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Will UK-based beverage company Diageo enter the cannabis industry?

Bloomberg has revealed that the major producer of liquor is carefully monitoring the cannabis industry and may have its sights set on three leading cannabis producers

Bethan Rose Jenkins, Cannabis News Writer/Editorial

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Shares of cannabis stocks soared after BNN Bloomberg released a report stating that beverage company Diageo (NYSE:DEO) may be in talks with cannabis industry’s biggest players.

Diageo has two major alcohol brands under its belt: Smirnoff vodka and Guinness beer. Headquartered in Edinburgh, the UK-based beverage company has reportedly been in discussions with three Canadian cannabis cultivators.

Although details have not yet been confirmed by the company, speculation has stimulated cannabis stock market activity.

Diageo’s interest in weed comes after alcohol giant closes cannabis deal

Just last month, Constellation Brands invested $5 billion into Canadian cannabis company Canopy Growth Corp. The news meant that investors started scurrying for a slice of the growing alcohol-cannabis business sector.

Molson Coors Brewing Co and Heineken also announced a partnership in August. The two companies will collaborate to produce cannabis-infused drinks.

Diageo’s business year ended in June. Developments were not reported during the UK-based beverage company’s FY 2018 earnings call, but Bloomberg has revealed that the major producer of liquor is carefully monitoring the cannabis industry and may have its sights set on three leading cannabis producers.

Which cannabis partner is Diageo likely to choose?

Only time will tell which partner Diageo chooses to join forces with for the development of cannabis-infused drinks.

Nevertheless, there are three main candidates that come to mind: Aphria (NASDAQOTH:APHQF), Aurora Cannabis (NASDAQOTH:ACBFF) and Tilray (NASDAQ:TLRY).

Let’s take a look at what these companies could bring to the table:

  1. AphriaWith a market cap of $2.7 billion and an annual production capacity estimated to hit 225,000 kilograms next year, Aphria is certainly an alluring investment. What’s more, the chief commercial officer of Aphria, Jakob Riphstein, served as president of Diageo Canada for a decade before he joined Aphria’s team.
  2. Aurora Cannabis – Boasting global operations, a total funded annual production capacity of 570,000 kilograms and a solid presence in the medical cannabis market, Aurora is an appealing prospective partner for Diageo. Moreover, the company has the potential to dominate European cannabis markets, thanks to its Pedanios subsidiary.
  3. TilrayGroup, Tilray is one of three Canadian cannabis producers trading on the U.S. stock exchange. With a cannabis production facility in Portugal and a solid international reputation, Diageo might well strike a cannabis-alcohol business deal with Tilray.
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