Former British Columbia premier Christy Clark is joining Constellation Brands’ board of directors as the American alcohol giant tries to rescue its bet on Canadian cannabis.
Ms. Clark is the first Canadian to join Constellation’s board, and her appointment follows the company’s $5-billion investment in Canopy Growth Corp. in 2018. Constellation now effectively controls Canopy, with four of seven seats on Canopy’s board of directors.
A year ago, Constellation’s deal with Canopy was seen as a prescient bet on the cannabis industry’s potential. Lately, however, the outlook has soured and Constellation is taking action to shake things up.
In July, the beverage giant pushed Canopy founder Bruce Linton out, removing the man who was often held up as the face of Canada’s burgeoning cannabis industry. Canopy’s losses had been piling up, and Constellation chief executive Bill Newlands had voiced his displeasure with the results.
The exit, coupled with poor results from rival cannabis companies and ongoing trouble at CannTrust Holdings Inc., has spooked investors across the sector. Constellation made its investment in Canopy by purchasing 104.5 million new shares from the Canadian pot producer for $48.60, but Canopy is now trading far below that level, closing at $32.85 Thursday.
While Ms. Clark’s appointment is at the board level, meaning she will not be involved in day-to-day operations, it is another sign that companies with cannabis operations are re-tooling their governance for a new era. The high-flying days of growth at any cost are in the past, and cannabis producers are adding heavyweights to their governance structures.
“As investor impatience mounts and high profile stumbles give the sector a black eye, companies increasingly feel the pressure to ensure that the right people are in the right chairs at the right time," executive search firm Caldwell Partners wrote in a report this week.
Amid this shift, Constellation has praised Ms. Clark’s experience. “Christy brings extensive knowledge of Canada’s government, regulatory environment and legislative process,” the company said in a statement.
Constellation first experimented with the cannabis market by acquiring a 9.9-per-cent stake in Canopy Growth Corp. for $245-million in 2017. At the time, Canopy’s shares were trading around $13 a share.
The deal ignited a surge of investor interest in Canadian cannabis companies that lasted for around 18 months. But now as the one-year anniversary of Canada’s legalization of recreational cannabis approaches, the sector looks much different, with many investors pulling their money since the spring
After Mr. Linton was ousted in July, Canopy said in August as part of its quarterly results that it likely would not be profitable for three to five years. On a conference call, the company’s leadership also said Canopy had been too focused on being the early leader in recreational cannabis, which meant it cut corners and now has to go back and retrofit greenhouses and fix problems across its supply chain.
At an investor conference earlier this month, Constellation chief financial officer David Klein said the company pushed Mr. Linton out because "the board felt that it was time to make a change from that startup culture to a culture that was going to be more focused.”
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