about a 10% stake in Canopy. Now, Constellation will own 38% of the company.
As part of the proposed deal, Constellation will nominate four directors to Canopy Growth’s 7-member board.
This all comes as recreational marijuana use will soon be legal in Canada. Canada is only the second country to pass legislation permitting a nationwide marijuana market.
In the U.S., nine states now allow for recreational marijuana use, and 30 states, such as New York, have medical marijuana programs.
Makers of alcoholic beverages are looking to cash in on the growing use of cannabis around the world as their traditional business slows, perhaps by coming up with cannabis-infused beverages.
Molson Coors, Heineken, and Constellation Brands are among the companies in the mix.
Constellation Brands CEO Rob Sands said that, “Through this investment, we are selecting Canopy Growth as our exclusive global cannabis partner. 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.”
Sands told CNBC that this is an important step for his company for a couple of reasons.
“Number one we’re creating a fourth leg in our business, which is the cannabis business, and number two, that this is going to be a $200 billion-plus market by 2030 and Constellation, through Canopy, is taking first mover advantage of that.”
Sands says his company wants to be ready for the opening up of cannabis-related markets in a number of areas.
“So, that would be legal, recreational, as well as medicinal and then every form which would be not only drinkables or edibles, but bud oil, and so forth. That’s really what we have decided to do.” But Sands says if it involves beverages, it would likely be non-alcohol beverages that would be infused with cannabis.
Constellation Brands shares lost about 6% of their value on Wednesday, falling $13.54 to close at $208.27 per share.