On Monday, New York-based Constellation Brands, the $42-billion Fortune 500 company behind Corona and other popular beverages, made a deal for a 9.9 percent stake in Canadian cannabis producer Canopy Growth Corporation.
The purchase is worth approximately $191 million USD and makes the liquor company a strong minority shareholder in the world’s largest marijuana producer.
“I haven’t looked that closely at the financial terms, but at a high-level, we really like it,” said Ben Stoto, research director for CNBC’s Mad Money in an interview with Marijuana.com. “This is all about Rob Sands, the CEO of Constellation Brands, moving to where consumers are headed at a very early stage.”
Stoto went on to add that Sands appears to know a good thing when he sees it. “He’s been known to make some really impressive deals. He’s got a great track record of recognizing consumers tastes before they become very mainstream and moving into those areas.”
Having a beat on the needs of consumers is paramount, but Stoto thinks the Canopy Constellation deal is also about protecting the liquor giant’s bottom line. “There’s been some discussion amongst industry analysts about the rise of marijuana actually offsetting demand for alcohol. It’s a bit of a hedge for Constellation Brands because if that theory is correct and marijuana use actually replaces some alcohol demand, that’s a way for them to stay as a growth franchise.”
Although this deal marks a large entrance for big liquor — Constellation brands market cap is over $42 billion — into the cannabis industry, Stoto said a completely different industry still has his attention. “The [ones] to keep an eye on would be the tobacco companies,” he said. “They are going to look at their declining customer base. Some of them are getting into spaces like vapor-smoking and experimenting with new areas. If there was one candidate that might be kicking the tires on [cannabis] it would be the tobacco industry.”
For further insight on the greater implications of this deal within the cannabis industry, we reached out to Jason Spatafora, CEO of Marijuanastocks.com.
Spatafora started out by agreeing with Stoto’s earlier comments, stating the market is expecting big tobacco to descend on the cannabis industry. “[That] realistically is the anticipation,” said Spatafora. “Then you’ve got big pharma and the next industry is alcohol.”
Despite any trepidation from a Fortune 500 company’s influence on marijuana, Spatafora is optimistic about this venture. “I look at it as a really nice signal for the industry that these bigger industries have their eyes on this market.”
Spatafora added that it makes sense the Constellation deal involved a Canadian cannabis company. “In Canada, it’s legal for medical and it’s going to go recreational. It’s a first-mover advantage for a beverage company.”
Spatafora is not concerned that any degree of marriage between big cannabis and big liquor will significantly affect the smaller craft cannabis sector; he sees room for everyone. “You’ve got Molson [beer] in Canada, but then you’ve got those craft beers that everybody likes. They have a little bit of a higher price for a different palette.”
credit:marijuana.com