January 10, 2019 11:48 PM
Did one of Rochester’s biggest businesses bet too much on a marijuana company?
That’s the question after Victor-based Constellation Brands released its most recent financials this week. In late 2018, Constellation Brands closed on a $4 billion investment into Canopy Growth, one of the largest marijuana companies in the world, but on Wednesday it devalued that investment.
Marijuana is becoming legal in more and more counties and states.
With weed products likely to compete directly with alcohol products, it makes sense that Constellation Brands would enter that marketplace. News10NBC Investigative Reporter Jennifer Lewke took a trip to Ontario, Canada back in November to tour Canopy Growth and speak with its CEO about what his plans were for the Constellation investment.
Bruce Linton explained that the two companies are working on a line of weed beverages.
Bruce Linton - "The problem with the current drinks is they're terrible. So, when people say well they're not very popular, I'm surprised that anyone has ever bought a second one, it's because oil and water don't want to mix. so, you have to think about how do I mix them, we'll we thought about that a lot."
Jennifer Lewke (News10NBC) - "Is it that you want to take something that they (Constellation) have and make it appealing with cannabis in it? Or is that you make something completely different?"
Bruce Linton - "Both. So, we expect to have and have already created products that are entirely unique that we think are going to be very well received…The last round of money that came in (from Constellation) was about us accelerating for everything that can happen globally, medically, and recreationally and for them it was about having the best company in the sector as their sole partner for this so that if it's going to be disruptive or if it's going to be huge, they're going to win."
But no one is cashing out just yet.
This week, Constellation Brands released its 3rd quarter financials which show the company wrote down the value of its $4 billion investment in Canopy Growth by $165 million.
“The problem is not whether marijuana will become a thing, the problem is not whether it will be profitable, the problem is, have they paid too much for the investments they've made so far and when will those investments begin to pay off,” says George Conboy, the Chairman of Brighton Securities.
At this point, those with Constellation Brands stock really just have to wait it out, “in the long run, the company will be okay but there's still a big question whether cannabis will be the bonanza that everyone seems to hope it will be…The market value of Constellation Brands is $32 billion. So, a couple of billion investment made into Canopy Growth, probably will pay off but if it doesn't, it won't sink the company,” Conboy says.
News10NBC reached out to both Constellation Brands and Canopy Growth, neither returned calls and emails on Thursday.
In a conference call on Wednesday, incoming Constellation CEO Bill Newlands said he’s confident the investment will pay-off over time, “I'll remind everyone, beverages are not currently available in Canada. We expect, Canopy expects, that that will change later this calendar year but an exact date of that has not been defined yet but I can assure you that when and if that eventually occurs and we certainly expect that it will, Canopy will be in a position to take advantage of that opportunity,” he said.
Updated: January 10, 2019 11:48 PM
Created: January 10, 2019 05:44 PM
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