Constellation Brands (STZ) a United States drinks company is making its way into the $7 billion marijuana industry. Constellation has settled on an acquisition of a portion of the marijuana company, with a market valuation of 2.2 billion Canadian dollars, Canopy Growth Corporation (TWMJF). On Monday it was confirmed during a press release, $245 million Canadian dollars ($191 million) for a 9.9 percent ownership in the marijuana company.
Constellation is an extensive company compromised of roughly one hundred different brands. The beer, wine and spirit company are known for brands such as Corona, Modelo, Ruffino, and Woodbridge by Robert Mondavi and has now become the first major drink company to invest into the marijuana sector. The company is listed on the S&P 500 and reported record net sales of $7.3 billion for its fiscal 2017.
The primary reason for the deal with Canopy Growth, the world’s greatest publicly traded marijuana company, is due to the anticipation of national legalization throughout the U.S.
Rob Sands, the Constellation Brands President and CEO stated in an interview regarding legalization, “We think that it’s highly likely, given what’s happened at the state level”.
Twenty-nine states including the District of Columbia have legalized the use of medical marijuana. Eight states have also moved towards recreational legalization and California is the next on that list. Constellation is now preparing for the anticipated demand and will work with Canopy to cultivate, market and eventually sell marijuana-infused drinks. Doesn’t seem like they are just drinking the Kool-Aid.
Stands stated that Constellation has no intention to sell products in the U.S until the country establishes national legalization. Meanwhile, the company will begin selling products in countries where recreational marijuana is legal. Canada will be able to drink up as early as next July as the country shifts towards recreational legalization in 2018.
According to the companies, the deal is projected to close during the third quarter of 2018.