Alcohol giant Constellation Brands is making a foray into marijuana, a precedent-setting move for an industry that has mostly stayed on the sidelines during the cannabis boom.
Constellation will pay about $191 million (C$245 million) for a 9.9 percent stake in Canopy Growth Corp., a Canadian seller of medicinal-marijuana products. The deal kicked off the biggest rally in nearly a year for Canopy, which trades on the Toronto Stock Exchange under the ticker WEED.
The legalization of marijuana in Canada and a growing number of U.S. states is opening up a huge potential market—just as demand for alcohol is slowing. Still, marijuana remains prohibited at the U.S. federal level, meaning American companies have to tread carefully.
RELATED: Corona Beer Owner Set to Buy Near 10 Percent Stake in Canopy Growth Corp.
Constellation, based in Victor, N.Y., said it has no plans to sell cannabis in the U.S. or other markets until it's legal "at all government levels." For now, it's more a matter of identifying markets with growth potential, said Chief Executive Officer Rob Sands, whose company sells Corona beer, Svedka vodka and other brands. Its beer division is based in Chicago.
As part of the Constellation agreement, the two companies will collaborate on cannabis-based beverages that can be sold as adult products—but only in places where the products are legal at the federal level.
