With Cannabis Drinks As North Star, Canopy Investment Begins To Deliver For Constellation

By Neat Pour Staff |

Over the last few years, beverage powerhouse Constellation Brands, Inc.(STZ) bought and sold brands, shuffled executives, and bet heavy on marijuana. Investors reacted with skeptical selloffs and industry insiders snickered. However,  the star finally seem to be aligned for Constellation.

Constellation’s marquis cannabis investment, Canopy Growth, reported a strong outlook on a Monday (8.10) conference call between CEO David Klein and investors.

Klein reported that led by their signature Tweed brand, Canopy’s cannabis-drink business is booming. Production of these buzzy bevs doubled from June to July and is once again set to double in August according to the CEO.

Currently, the drinks are only available in Canada, but a US expansion is in the works said Canopy. The Company added that Tweed will expand their line, using strains to create unique effects from different flavors.

In a followup interview with Bloomberg, Klein explained that beverages are part of a larger strategy to create ‘value’. Basically, marijuana is getting cheaper as legality runs its early course. Canopy hopes to compensate for those dropping prices by creating lines that offer ‘value’ justifying a higher price.

For example, Canopy’s next big-ticket launch will be Martha Stewart’s brand of CBD infused edibles.

“We believe as consumers try brands like the Martha Stewart brands, they will notice the difference,” said Klein. “There’s an effect you feel when you consume the Martha Stewart gummies that you don’t get when you consume other product in the space.”

Back in April 2019, the company executed a complex warrant swap to up their bet on marijauna legalization. The maneuver was the latest in a series of moves into the THC market that began in October 2017 when Constellation dropped a cool $191 million (US) to pick up a minority stake in Canopy. In a second pickup, in August 2018, Constellation spent another $4 billion (US) to increase their existing stake in Canopy from 9.9% to 38%.

Also in April, the corporation announced a deal to sell 30 low-end wine and spirits brands and six wineries to E. & J. Gallo for $1.7 billion.

In October 2018, the company announced that its chief executive of 11 years, Rob Sands, will conclude his tenure in March, with Newlands taking the helm. Likewise, the summer re-up on cannabis was accompanied by layoffs of entire craft beer sales team. There is even precedent for the wine sales; in 2016, the conglomerate’s Canadian wine portfolio was sold to the Ontario Teachers’ Pension Plan for about C$1.03 billion ($775 million).

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