US alcohol giant Constellation Brands buys 9.9% in Canadian seller of medicinal-marijuana products

US alcohol giant Constellation Brands buys 9.9% in Canadian seller of medicinal-marijuana products

Alcohol giant Constellation Brands is venturing into marijuana, a precedent-setting move for the industry. Constellation will pay around $191 million (C$245 million) for a 9.9 per cent stake in Canopy Growth Corp, a Canadian seller of medicinal-marijuana products.

The deal led to the biggest rally in nearly a year for Canopy, which trades on the Toronto Stock Exchange under the ticker WEED.

With the legalisation of marijuana in Canada and several US states a huge potential market has opened up even as demand for alcohol is declining. However, with pot still prohibited at the US federal level, US companies will need to tread carefully.

Victor NY-based Constellation said it has no plans to sell cannabis in the US or other markets until it is legal "at all government levels." Currently it is 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, Bloomberg reported.

"Our company's success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction," he said in a statement.

Under the terms of the deal, there is an option for Constellation, to increase its future ownership interest in Canopy Growth Corp to nearly 20 per cent, officials told The Cannabist.

The Wall Street Journal first reported about the investment on Sunday.

''Canada is expected to become the second country to fully legalise cannabis for adult recreational use at the national level,'' Constellation spokesman Michael McGrew wrote via email. '' We feel it is strategically important to be cognizant of and knowledgeable about this emerging and potentially disruptive market.''

''But it's important to note that we have no plans to sell any cannabis-related products in the US or any other market unless or until it is legally permissible to do so at all government levels.''