Major wine company invests in pot business

Major wine company invests in pot business

Constellation Brands Inc. announced Monday that it will venture into the cannabis business, acquiring a 10 percent stake in a Canadian medicinal cannabis provider.

In a first for a major American wine company, Constellation Brands Inc. announced Monday that it will venture into the cannabis business, acquiring a 10 percent stake in a Canadian medicinal cannabis provider.

The New York-based company — which owns such local wineries as Clos du Bois in Geyserville, Simi Winery in Healdsburg and Robert Mondavi Winery in Napa — said its $191 million stake in Canopy Growth Corp. would help in its efforts to “identify, meet and stay ahead of evolving consumer trends and market dynamics, while maintaining focus on its core total beverage alcohol business.”

 The company, however, cautioned that it has no plans to sell cannabis in the United States or any other market until it is legal “at all government levels.” That caveat is important because as states have moved to legalize recreational use for adults — including California, on Jan. 1 — the federal government still considers cannabis illegal.

But the deal also could open up possibilities for collaboration in the alcoholic beverage sector, such as cannabis-infused drinks, which Canopy Growth has expressed interest in. This summer, Lagunitas Brewing Co. of Petaluma released a limited-release beer brewed with terpenes, aromatic compounds of essential oils that were extracted from cannabis provided by Santa Rosa-based CannaCraft Inc.

One wine label, Legion of Bloom, also has introduced a sparkling wine infused with terpenes from a cannabis strain cultivated in the Russian River Valley. Neither of those products contained THC, the chemical that triggers psychoactive effects.

“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Rob Sands, Constellation Brand’s president and CEO, in a statement.

“Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”

 Canopy Growth was founded in 2014 and is traded on the Toronto Stock Exchange under the symbol “WEED.” It has a market capitalization of $1.6 billion and lists the rapper Snoop Dogg as one of its core partners.

“I don’t think this is the tip of the iceberg,” said Jon Moramarco, a wine industry consultant who previously worked for Constellation Brands, adding he doesn’t see other large wine companies making similar deals.

Moramarco said the investment would likely help Constellation Brands understand the cannabis business from the inside. Unlike most wine companies that are privately held, Constellation Brands is publicly traded and faces the expectations of Wall Street to post strong growth numbers every quarter. Others, such as E & J Gallo Winery of Modesto and Jackson Family Wines of Santa Rosa, don’t face such pressure.

“It’s an easier way of learning the business than watching from the sidelines,” he said, because they’ll have first-hand knowledge of how profitable cannabis investment can be.

“I haven’t seen it in the short run in terms of volume,” said Bart Watson, an economist for the Brewers Association, which represents independent craft brewers.The industry overall is experiencing much slower growth in 2017, with craft beer volume growing only at 5 percent rate for the first six months, far below its double-digit increases from previous years.

This story originally ran at www.pressdemocrat.com

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