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Why Constellation Halting Cannabis Investment in Canopy Isn’t as Bad as It Looks

Canopy Growth
Canopy Growth

US Company May Be Headed Away From Cannabis Investment Altogether – LPC

Constellation halts cannabis investment in Canopy Growth.Canopy Growth’s US partner, Constellation Brands, announced last week that it was stopping all cannabis investment in the company. This came after Canopy once again announced losses for the quarter, along with several other industry giants. CEO Mark Zekulin blamed the Ontario government in part for disappointing cannabis sales.

As many have stated including the author of this article (please see link below), Constellation is profit-driven. In July 2019, Canopy fired Bruce Linton after disappointing sales. Linton stated that his focus was on market growth. Tilray CEO Brendan Kennedy has also called profit-chasing constraining. However, Constellation’s fouces clearly was on return for their cannabis investment – and fast.

As it is, Constellation will take a nine-month net loss of $125.4 million from its Canopy Growth cannabis investment. It announced it may not exercise its warrants to buy more shares in May.

Cannabis 2.0 May Be the Deciding Factor – LPC

Cannabis investment and the cannabis industry is hoping Cannabis 2.0 will pull it into the red. The first cannabis edibles, beverages, vapes, and topicals are expected in time for Christmas, if all goes to plan.

According to this article, Canopy alone has 30 products that fall into these categories. Since Constellation’s announcement Canopy has sent out three media releases about its Cannabis 2.0 plan and products. That includes a beverage by Houseplant, Seth Rogen’s cannabis brand. Clearly, Canopy is motivated to dominate the edibles and beverages marketplace.

But will Cannabis 2.0 be enough? This article states that Canopy believes 80 per cent of non-cannabis users might try a cannabis beverage. If true, that would trigger many sales. Except that one of the main problems is still a lack of retail stores. Cannabis retail roadblocks may be coming down in Ontario, which would be a huge help, but at this point we don’t know when or how.

Even so, Constellation’s announcement shouldn’t be too much concern in the long run. There is a downside with any partner, and perhaps especially a US partner. It doesn’t help that the industry can be frustrating from a business perspective. US legalization is coming slower than expected. Growth in Canada is hampered by a lack of retail stores. Constellation looks like so many others with a cannabis investment – searching for the quick buck even though the green rush may be over. Canopy likely wants to keep Constellation as a partner in case cannabis legalization does happen in the US. But with $2.7 billion in the bank in cash and securities, it doesn’t need any further cannabis investment at the moment.

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.

Click here to view full story at articles2.marketrealist.com

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