U.S. Giant Constellation Brands Scaling Back Cannabis Investments

After betting CA$4 billion (€2.7 billion) on the explosion in demand for cannabis and CBD beverages, via its investment in a Canadian cannabis manufacturing and distribution company, the American group Constellation Brands is considerably scaling back. The absence of federal legalization in the United States has put a spanner in the works.

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Constellation Brands is considerably scaling back

Since its decision to invest in the cannabis sector in 2017, through Canopy Growth Corporation, the American giant has continued to suffer negative repercussions. A year ago, it was forced to reduce the book value of its investment by CA$1 billion (€677 million). This month, it announced the expiry of its warrants in the Canadian company, going so far as to state that it had “no further plans or intentions with regard to Canopy.”

Constellation Brands reserves the right to dispose of shares or other securities in the Canadian cannabis specialist, “depending on a number of factors, including overall market conditions and conditions, other investment opportunities, regulatory developments or other factors defined by Constellation.”

US regulatory developments slower than expected

The American group, owner of wine assets such as The Robert Mondavi Winery, The Prisoner Wine Company, Kim Crawford, and Meiomi, is not totally withdrawing from the cannabis sector. From a stake of almost 40% in Canopy Growth Corporation, its involvement remains around 20%, allowing it to bounce back should regulatory changes occur.

These include the long-awaited federal legalization of cannabis in the United States since the election of Joe Biden, who has so far favored its decriminalization. To date, 24 states have legalized the personal consumption of cannabis, but it remains prohibited at the federal level.

Constellation Brands stock

The U.S. giant shares closed the last session down, -$1.23  to $236.59. Constellation Brands Inc. Cl A closed at $37.06 below its 52-week high reached on August 8th.

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(Featured image by Elsa Olofsson via Unsplash)

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