Here’s what the biggest cannabis investor on the planet has to say about his $4 billion investment
Sands has revealed he will step down from his position as the CEO of Constellation Brands in March of next year
The recent surge in cannabis stocks could be attributed to a deal that was struck between Constellation Brands (NYSE:STZ) and Canopy Growth Corporation (NYSE:CGC) back on August 15.
Constellation invested $4 billion into the Canadian cannabis cultivator, bringing its stake in the company up to 38 percent. The investment was an indication of the interest that beverage companies are taking in the CBD-infused drinks craze that is currently acting as a catalyst for growth amongst publicly trading cannabis stocks.
Cannabis stocks have soared since Constellation-Canopy deal was struck
Canopy, Aurora Cannabis, Aphria, Tilray and Cronos Group have experienced significant gains of more than 50 percent since the announcement of Constellation and Canopy’s partnership to produce CBD-infused drinks. Let’s not forget about the ETFMG Alternative Harvest ETF either, which has climbed more than 50 percent as of late.
With so much happening in the cannabis market, there’s no wonder why investors were so keen to hear what Constellation CEO Rob Sands had to say during his recent earnings call. The four quotes highlighted below were noteworthy:
1. “With our focus on continuous growth, we’ve recognized the significant opportunity that the emerging cannabis space presents as potentially one of the significant global growth opportunities of the next decade… This [the $4 billion investment] will be the largest investment to date in the cannabis space, a market which is expected to reach more than $200 billion in retail sales globally within the next 15 years, and one that is opening up much more rapidly than originally anticipated.”
As cannabis legalization advances, just like supporters and industry investors are optimistic it will, Sands’ sales predictions are not hard to believe. One report from Grandview Research predicted that the global cannabis market will be worth a whopping $146.4 billion by the end of 2025.
2. “Canopy Growth has the largest legal cannabis production footprint in the world and in Canada, and they are the only producer currently participating in all Canadian provinces. They also have been awarded approximately 35% of the supply contracts announced throughout all Canadian provinces to date that are dedicated to recreational cannabis, a market that will become legal in Canada later this month. Going forward, we will be working exclusively with Canopy, as we believe that having a single platform to address all markets and formats globally is essential to winning in this space.”
This quote from Sands pretty much sums up his company’s reasons for buying such a huge stake in Canadian cannabis producer Canopy. It confirms Constellation’s confidence in Canopy and should, therefore, reassure investors who are contemplating taking a slice of the pot partnership.
3. “We see no evidence whatsoever, especially in the United States in the legal states, of alcohol cannibalization. So, I’d say as we sit here right now and we think about the cannabis business and our position in the cannabis business, it’s probably going to be close to 100% incremental for us, talking about incrementality. So, this conversation comes up a lot. Two things, OK? Number one, is it a defensive move? The answer is no. We’re not playing defense, we’re playing offense. This is an offensive move, period.”
Legal cannabis consumption has raised concerns among alcohol producers, who are worried that the green stuff might overshadow alcohol sales. For example, the Cannabiz Consumer Group thinks that the beer industry could lose $2 billion as a direct effect of cannabis legalization. However, Sands made it clear that this is not the case.
4. “So, we think that we’re by far the best company in the world, or in the best position in the world of any company to capitalize on what is absolutely without a doubt going to be a huge market over the next 10 years. Hundreds of billions of dollars. So, we’re addressing our position on every front, meaning that we need to be a key player in the development of the science. That’s really important. Branding, we’ve got top people and top agencies and firms working on branding, because like all businesses of this nature and consumer products, branding is gonna be the key to success in the future.”
This quote was mentioned towards the end of the earnings call with the Constellation CEO. Sands’ confidence is comforting for investors who have already taken a chance in Canopy’s cannabis stocks and it could potentially spark further investments as Canada’s legal cannabis market gets into full swing.
Sands will step down as Constellation CEO
Interestingly, Sands has revealed he will step down from his position as the CEO of Constellation Brands in March of next year. He will be replaced by Bill Newlands, the company’s president and chief operating officer.
