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Constellation to make cannabis-based drinks

Constellation Brands is set to develop cannabis-based beverages after entering into an agreement to acquire a minority stake in cannabis producer Canopy Growth Corporation.

The Svedka Vodka and Casa Noble Tequila maker will pay C$245 million (US$191m) to acquire a 9.9% equity share in the Ontario, Canada-based firm. The deal, which also gives Constellation the opportunity to purchase additional ownership in the future, is expected to be completed in the third quarter of the group’s fiscal 2018 period.

The companies plan to develop and market cannabis-based beverages, however Constellation has no plans to sell any cannabis products in the US or any other market, unless it is legal do so “at all government levels”.

“Canopy Growth has a seasoned leadership team that understands the legal, regulatory and economic landscape for an emerging market that is predicted to become a significant consumer category in the future,” said Rob Sands, president and CEO of Constellation Brands.

“Our company’s success is the result of our focus on identifying early stage consumer trends, and this is another step in that direction.”

Canopy Growth is the world’s leading provider of medicinal cannabis products. Listed on the Toronto Stock Exchange (TSX), the company has a market cap of C$2bn (US$1.55bn)

“In Constellation we have a strategic ally that will join us as we lead the global cannabis sector into the future,” said Bruce Linton, chairman and CEO of Canopy Growth.

“We have also strengthened our balance sheet to fund the ambitious expansion efforts we have planned heading into 2018 – a year that will see unprecedented growth in medical and adult-use opportunities.”

Canopy Growth will use Constellation’s investment to fund its international expansion, new product developments and research. Under the agreement, both companies will exchange knowledge and expertise in the future.

Constellation has undertaken rapid acquisition activity over the last year, particularly in the brown spirits sector, with the complete acquisition of Utah’s High West Distillery, a minority stake in Bardstown Bourbon Company, and a further minority stake in Virginia-based Catoctin Creek Distilling Company.

Also over this last year, a wave of cannabis legislation spread across the US, raising questions over how the drug can coexist with alcohol. Speaking to The Spirits Business, Spiros Malandrakis, senior alcoholic drinks analyst at intelligence provider Euromonitor, predicted that cannabis-based drinks are set to become the “biggest disruptor that ever was” in the US drinks market.

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