One of the earliest movers in the cannabis industry was Ontario’s Canopy Growth Corp. (NYSE: CGC ). It’s still one of the biggest players in the space.
And it has set itself up to be a leader in the industry moving forward. Canopy has a stable of strong brands. It has friends in high places. And it’s set up well for continued growth.
It brought in $172.5 million in revenue in 2019 and is projected to bring in $412.9 million in 2020.
The company also has a war chest of $1.8 billion in cash, so it’s more than capable of weathering the slow growth of the Canadian market as it waits for Cannabis 2.0 (cannabis-infused edibles and beverages) to take off over the next several months.
Canopy hits the growth sweet spot. It’s big enough that it’s proven it’s not a flash in the pan but still small enough that it has plenty of room to grow quickly.
And growing it certainly is. Canopy has a stable of eight brands and counting that it sells its products under. They range from Tweed, a brand focused on recreational marijuana and CBD products, to Spectrum Therapeutics, a brand developing cannabis-derived medicines .
Canopy’s runaway success attracted the attention of Constellation Brands (NYSE: STZ ), one of the largest companies in the alcoholic beverage industry. It’s the owner of Corona, Modelo, Svedka, and a number of other beer, wine and liquor brands.
Constellation invested $4 billion in Canopy Growth in 2018. That money gives Canopy a significant edge in the cannabis sector. But it also gives investors an “adult” in the room that’s used to running a public company.
Constellation is already exerting its influence over Canopy. Concerned with Canopy’s difficulties in constraining costs, Constellation ousted Canopy CEO Bruce Linton. Constellation has also named one of its executives as Canopy’s chairman of the board.
For investors, the short-term upheaval is never fun. But as a long-term investment, this bodes well. Constellation has shown it’s willing to protect the interests of investors. And by focusing on constraining costs while still expanding efficiently, Canopy is on the road to generating significant profits – and reaching profitably much quicker than it would have otherwise.
I also think Constellation’s investment is a sign of things to come. I expect food and beverage heavyweights like Constellation to place their bets on their preferred cannabis companies.
Hemp food products have enormous potential. Cannabis beverage additives could be the next big thing for both alcohol and soda.
Last year alone, legal cannabis generated sales of $12.2 billion worldwide. Constellation was one of the first to get a slice of the pie. It won’t be the last…
Anheuser-Busch InBev (NYSE: BUD) subsidiary Labatt partnered with Tilray (Nasdaq: TLRY ). Diageo (NYSE: DEO), parent company of Guinness, is looking for a cannabis partner as well.
It’s not just alcohol companies either…
Even PepsiCo (Nasdaq: PEP) is looking for an entry point in the cannabis industry.
No matter which direction the cannabis industry moves in – pharmaceuticals, recreation, food or all of the above – Canopy Growth will be a leader in it.
It’s fiscally healthy. It’s got friends in high places. It’s versatile. Most importantly, at just over $15 per share, it’s a bargain.
Stay ahead of the masses,
Founder, Crypto Wealth Coach LLC
Owner, Modern Wealth Management, LP