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Seeing massive opportunity, Constellation Brands increases its stake in a leading Canadian cannabis company

Tim Nelson
Updated: October 09, 2018

Practically since the dawn of civilization, mankind has had a taste for alcohol. While our thirst for booze doesn’t seem like it will be fully quenched any time soon, the rise of recreational marijuana shows that a cultural shift in our choice of intoxicants is underway. So what’s one of the biggest producer of alcohol in the world to do? Invest in the growing cannabis industry and cash in, of course.

That’s exactly what Constellation Brands, the producers of Modelo, Corona, and more than 100 other alcohol brands has done with its investment in Canopy Growth. After initially snatching up 9.9% of the Canadian cannabis company a year ago, Constellation is set to buy a massive $4 billion worth of Canopy stock, boosting its ownership stake in the company to 38% in a sale that’s expected to close soon after Canada’s legalization of recreational marijuana takes effect.

What’s remarkable isn’t so much that Constellation sees an opportunity in cannabis— other makers of alcoholic and non-alcoholic beverages as mainstream as Coca-Cola and Diageo are exploring the idea of selling CBD and THC-infused products. It’s that the investment in cannabis has already proven so lucrative. In the year since Constellation’s initial investment, Canopy shares have soared by 285%, leading to a market value of US$1.6 billion according to The Drinks Business. It’s even more remarkable when you consider that Constellation’s revenue across its entire portfolio in 2017 was $7.33 billion, the gain in value of its cannabis play over the course of a single year is nothing to scoff at.

The crazy part is knowing that this gaudy valuation is only the beginning for Canopy and Constellation. With Canopy winning 35 percent of all recreational weed supply contracts the government’s handed out over the past year, the legalization of recreational marijuana in cannabis is set to be a major boon for a company that could see its revenue soar in the months and years ahead.

So yeah: the money to be made from marijuana is very real. Even though Constellation enjoyed double digit beer sales growth in the first half of 2018, expect them— and other alcohol brands looking to cash in on the green gold rush— to further invest in the space now that there’s a clearer understanding of just how much cash there is to be made.  

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