Canopy to Bring Cannabis Beverages to the U.S. Next Year

(Bloomberg) -- Canopy Growth Corp., the cannabis company that attracted Corona beer producer Constellation Brands Inc. as an investor, is moving to bring cannabis beverages to the U.S. in 2021.

The drinks will contain THC, the psychoactive compound found in marijuana, in dosage amounts designed to keep people buzzed and social in a similar way to beer, cocktails or wine, the company said in a statement.

“Just as hard seltzer disrupted beer by providing a lighter, low-calorie alternative, we believe cannabis beverages will be an attractive option for what have traditionally been alcohol-driven occasions and mood states,” said David Klein, Canopy's chief executive officer, in an email exchange with Bloomberg News.

The company's shares fell 1% to $14.18 at 11:54 a.m. in New York, reversing an earlier gain. The stock lost 32% of its value through the first nine months of 2020.

Canopy, based in Smiths Falls, Ontario, said Acreage Holdings Inc. will start selling the drinks in California and Illinois next summer with its distribution network and move into other states in following months. They'll appear first in dispensaries, with aims to get them in liquor stores or other retail locations once that becomes legally permissible.

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Canopy said it will have access to Constellation's brand expertise and distribution network in the venture. Acreage, which has an agreement to merge with Canopy when federal legalization occurs in the U.S., has already moved to start manufacturing operations for the beverage.

The deal shows the increasing overlap between the beverage and cannabis industries. Drinks with CBD, a non-psychoactive cannabis ingredient, are already catching on in the U.S., with big companies like Molson Coors Beverage Co. starting to take action. The beverage industry is experiencing disruption as Americans, looking for new ways to unwind amid Covid-19 and lockdowns, increasingly turn to products like canned cocktails and hard seltzers over standbys like beer.

Other THC drinks on the market have much larger doses of the compound, and Canopy's drinks aim to draw new users to cannabis with a better taste and a lower dose that will make the experience more akin to an alcoholic beverage.

Better Fit

Consumer insights have shown the drinks may be a better fit than alcohol for some people, “such as a young parent who seeks to unwind with a beverage at the end of the day, but can't afford a hangover with their 5 a.m. wake-up call,” Klein said.

Canopy already dominates the Canadian market for cannabis beverages. Since it started selling them there in March 2020, it's sold more than 1.7 million cans, and has captured 70% of the Canadian market by units sold, according to the company. Tweed is its No. 1 beverage brand in Canada. The company declined to say what brand names it would use in the U.S. or give any new financial projections tied to the drinks.

As of May, Constellation owned a 38.6% stake in Canopy. In its quarterly earnings Thursday, Constellation reported a loss of $31 million for its latest fiscal period related to the stake.

During Constellation's earnings call with analysts on Thursday, Chief Financial Officer Garth Hankinson said the company sees the latest generation of recreational cannabis products attracting new consumers, and that Canopy is “best positioned to win in the long term” and is well capitalized.

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