Constellation Brands, the brewer of Corona beer and a major distributor for Svedka vodka, just invested nearly $4 billion (CAD $5 billion) into Canada’s Canopy Growth, Marketwatch reports. It is the largest investment ever in the cannabis industry.
After news of the announcement broke, Canopy Growth — which is publicly listed on both the New York and Toronto stock exchanges — saw its share values skyrocket up almost 30 percent across both stock exchanges.
Constellation Brands first partnered with Canopy Growth in October 2017, when the alcohol giant agreed to buy a 9.9 percent stake in the company for about $191 million (CAD $245 million). But with this investment, Constellation’s stake in Canopy Growth has increased to 38 percent; there are also options on the table for Canadian cannabis producers to access an additional $3.4 billion in investments down the line, which would give Constellation more than a 50 percent stake in the company.
Wells Fargo analyst Bonnie Herzog told Marketwatch this is a smart move for Constellation Brands, as it “further solidifies Constellation Brands’ first-mover advantage” among other major brewers and alcohol companies.
“While there could be some cannibalization risk for Constellation Brands beer/alcohol portfolio, we believe the strategic partnership will ultimately be incremental to Constellation Brands’ core business, especially as the deal opens the door to tremendous white space opportunities globally – beyond Constellation Brands’ current U.S. limits with its core brands.” — Bonnie Herzog, analyst for Wells Fargo, via Marketwatch
Cannabis entrepreneurs have long predicted that Big Alcohol will dip into the cannabis space. After the bold investment by Constellation Brands, cannabis stocks seemed to enjoy a slight increase across the board on Wednesday, as the move signals a willingness among major alcohol companies and other players to make big investments — and take big risks — on the burgeoning cannabis industry.
“These alcohol and tobacco companies are starting to better understand the cannabis industry and the opportunity for large scale growth. Mood modifying beverages for socialization is a natural segway for their businesses. As people continue to move toward a more healthy lifestyle and recognize some of the negative effects that alcohol may have on the body, I think we are only going to see this trend continue and get stronger.” — Beth Stavola, president and founder of MPX Bioceutical Corp., in a statement