The Merging of the Alcohol and Cannabis Industries

With regulations on cannabis beginning to loosen at a rapid rates in the world, and the United States alike, it is apparent that everyone will be trying to get a piece of the pie. Although an individual would think that companies involved in alcohol production would be opposed to the increase of support for cannabis related products, we have found that many of them have already begun to capitalize on the trend. While many alcoholic beverage companies have begun to explore the possibilities of marijuana-infused beverages as well, other companies have taken their investments even further. Constellation Brands $4 Billion investment into Canopy Growth Corporation serves as a monumental indication of what is to come between these two spaces, and how they will coexist in a leveled playing field.

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Official logo for Canopy Growth Corporation (TSX: WEED and NYSE: CGC. As of November 19th, 2018, the company’s stock sells for nearly $33 a share.

Prior to the era of legalization, alcohol companies had little to worry about when it came to marijuana. They naturally owned the competitive advantage over cannabis related companies due to one fact:

Alcohol has been legal in the majority of the world for years. Cannabis is just now recently nationally legal in a few countries; yet that wont last long. 

The alcohol industry enjoyed this exclusivity over cannabis, yet now it does not own the same luxury. Though alcohol has proven to temporarily impair individuals and also cause long-term health effects when consumed improperly, it has enjoyed nationwide legalization regardless. By being a legal entity, it has reaped the benefits of a much more relaxed perception and connotation, even though it’s record of destruction has been recorded along the way. In today’s age, however, cannabis is now creeping into the same space. Companies such as Constellation Brands have already made the conscious decision that rather than try to delay what is inevitable, they will invest in the development of the cannabis industry.

For background information, Constellation Brands is one of the leading international producers and marketers of beer, wine, and spirits. Ranked as the number 3 beer company in the United States, Constellation is the host brand for many iconic beers including Corona, Corona Light, Modelo Especial and Pacifico. Under its premium spirits brands, the company supports SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey. On the other hand, Growth Corporation was one of the early distributors in the Canadian and international marijuana market, which has in turn allowed it to become the largest player in the game. The company is not solely interested in providing consistent access to high quality cannabis products, but is just as invested in educating healthcare professionals and conducting clinical research about cannabis.

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Image depicting the iconic beer brands under host company, Constellation Brands.

Constellation Brands investment gives them a 38% share in Canopy Growth Corp., while also giving them further warrants that could take the stake to over 50% in the near future. The investment will help Canopy solidify its position as an industry leader and gives them the funds to build or acquire new assets. While more than 30 countries, including Argentina, Austria, Brazil, Germany, and South Africa, begin to purse medical cannabis programs, the $4 billion investment will help Canopy to serve those markets. According to Forbes, the money will also help for the company to be more invested in the cannabis edible space. Forbes states that,

“For example, in Colorado, the share of edibles and concentrates went up from 11% and 13% at the beginning of 2014 to 15% and 29% by the end of 2017. Furthermore, in California and Oregon, their combined share exceeds 35%.” – Trefis Team, Great Speculations, 2018

The leading alcohol brand was determined to find a new influx of revenue, as it’s own industry has been suffering. According to Forbes, in US States where medical marijuana has been legalized, there has been a 15% drop in monthly alcohol sales. This figure can prove to be detrimental to the industry at large, but to Constellation in particular. It has already experienced falling revenues in the wine and spirits segments, and predicts a decline in the beer market and the US as well.

This trend will continue to grow as regulation continues to spread across the United States. What company do you think will follow next? Comment and let us know!

Article: What Constellation Brands’ Massive Investment In Canopy Growth Corp. Means For Both Companies