The cannabis sector received a jolt of good news when Canopy Growth Corporation (WEED.TO) (CGC) announced a multi-faceted strategy to capitalize on the US cannabidiol (CBD) beverage market.
Over the next year, we expect Canopy Growth to benefit from its strategic partnership with Constellation Brands (STZ), a multi-national beverage conglomerate that owns Corona. After Constellation announced its initial investment in Canopy Growth, we became very bullish on the long-term growth prospects of the Canadian cannabis company and are favorable on how the story has advanced since then.
Last night, Canopy Growth was featured on Jim Cramer’s Mad Money segment on CNBC. On the program, Canopy Growth CEO David Klein explained how it tests products in Canada before bringing them to the US market and has benefited from a test-and-learn process and expects Constellation to play a key role in how the product is distributed in the US.
This is not Canopy Growth’s first foray in the beverage market and in 2019, it acquired a majority stake of Biosteel, a sports nutrition products maker. CEO Klein expects Constellation to play an important role in how Biosteel branded products comes to market. We are favorable on the expertise that Constellation adds to the Canopy Growth team and expect the relationship to be a long-term leader in the global cannabis industry.
One of the reasons we are excited about the Quatreau CBD beverage line is based on its performance in Canada. Last year, Quatreau was the top-selling CBD beverage and benefited from a large spike in demand for cannabis-based products during the COVID pandemic.
The Quatreau beverage line that is sold in US will include 20 milligrams of hemp-based CBD that was grown in the US. We are favorable on the route that Canopy Growth is taking with sourcing premium hemp-based CBD and will be closely following this aspect of the story.
Although Canopy did not say when it plans to carry the product in US stores, we expect the brand to play an important role in its strategy to have a first mover advantage in the emerging US cannabis market and we will monitor how the leadership team from Canopy Growth and Constellation are able to execute on this.
During the last year, we have seen as pike in the number of Canadian cannabis prpdcuers that are focused on both the cannabis beverage and the US market. For instance, Aphria (APHA.TO) (APHA) and Tilray (TLRY) announced plans for a mega merger in late 2020. The development comes after Aphria acquired Sweetwater Brewing Company for approx. $300 million.
The combination of Aphria, Tilray and Sweetwater, creates a recipe to compete with Canopy Growth and this is an operator that our readers need to be aware of. We also expect Canopy Growth to face competition from HEXO Corp. (HEXO.TO) (HEXO) which is executing on the cannabis beverage vertical via a strategic partnership with Molson Coors Brewing (TAP).
If you are interested in learning about the companies that are positioned to capitalize on the cannabis beverage market, please send an email to firstname.lastname@example.org with the subject “Cannabis Beverage Leaders” to be added to our distribution list.