Friday, May 24, 2024

Cannabis Won’t ‘Cannibalize’ Alcohol, Says Maker Of Corona

When Constellation Brands, the parent company of Corona, made a $4 billion investment in Canopy Growth, some analysts viewed it as a preemptive strike against a possibly declining beer and spirit industry. After all, millennials reportedly prefer cannabis over alcohol, and that demographic will only further solidify its purchasing power in years to come.

In general, there has been buzz in Big Alcohol circles that the popularity of cannabis could detract from the appeal of beer, wine and hard alcohol. But Constellations Brands CEO Rob Sands said there was “no evidence whatsoever” that alcohol sales in states with legalized marijuana would be eaten up by cannabis.

“This has nothing to do with the core business or defending against the potential cannibalization of beverage alcohol by cannabis. There’s really no evidence of that,” Sands told CNBC host Jim Cramer in an exclusive interview. “And our core business, as we’ve demonstrated in the first half of the year and this quarter, is stronger than ever.”

His lack of concern is understandable. For one thing, if you’re going to take that big of a slice of pie, you’d better be confident that you can eat it up to the final crumbs. But in the way of substantial evidence that blue skies are overhead, Constellation had an “unrealized gain” of $1.3 billion since they first invested in Canopy in 2017.

“We continue to be extremely bullish, if not more bullish, since we’ve announced the deal,” Sands said. He also added that Constellation was in “the best position in the world of any company” to capitalize on the green rush.

“We’re not a company that’s sitting around waiting for some element of our business to turn down or get bad before we take action,” he said. “We’re the opposite of that. When it turns bad, turning something around is 900 times harder than it is to play offense from an already very strong position.”

Their initial investments ride on the Canadian marketplace, which opens up fully to legal sales on October 17. But the company is clearly banking on the United States loosening federal marijuana laws  in the near future. Beyond not worrying about the cannabis industry biting into alcohol sales, Constellation is confident that incorporating cannabis components will put them in a unique position to enjoy proceeds from various marketplaces moving forward.

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