Three of the world’s biggest companies have invested in the cannabis industry. What are their plans for this new market?
The cbd stocks to watch is a list of 3 big names that have invested in the cannabis industry.
When marijuana is legalized in the United States, there will surely be a slew of new companies vying for a piece of the lucrative market. Because marijuana cannot cross state borders, the existing federal prohibition means that big businesses with strong logistical capabilities don’t see the purpose in becoming involved. Significant changes may be on the way shortly, with Senate Majority Leader Chuck Schumer spearheading the fight and advocating for marijuana reform (which includes legalization).
While firms from other sectors are likely to sit on the sidelines waiting to make a major move, others have already made substantial investments in the Canadian marijuana industry, where marijuana is legal on a federal level. Altria Group (NYSE:MO), Constellation Brands (NYSE:STZ), and Alimentation Couche-Tard are among the most well-known companies that have already invested in the cannabis business (OTC:ANCU.F).
The Altria Group is number one.
Altria Group, the world’s largest tobacco company, invested $1.8 billion in Cronos Group (NASDAQ:CRON) in 2018, acquiring a 45 percent stake in the cannabis company. In view of declining cigarette sales, Altria’s decision made sense. Furthermore, with the rising popularity of vaping goods, it may provide a method to access a comparable consumer base. Altria made an even larger announcement the same month as the marijuana deal: it was buying a 35 percent interest in e-cigarette startup Juul for $12.8 billion.
While the Juul venture hasn’t gone well (Altria has written it off many times), Cronos still has some promising development possibilities that extend beyond vaping. The cannabis company headquartered in Canada is trying to bring lab-grown marijuana products to market, which may help it undercut rivals and gain market dominance.
Cronos is able to profit from substantial research and development skills while still having a good stockpile of money to utilize for expansion projects thanks to Altria’s support; Cronos reported more than $1 billion in cash and short-term investments as of June 30. Investing in Cronos is still risky due to the company’s lack of continuous revenue growth, but the company’s relationship with Altria makes it a safer bet than many of its rivals.
Meanwhile, a firm like Altria, which currently operates in the highly regulated tobacco industry, is unlikely to be overwhelmed or intimidated by the prospect of entering the cannabis market. Other tobacco firms have made investments in marijuana, notably British American Tobacco, which said earlier this year that it would buy a 19.9% interest in cannabis edibles startup OrganiGram.
2. Constellation Brands is a conglomerate that owns a number of
Another industry that seems to be a good fit for cannabis is beer. Constellation Brands, well renowned for its Corona beer, was the first major corporation to engage in the marijuana business, announcing in 2017 that it would buy a 9.9% interest in cannabis company Canopy Growth. It was a very small 245 million Canadian dollar investment. Constellation has invested billions more since then, and currently controls 38.6% of the company.
Cannabis beverages are still in their infancy; experts estimate that by 2025, the sector will be worth just $2.8 billion, part of a worldwide cannabis industry that may be worth more than $90 billion. However, one of the benefits of the investment for Constellation Brands is that, although cannabis-infused drinks are still in their early phases of development, the firm may test goods in the Canadian market, where they are legal. As a result, once the market is completely legal in the United States, Constellation will have ready-to-use goods and will not have to start from scratch.
Another business with a lot of cash on its books is Canopy Growth. It has CA$2.1 billion in cash and short-term investments as of June 30. Despite its difficulties and continuing transition to profitability, it is one of the safest cannabis companies to purchase for long-term investors, similar to Cronos.
3. Couche-Tard Alimentation
Global convenience store operator Alimentation Couche-Tard, known in the U.S. for its Circle K brand, had been eager to get involved in cannabis for years, even before pot was legalized in Canada in 2018. It was no surprise when the company finally took the plunge in 2019, investing CA$26 million to take a 9.9% stake in cannabis retailer Fire & Flower (OTC:FFLW.F). At the time of the deal, Fire & Flower had 23 pot shops in its portfolio. As of May 1, that total number was up to 83.
Fire & Flower has plans to grow beyond Canada and is deploying a strategy for the U.S. market. Through a licensing partner known as Fire & Flower U.S. Holdings, there is now a store under the company’s brand in Palm Springs, Calif. Fire & Flower has also given the partner (previously known as American Acres) the ability to use its Hifyre technology platform, which helps cannabis retail merchants analyze sales and identify trends.
For cannabis investors focused on the retail market, investing in Fire & Flower — which is backed by a growth machine like Couche-Tard that has more than 14,000 stores spread across 26 countries and territories — could lead to some great returns down the road. The retail pot stock has a market cap of just $250 million, and there’s loads of potential for it to climb much higher as the company branches out its operations.
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