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Okay, we’ll ask it. Did the drinks giant that spent $1 billion to purchase Ballast Point Brewing, overspend again when it got into the cannabis biz?
Here’s what we know…
On Thursday Constellation Brands, home to Mexican import brands Corona, Modelo and Pacifico and craft properties Ballast Point, Funky Buddha and Four Corners posted second quarter earnings that largely beat expectations but revealed a $484 million loss on its investment in Canopy Growth, a cannabis company
In 2018, Constellation, the third largest brewer in the US behind AB InBev and MillerCoors, closed a $4 Billion investment in the Canadian pot producer…
But with big money, big things are expected but so far Canopy Growth the world’s largest cannabis company by market value has been hemorrhaging money.
Canopy Growth reported losing $1 Billion in just three months last year and fired its co-CEO, Bruce Linton, who founded the pot producer in 2013, a week after Constellation CEO Bill Newlands expressed disappointment over its financial losses.
Aside from the hit the company is taking from its cannabis investment, the Victor, NY-based company’s beer business is performing well.
Sales rose by 7.4% to total $1.64 Billion in the three months to August according to the Drinks Business with growth especially driven by Modelo.
The future?
Constellation also revealed that it too was getting into the hard seltzer game next spring, with a Corona seltzer brand that will come in four different flavors including tropical lime, mango, cherry, and blackberry and lime.
But only time will tell if Constellation Brands overspent in its haste to get into the ‘budding’ recreational cannabis industry.
But if past is prologue, investors, who watched Constellation shares drop 8% after the company’s second quarter earning’s announcement, have reasons for concern…
With craft beer’s once double-digit growth now slowing, an increasing number of industry analysts are questioning Constellation Brand’s $1billion acquisition of Ballast Point in 2015.
