This week, Constellation Brands announced a $4 billion investment in the Canadian marijuana company Canopy Growth. Constellation is seeing cannabis as an expanded product line rather than a competitor and is putting a big stake in not only the company, but in the industry. While this particular deal may not be a unicorn for Constellation, the long-term benefits of this market positioning should reap nice returns for investors in both Constellation and the weed and alcohol industries.
The distinguished Wall Street investment bank Cowan and Company stated that although Constellation and Canopy Growth did not announce any joint operating arrangements, they look for further details on possible synergy benefits. In addition, the liquidity from the transaction will allow Canopy to accelerate its domestic and international investments. Canopy remains their top midsized idea, and Constellation remains their top pick in our overall coverage.
One of the barriers of the industry is both understanding and experience of truly mainstreaming a product for general public consumption. Constellation’s investment, along with Heineken, Molson Coors and Labatt Brewing stepping into the market are adding a level of knowledge that is missing. These companies have a rich history of taking the product from plant to shelves to homes, grocery, online, airlines, drug stores, restaurants and hotels—something the cannabis industry will need to reach market potential.
“Constellation is a company that works in a regulated market with complex, varying, state-based regulatory systems and manages a logistics network around an intoxicating substance. One of the common critiques of corporate investors pumping money into the cannabis industry is that they know much about business and little about the industry. Constellation, and companies like it, can bring an important knowledge based along with a stream of capital” shared John Hudak, Senior Fellow and Deputy at Brookings
Hudak continued, “Constellation getting into the cannabis space will likely raise alarm bells among activists that ‘Big Marijuana’ has arrived, but that breathless fear is unfounded. Large companies engaging with industry is a sign that the industry has matured, commercial enterprises are no longer drunk with the hysteria of taboo and bias associated with cannabis, and large-scale investors see cannabis as a commodity market of opportunity rather than risk.”
Already we see companies like Miracle Grow, Lamar Advertising and the Prtizker family making big investments. Our company, The Fresh Toast, is the primary bridge connecting the industry to the general public, and big business is seeing the growth and acceptance of cannabis as a potential boon to the bottom line.
“We feel this is the first of many large deals between traditional corporations and the cannabis industry” says Jennifer M. Sanders, Founder and CEO of CNS Equity Partners.
As an example of the changing opinion on marijuana, Fox News has featured stories showing the majority of Americans, including 46 percent of Republicans, are pro legalization.
“This is a very exciting development for the industry — Constellation’s commitment to the industry legitimizes it even more as an investment opportunity. And it makes Canopy the legitimate first major cannabis company on the planet. These are exciting times for the industry,” Shared Bill Kelly, General Partner, AgriCasadia, a leading cannabis investment fund.