Alcohol companies are keeping close tabs on the cannabis industry. And for good reason. A recent market analysis shows legal cannabis sales are gaining ground on wine and beer. And to stave off the potential for cannabis to cannibalize alcohol sales, major alcoholic beverage firms are looking to add legal weed to their portfolios. The latest company to make such a move is Diageo, the makers of Johnnie Walker, Crown Royal, and Guinness. According to sources with BNN Bloomberg, Diageo is in the middle of high-level talks with a number of Canadian cannabis producers.
Alcohol Companies Are Investing Big in Canadian Cannabis
The goal of the talks, which have so far been private, appears to have to do with Diageo’s interest in investment and possibly collaboration. Representatives of Diageo have not been forthcoming about the specifics of their talks. The firm hasn’t even revealed which Canadian cannabis companies it’s in discussions with.
But it isn’t hard to guess. A likely candidate is Canopy Growth Corp., Canada’s largest medical cannabis producer. Canopy has already secured two rounds of substantial investments from Constellation Brands, the firm behind Corona and Modelo. Another could be Aurora Cannabis, or Aphria, just to name some major players. Or, Diageo could be meeting with a more boutique company, taking a page out of Molson Coors’ playbook. Coors’ just secured a deal with Hydropothecary Corporation to develop non-alcoholic, cannabis-infused beverages for Canadian consumers.
Whoever the three (or more) companies are that Diageo is in serious talks with, it’s very likely the beverage firm has its sights set on developing its own cannabis-infused beverage brand. Diageo began making moves into the Canadian cannabis space at an industry conference in Toronto earlier this month. Those informal meetings led to Diageo’s closed-door talks this week.
Diageo Close to a Deal With a Major Canadian Producer
Across Canada, retail adult-use cannabis sales can begin on October 17. Diageo could wait until then to make a decision about which company to ultimately partner with. But considering the advanced nature of the talks, according to some sources, Diageo could make a decision sooner.
And that alone is a powerful signal that cannabis legalization is reshaping a number of adjacent markets. Alcohol giants like Molson Coors, Constellation Brands and Diageo have such high market caps and steady performance that they don’t need to rush into anything, especially a new market segment.
The fact that major alcohol players are moving quickly is a testament to the anxiety legal cannabis is causing in the industry. Canadian regulators aren’t even allowing the sale of cannabis-infused beverages until October 2019. But market analyses are showing beverage producers that cannabis sales are cutting into binge drinking where adult-use is legal. Legal cannabis is putting pressure on alcohol sales and shifting consumer preferences. And beverage companies are feeling the heat.