Constellation Brands Still Bullish on Canadian Cannabis Market
US Partner to Canopy Growth Says Black Market Cannabis is Shrinking – LPC
The Canadian cannabis market made news once again south of the border. Constellation Brands announced its third-quarter earnings with net income of US$366.5 million. That’s after a US$71.1 million loss due to Canopy Growth. But despite losses, Constellation CEO Bill Newlands said the company is optimistic of its long-term plan.
“We remain bullish on the Canadian cannabis market as the conversion of the illicit market to the legal market continues to strengthen,” he said.
Newlands also said that incoming Canopy CEO David Klein would bring “more focus and discipline” to the company. Canopy announced in December that Klein, who was the CFO at Constellation, would take over from interim Mark Zekulin. The move sparked speculation of an all-out takeover bid from Constellation.
Ousted ex-co-CEO Bruce Linton also floated the possibility that Constellation would break up the company. It would sell all but Canopy’s cannabis beverage division. Canopy recently unveiled its new bottling facility to produce five million cannabis beverages per month for the Canadian cannabis market.
Newlands also commented on Canopy’s other Cannabis 2.0 products. Besides cannabis beverages, these include cannabis vapes and cannabis edibles. Interestingly, the CNBC article states that Canopy’s “cannabis-infused beverages” are “made with Constellation.” (Please see link to full article below.)
Canadian Cannabis Market Undergoes Changes – LPC
One of the key takeaways from the CNBC article is its approach. It reads like Canopy Growth is a division of Constellation, not just a partner. That could be American media bias. We saw this last year when Reuters reported upticks in cannabis stocks. US media speculated it was due to a Congressional sub-committee. In fact, it was more likely due to Doug Ford’s announcement that day that Ontario would remove cannabis retail roadblocks.
But it could also be a sign of a changing Canadian cannabis market. Initially, Canadian cannabis companies were seen as being in the best position to enter the US cannabis market. Aurora Cannabis, for example, was investigating ways of entering the US market through US companies.
Meanwhile, Mad Money’s Jim Cramer also gave his vote of confidence – albeit with more American media bias. “While Constellation has turned Canopy Growth into a powerhouse, it’s really a nice house in a really ugly neighbourhood.” But that doesn’t mean sell, Cramer said. “I think this company’s too good to be written off. At some point, the cannabis industry will be worth dominating.”
Either way though, it’s also a sign that the Canadian cannabis market should strengthen soon. Canopy used to be the same as Tilray, which chooses market expansion over profits. With both powerhouses squaring off using different strategies, we’ll get to see which approach works best.
This editorial content from the LPC News Team provides analysis, insight, and perspective on current news articles. To read the source article this commentary is based upon, please click on the link below.
