• by Karlene Lukovitz  @KLmarketdaily, August 15, 2018

The beer business continues to go to pot, in more ways than one.

As overall beer sales continue to decline in the United States, major beer companies’ efforts to hedge their bets by investing in the future of cannabis-infused beverages and other products are picking up steam.

This morning, Corona parent company Constellation Brands — which last October invested $200 million to acquire a 10% stake in Ontario, Canada-based Canopy Growth Corp., the world’s largest publicly traded cannabis company — is investing another $3.9 million in Canopy.

That investment — one of the largest to date by a corporation — will raise Constellation’s share in Canopy to 38%, and secure four of Canopy’s seven board seats for Constellation.

Constellation’s Corona and Modelo are actually among the rare brands bucking the downward trend in U.S. beer sales. But Constellation, along with two other brewers, is among those looking to get in early and establish a competitive advantage in the legal marijuana market.

Euromonitor International estimates that pot sales will reach $10.2 billion in the United States and $7.5 billion in Canada this year, reports The Wall Street Journal.

This morning, during a call with analysts, Constellation CEO Rob Sands described cannabis-infused beverages and food as “potentially one of the most significant global growth opportunities of this decade.”

"Over the past year, we've come to better understand the cannabis market, the tremendous growth opportunity it presents, and Canopy's market-leading capabilities in this space," Sands elaborated in a statement. "We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space."

Canopy, which currently markets medical marijuana, will begin selling recreational pot in Canada in October, when the country legalizes such use. It will work with Constellation to offer pot-infused, non-alcoholic beverages and a “full suite” of other infused products, Sands reported. Canada is expected to legalize consumable marijuana-infused products next year.

Canopy is also focused on international opportunities. Some 30 other countries are now mulling the legalization of medical marijuana, according to the Journal. During the analysts’ call, Canopy CEO Bruce Linton said the company has targeted $1 billion worth of companies worldwide for acquisition, and is already on its ninth such acquisition.

Of course, U.S. opportunities are also expanding rapidly. Nine states and Washington, D.C. have legalized marijuana for recreational use for those over 21, and medical marijuana is legal in another 30 states.  

Constellation’s expanded partnership with Canopy gives it the right to make additional investment over the next three years to up its stake to 50%.

Rival brewers Molson Coors and Heinken, which are among those feeling significant pressure from declining U.S. sales of their core beer products, have also recently taken the leap into cannabis ventures.

Molson Coors announced last August that it was forming a joint venture with another Canadian cannabis company, The Hydropthecary Corp.—also to develop non-alcoholic, pot-infused beverages for sale in Canada.

Heineken just last month launched a cannabis-infused sparkling water in California, under its Lagunitas brand.

Actually, it’s possible that marijuana legalization could further dampen domestic beer sales, already suffering from younger generations’ preference for wine and spirits.

As the Journal points out, the evidence thus far is contradictory: a study by the Bernstein research firm showed an under-1% increase in beer sales in the four U.S. states where pot has been legal for more than three years, while a Cowen survey found 30% of North American pot consumers saying that they’ve significantly reduced their alcohol consumption.

But the brewers apparently are betting that the payoffs from sales of legal pot and cannabis-infused beverages and food will, in the coming years, more than make up for any losses from a possible acceleration of beer’s downward trend.