Article by Andrew Willis, The Globe and Mail
An investment banker who routinely talks to beverage and pharmaceutical executives likes to tell a quick story about the current state of the world: Every meeting with CEOs used to start with five minutes of small talk about U.S. President Donald Trump. Now every session starts with a conversation about cannabis..Constellation Brands Inc.’s $5-billion investment in Canopy Growth Corp. is more than just an expanded partnership between the owners of Robert Mondavi wine and the folks who got their start just five years ago growing marijuana in an abandoned chocolate factory in Smith Falls, Ont. This is a defining transaction for an industry, in part because a leading consumer-product company is staking its claim to the recreational marijuana market and in part because Wall Street is now fully embracing cannabis..The federal Liberals’ ground-breaking move to legalize recreational cannabis this year, along with a mature market for medical marijuana, has spurred the creation of several relatively large made-in-Canada companies. Canopy Growth has emerged as the clear industry leader; chairman and co-chief executive Bruce Linton has already expanded the focus from the domestic market, served by what’s grown in that former Hershey’s facility, to operations in 30 countries..But when Mr. Linton looks ahead, he sees his sector attracting the attention of deeper-pocketed rivals based in the beer, spirits, tobacco and pharmaceutical industries. In a conference call on Wednesday, Mr. Linton said: “When you talk about competitors and why we’re doing this now, we have a great position and a great start. This is about accelerating and getting way further out there before those other big names are in, getting our products, staking our claims, having the leverage that we have now.”.Canopy Growth cut this deal to build a war chest in a volatile sector and to better tap Constellation’s global expertise in marketing and retailing, as Mr. Linton tries to do for cannabis what Sam Bronfman did for rye whisky. Constellation is betting that Canopy Growth can come up with cannabis beverages that rival the popularity of wine and beer.