Far from going up in smoke: the booming legalised cannabis business worth billions

By Hannes Breustedt, dpa

Anyone who has spent time around cannabis users will know that it’s not exactly renowned for infusing people with a sense of get-up-and-go. However, there is one area where the drug has provided a much-needed energy boost.

Breweries and spirits makers in the US and Canada have seen demand for many major brands declining in recent years, and with marijuana now legal in some areas and on the way to being legalized in more, they are turning to weed to fill the gap.

Business with legal marijuana is booming in many US states – including the billion-dollar market of California. In Canada, it was set to be legalized in October.

“Over the past year, we’ve come to better understand the cannabis market, the tremendous growth opportunity it presents,” says Rob Sands, chief executive of spirits maker Constellation Brands.

The company, whose brands include Corona and Modelo, bought into the Canadian marijuana producer Canopy Growth in October last year. Constellation was thereby at the vanguard of the industry, proving that its business instinct was right on-target.

In mid-August this year, the US company strongly increased its commitment, investing a further 4 billion dollars in Canopy Growth, boosting its share in the Canadian company to 38 per cent.

“With this investment we are choosing Canopy Growth as our exclusive global cannabis partner,” Sands said. “We look forward to supporting Canopy as they extend their recognized global leadership position in the medical and recreational cannabis space.”

His company, whose product portfolio includes diverse wines and high-proof spirits such as Svedka Vodka and High West Whiskey, finds itself very much moving with the zeitgeist.

Just before Constellation’s mega investment in Canopy, the world’s fifth-largest brewery group, Molson Coors, announced that it was aiming to enter the cannabis business in a big way.

The Denver-based company has been keeping a close eye on marijuana legalisation in Canada, and its subsidiary there is setting up a joint venture with what it says is Canada’s leading marijuana producer, Hydropothecary.

“While we remain a beer business at our core, we are excited to create a separate new venture with a trusted partner that will be a market leader in offering Canadian consumers new experiences with quality, reliable and consistent non-alcoholic, cannabis-infused beverages,” said Frederic Landtmeters, chief executive officer of Molson Coors Canada.

According to US media reports, Diageo, the maker of world-renowned brands as Johnnie Walker and Smirnoff, is also looking for cannabis partners in Canada.

What exactly are these companies planning? Could the shelves of liquor stores soon be stocked with products mixing beer or spirits with cannabis?

In fact, at the moment, the focus is mainly on non-alcoholic cannabis drinks. Molson Coors and Hydropothecary want to develop such drinks specifically for the Canadian market, where cannabis beverages may be legalized starting in 2019.

Rival company Heineken has already introduced a sparkling-water beverage containing cannabis called Lagunitas in California. In Nevada, a genuine cannabis beer is soon to be introduced – without any alcohol.

There are sound reasons why the industry is searching for alternative products and markets. Beer consumption in North America leaves a lot to be desired, in the brewers’ view.

In particular, younger consumers are no longer so thrilled by such mass-beer brands as Bud, Miller, Coors and others. If they do want to drink alcohol, then this group is turning more to wine and spirits.

The only niche in the US beer market that has shown respectable growth in the past few years has been the “craft beers” of the microbreweries. These brewers have become coveted takeover targets of the huge brewery companies.

Industry experts see the booming cannabis business as posing a major opportunity for beer and spirits makers. “The cannabis revolution is fully under way, while the alcohol industry is largely on the sidelines,” notes Spiros Malandrakis of the market research company Euromonitor.

For the breweries, he says, there is only one solution – if you can’t beat ’em, join ’em: “The marijuana industry could drive the next growth cycle or else throttle a branch that is on the defensive.” A new orientation has begun which could provide answers to the existential issues facing the industry.

Euromonitor estimates the annual sales volume for legal marijuana in Canada at 7.5 billion dollars. “The warm-up phase is over – now it really starts,” says a pleased Canopy chief executive Bruce Linton.

In the US, where cannabis is now permitted as a stimulant or a medicinal drug in 30 states, the market value should reach 10 to 11 billion dollars this year.

Arcview, a platform for high-net-worth cannabis investors, estimates that the marijuana industry will grow to 24 billion dollars by 2021, creating 400,000 jobs in the US and generating 4 billion dollars in tax income.

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