What Is Keeping Anheuser-Busch From Entering the Weed Industry?

Constellations Brands (NYSE: STZ) now owns 38% of Canopy Growth Corporation (NYSE: CGC). That’s right, an alcohol company owns a massive stake in the largest marijuana company in the world. They bought 9.9% last year and just spent another $4 billion to up their holdings. In fact, they have issued warrants that could end giving them over 50% ownership of Canopy. Look what the purchase did to their stock price. Just earlier this year Canopy had a market cap a little over $6 billion, not it is now over $11.5 billion.

One of Constellation’s brands is Corona beer and they now offer beer flavored gummies. Hmm? I wonder what the market is like for beer flavored gummies? Yeah, nothing! (I’ll probably be surprised.) Check out the presentation on the Sugarfina Corona Gummies. That little container on the bottom holds these little watermelon shaped beer flavored gummies. Likely, the massive alcohol distributor is warming up its consumers to associating marijuana with its brands and some look-alike of a marijuana infused gummy made the most sense. Non-alcoholic drinks infused with marijuana is what they are really planning.

And, who can blame alcohol companies for wanting to be a part of the fastest growing industry? They will be direct competitors of one another. Consumers are likely to drink less alcohol now that they have another alternative to enjoy, and one that is being marketed as healthier too. Younger generations seem to be turned off by beer and alcohol for the most part, but they very much embrace marijuana legalization according to recent polls. What sound business mind would not react to the growth of a product that directly threatens the integrity of their business? Perhaps Anheuser-Busch (NYSE: BUD) is one example.

Anheuser-Busch, you know the king of beer, the largest beer company in the world, has shown little to no interest in the cannabis industry, until recently. While executives over at Budweiser have remained pretty quiet on the topic of weed, rumors are that they have been speaking with some Canadian marijuana companies. They even elected a new Chief Non-Alcoholic Beverage Officer, and when I say new. I mean new. Non-alcoholic beverages only make up 10% of their volume.

So, why are they making the change to taking a closer look at non-alcoholic beverages? Easy, sales are dropping. In the second quarter of this year Anheuser-Busch announced sales had dropped 3.1%. Perhaps sales will have climbed here in the third quarter with the very hot summer, the start of football season and October baseball, but there are some statistics that are simply undeniable. Sales for beer in general fell 5% in the second quarter. Targets are not being hit and if a smart executive was to demand to know why, the smart person in the room would be pointing at the star shaped leaf that keeps popping up more and more on our screens.

Let there be no doubt, any perception that nothing could compete with the beer industry is wrong. Anyone that believes beer sales would even stand up during a depression and that means that beer sales would stay consistent no matter what, is wrong. The story behind marijuana is compelling. There is strong evidence of the medicinal benefits of cannabis and a lack of unhealthy side-effects. Neither is true of the beer industry. Millennials and the younger generations are believers in marijuana, and the lure of alcohol is simply diminishing. Our economy may be strong right now, but alcohol companies are preparing for the dark green storm on the horizon.

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anheuser-buschCanopy Growth CorporationCGCConstellations BrandsSugarfina Corona Gummies