Constellation Brands, the world’s biggest wine producer and one of the world’s biggest alcohol companies, announced today that it has acquired a minority stake in Canopy Growth Corporation, a medicinal cannabis producer from Ontario, Canada. The move is significant for the wine industry, signaling a future entwined with cannabis.
“Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction,” said Rob Sands, president and CEO in a statement.
While Constellation claims it has “no plans to sell any cannabis products in the US or any other market unless or until it is legally permissible to do so”, this move puts them in the perfect position to take advantage of the coming cannabis explosion – only a couple of months away.
Why now is the time
Canada is widely anticipated to make recreational marijuana legal in July 2018 - which means well-established companies, who won't be struggling with start-up issues, can expect record profits. In the US, while cannabis is theoretically still a Schedule 1 drug, possession of which can result in a prison term, it's now legal in 23 states and the District of Columbia. While it’s mostly restricted to medicinal uses only, some states do allow recreational use. In the last few years, the number of cannabis-based businesses has exploded, from medical dispensaries, to cookie and tincture makers, to the ‘cannabis cuisine’ sweeping parts of California.
As of 1 January 2018, California will be awarding cannabis licenses and competition for market share will be intense. But the proposed distribution model will follow the medical framework, meaning that it’s the existing players who will be best placed to seize the opportunity.
Fortunately for Constellation, Canopy Growth Corporation, its new partner, is the second-largest cannabis business in North America. As of December 2016, its share price had rocketed by 192% by year’s end, while its market cap was $780.6m.
According to the Constellation statement, “both companies intend to enter into an agreement to exchange knowledge and expertise”. For the weed trade, this means tapping into wine industry knowledge of how to inform consumers about such arcane matters as clonal selection, terroir and food matching.
Impact on wine
The coming boom in dope isn’t all good news for wine, and in some regions could be very bad news. If consumers adopt cannabis as their relaxant of choice, it could mean a drop in wine sales. There are already reports of some “apprehension” among California wine growers, particularly those in Sonoma, where an acre of planted wine grapes is “valued at no more than $200,000,” while one acre of cannabis can be worth more than $1m, according to an CNBC report. Even if the price drops as the supply of cannabis increases, there’s a chance that wine growers will find themselves competing not just for land, but also for labour.
“Sonoma County expects so many applications for cannabis land-use permits that it has hired 14 additional regulators,” reported NPR.com this past July.
One thing is absolutely certain. Cannabis is “predicted to become a significant consumer category in the future,” according to Constellation’s Sands. And Constellation will be a big part of it.