Okay, we’ll ask again…Did the drinks giant that spent $1 billion to purchase Ballast Point Brewing, only to unload it last December at a considerable loss, overspend again when it got into the cannabis biz?
On Wednesday Constellation Brands, home to Mexican import brands Corona, Modelo and Pacifico and craft beer brands, Funky Buddha and Four Corners posted its third quarter earnings that largely beat expectations but revealed a $534 million loss on its investment in Canopy Growth, a leading Canadian cannabis producer.
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.
Its 2Q loss of $484 million on its cannabis investment was hardly a rebound no matter how you spin it. And the company has said it could be years before investors see a profit on the costly venture.
Only time will tell if Constellation Brands overspent in its haste to get into the ‘budding’ recreational cannabis industry. But Spiros Malandrakis, drinks analyst at Euromonitor told the Drinks Business that in spite of Constellation’s enormous losses it’s his belief that investing in cannabis is still an “absolute necessity” for alcohol companies.
“There is a cautionary tale here. But it’s not about entering the cannabis segment, it’s about having a more strategic or nuanced approach than ‘big is best’.”
Aside from the enormous hit the company is taking from its cannabis investment, the Victor, NY-based company’s beer business performed decently in its most recent quarter.
Although Constellation did report a 9% net sales decline for its wine and spirits division in the third quarter ending in November, the company’s beer sales fared much better. Beer was up 8%, driving a 2% lift in group sales for the period.
(Homepage Pot Beer Image Credit: Mitchell Maglio)