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Corona beer owner invests $4bn in weed; what's the craze?
16 Aug 2018
In what could be the biggest investment in the marijuana industry till date, Corona beer owner Constellation Brands is all set to invest $4bn in Canopy Growth, Canada's largest cannabis producer.
With Canada set to become the first G7 nation to legalize the recreational use of marijuana this October, many beer companies are turning their attention towards cannabis.
Why? We explore.
Canopy Growth's shares jumped by 52% following the deal
Fact
Following the announcement of the deal that saw Constellation Brands' stake in Canopy Growth touch 38%, the cannabis producer's Toronto-listed stock jumped by a whopping 52%. Commenting on the deal, Canopy Growth CEO Bruce Linton called the investment "rocket fuel".
This isn't Constellation's first investment in Canopy Growth
Investment
Notably, this isn't Constellation Brands' first investment in Canopy Growth - in October last year, Constellation invested around $200mn in Canopy in a deal to produce non-alcoholic, cannabis-infused beverages.
Neither is Constellation's interest in the cannabis an isolated incident.
With many Americans increasingly preferring wine and spirits to beer, many beer companies are hedging their bets on cannabis as a future driver of sales.
What Constellation Brands feels about Canopy Growth's potential
Fact
"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," said Rob Sands, the chief executive of Constellation Brands.
Other major breweries are also moving towards the cannabis space
Other breweries
Just a couple of weeks back, one of the world's best-known breweries, Molson Coors, announced that its Canadian arm was partnering with Canadian cannabis producer, The Hydropothecary Corp to develop non-alcoholic, cannabis-laced drinks for the Canadian market.
Other well-known breweries like Blue Moon Brewery and Lagunitas Brewing are also entering the cannabis space.
Notably, several marijuana drinks are already available in Colorado.
Legal cannabis market is set to hit $57bn by 2027
Cannabis market
Big alcohol companies' interest in cannabis seems logical as entering that market protects their interests and revenues, even if consumers decide to switch from alcohol to cannabis-infused drinks.
Additionally, according to studies, the legal cannabis market is expected to grow to $57bn by 2027, with recreational use and medical marijuana accounting for 67% and 33% of that value, respectively.
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