Cannabis-infused beer could be coming to a bar near you after Corona owner Constellation Brands Inc (NYSE:STZ) agreed to take an almost 10% stake in Canopy Growth Corporation (CVE:WEED), in what one analyst described as a 'game-changer' deal.
The beer distributor is paying C$245mln (US$191mln) for the 9.9% stake in Canopy – the world’s largest publicly traded cannabis company.
READ: Constellation Brands shares rise premarket after second quarter results outshine market expectations
Constellation is reportedly planning to work with the grower to develop, market and sell marijuana-infused drinks.
It is seen by many as anticipation of a nationwide legalisation of cannabis in the US, with Constellation’s chief executive Rob Sands recently saying he thinks that “highly likely”.
The New York-listed group said it had no plans to sell any marijuana products in the States until it was legal in all 50 states.
Sales in Canada an option
Instead it will start by selling in countries where recreational cannabis use is already legal and Canada could also be an option if, as planned, legalisation there is relaxed in 2018.
“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Constellation boss Sands in a statement.
“Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”
Broker Eight Capital says the move is a complete "game changer", not only for Canopy, but for the entire industry.
Daniel Pealstein reckons it validates the cannabis industry as both a threat and opportunity for larger established firms in the beverage, alcohols, food manufacturing, and technology.
It also raffirms that Canada is fostering tomorrow's global leaders today within a favourable domestic regulatory environment, access to capital, a 3-5 year headstart on any other country, and a global medical market the broker estimates at $180bn annually at maturity.
It also signals to institutional investors an emerging growth sector where the addressable market is expanding, and where industry valuation appear sufficiently attractive to make solid returns over a multi-year period.
Constellation shares were up 0.5% to US$212.97 in early deals on Monday, while Canopy Growth soared 15.2% to C$14.66.
Wine conglomerate Constellation Brands buying 10% stake in pot company Canopy Growth https://t.co/cz9HZxmhlc #BusinessNews #CanadaNews
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