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Constellation Brands Inc.'s move to take effective control of Canada’s largest cannabis producer is the biggest signal yet that alcohol companies see the drug as a way to revive their sluggish growth prospects.

Constellation, based in Victor, N.Y., said on Wednesday that it will invest $5-billion in Canopy Growth Corp. to help propel the Canadian company’s international growth plans. Constellation chief executive officer Rob Sands, whose firm makes brands such as Corona beer and Black Velvet whisky, said cannabis markets around the world are “opening up much more rapidly than appreciated.”

The investment, by far the single largest financing of any cannabis producer, could give Constellation ownership of more than 50 per cent of Canopy’s shares, if the booze manufacturer chooses to exercise warrants it gets as part of the deal.

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Constellation was the first big name in alcohol to make a large move into cannabis, when it invested an initial $245-million in Canopy last fall. Other alcohol companies have begun edging into the sector as well.

At the start of August, Molson Coors Brewing Co., after months of eyeing legal cannabis in Canada, concluded it had no choice but to follow. North America’s No. 2 beer maker announced a joint venture with marijuana grower Hydropothecary Corp. of Gatineau, Que. The two companies plan to produce cannabis-infused non-alcoholic drinks. The news came on the same day that Molson reported another quarter of falling beer sales in Canada and the United States. Its shares have lost a quarter of their value in the past year.

The strategic shifts come at a difficult time for beer: In Canada, it remains the biggest segment of the alcohol market, at about $9-billion a year in sales, ahead of $7-billion for wine and $5-billion for spirits – but growth has been stagnant and the beverage’s market share over the past decade has slid to about 40 per cent from about 45 per cent, with wine making most of the gains. The same thing is playing out in the United States, where per-capita beer consumption is down almost 10 per cent this decade. The legalization of marijuana in Canada in October – with edibles, including cannabis beverages, expected to join next year – is seen as a significant threat to the booze business in general and beer makers in particular.

Molson CEO Mark Hunter, speaking to analysts and investors on Aug. 1, said the question the brewer weighed about getting into cannabis was simple: “Do we want to be a spectator or a participant?”

Vivien Azer of Cowen and Co. in New York has been recommending stocks of cannabis companies and warning of challenges for alcohol producers. Among the trends she sees is young adults more open to cannabis and more skeptical of alcohol, as well as drinkers consuming less in single sittings.

“We believe alcohol could be under pressure for the next decade,” Ms. Azer said in a report.

Other analysts see a more nuanced situation.

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“Cannabis is not new for many adults. Legal cannabis is new,” said Jessica Lukas, vice-president of consumer insights at BDS Analytics, a consultancy in Boulder, Colo. “The idea that a dollar spent in cannabis is a dollar taken away from alcohol is an incorrect assumption. It’s much more complex.”

Making a cannabis beer

Keith Villa is a beer guy. In 1995, working for Coors Brewing Co. in Colorado, Mr. Villa created Blue Moon, a Belgian-style wheat ale. It caught on and for years has been poured from draft taps across the United States.

Six years ago, when Coloradans voted on the question of legal recreational cannabis, Mr. Villa voted no. But his views have evolved: He realized cannabis wasn’t some terrible thing. After Mr. Villa retired from three decades in the beer business, he co-founded Ceria Beverages, which is set to introduce a line of cannabis-infused non-alcoholic beers later this year in Colorado. Ceria, which is infused with THC, the primary psychoactive compound in cannabis, aims to mimic a regular beer, where the buzz comes on and fades over a short period of time. Other beverage makers are working with cannabidiol (CBD), which doesn’t get a user high but produces a relaxed feeling.

In states where it’s legal, cannabis beverages, from sodas to coffee, currently represent a small fraction of the overall legal marijuana market. But backers of cannabis beer, and the likes of Molson, believe their product has a big future as marijuana use becomes more common. BDS Analytics tallied beverage sales growth of about 12 per cent annually in the past several years.

“It’s a whole new area for malt beverages,” Mr. Villa said. “What I saw with cannabis, it has a lot of potential.”

Mr. Villa is set to make three versions, THC beers with a mild hit (in the range of five milligrams), a medium feeling (10 mg) and a stronger result (15 mg). By comparison, a joint with half a gram of cannabis would be roughly in the range of 40 milligrams of THC.

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Bruce Linton, CEO of Canopy, on Wednesday talked about using some of the money Constellation invested in his company for beverages in Canada, saying infrastructure such as a bottling line is needed to produce beverages in attractive bottles. At the Constellation annual meeting in mid-July, CEO Mr. Sands said: “Our plans are to jointly develop cannabis-infused non-alcoholic beverages to market globally where legal at all government levels.”

Molson also wants to parlay its experience in Canada elsewhere, said Mr. Hunter, its CEO. But in the United States, even with big states such as California now home to legal cannabis, it is not legal federally, so Molson is cautious. “As a federally regulated company, we will tread very, very carefully,” Mr. Hunter said. The field, for now, is mostly left open for smaller players working in specific states.

As beer makers look at cannabis, cannabis growers are looking at beer. Aurora Cannabis Inc. has held talks with Steam Whistle Brewing about a potential acquisition and has plans for cannabis-infused beverages, a market Aurora’s chief corporate officer Cam Battley believes will be huge, especially since cannabis drinks have fewer calories than beer or wine.

In the United States, the cannabis-beer market has started to unfold in several states. Cannabiniers, a San Diego company, is introducing Two Roots Brewing this summer. The goal is to sell four million cans annually in California and adjacent Nevada, for US$5 each. The 300-millilitre cans, available in beer styles such as lager and IPA, have a dose of 2.5 mg.

“It allows you to have a few in a sitting,” said Kevin Love, director of product development.

Cannabiniers is working with partners in different states and has spoken with industry people in Canada.

“We could hit the repeat button and be in Canada,” Mr. Love said.

Cannabis versus beer

As the niche cannabis-beverages market emerges, and beer sales in general are flagging, the dynamic between beer and cannabis is evolving. Some reports have suggested beer sales specifically and alcohol sales in general have declined because of legal cannabis. However, government and industry data show they have increased in Colorado, Washington and Oregon, where legalization has played out for several years. In such states, however, alcohol, as well as cannabis, have been buoyed in part by population and economic growth.

In Colorado, where cannabis has been legal the longest, since the start of 2014, total alcohol sales have risen each year. Beer declined in 2014, the first year of legalization, but has risen since. In Washington, where the legal sale of cannabis started in mid-2014, beer consumption increased 10 per cent between 2013 and 2017, according to figures compiled by the Brewers Association and the Beer Institute, a national trade group. In Oregon, where legal cannabis became available in late 2015, beer sales rose 2 per cent between 2015 and 2017.

There are different levels of worry in the beer business. Among craft brewers, for example, which have seen sales climb this decade, there isn’t much fretting. The feeling is upstart craft brewers are growing quickly and their gains are made against taking market share from big brewers such as Molson.

Economist Luke Harford, president of industry lobby group Beer Canada, is more worried about rising taxes on beer and noted Canada already has a high rate of cannabis usage – which according to Statistics Canada is about one in seven Canadians, higher than most countries.

“The impact on beer is probably, to a certain extent, baked in, has been felt for some time,” Mr. Harford said. “But in terms of sales, I don’t see how it can’t affect the envelope of money Canadians have to spend.”

Molson, whose main problem is declines in flagship brands such Coors Light, wants to get ahead of any potential hit. Fred Landtmeters, CEO of the company’s Canadian business, said in early August that consumers’ acceptance of cannabis is rising, a trend the beer maker says will continue. But when asked whether cannabis has or will cut in to beer, he said: “It’s really difficult to evaluate.”

Paul Seaborn, a professor at the University of Denver who teaches a Business of Marijuana course, said he has not seen cannabis take a cut from alcohol. “There hasn’t been evidence one has pushed out the other,” he said.

Mr. Seaborn also noted that 4½ years after legalization, cannabis sales growth has slowed to the low single digits in Colorado. He thinks the competitive dynamic between alcohol and cannabis will shift as the state loosens restrictions, which generally limit consumption to private homes.

This is what some large alcohol companies, and upstart cannabis beer makers such as Mr. Villa’s Ceria, are eyeing. They hope to start drawing consumers in settings such as summer barbecues, where a person might choose a cannabis beverage over a beer, or a Friday night when friends gather at home to watch a movie and drink one or two fewer beers in favour of a cannabis beverage.

“They can complement each other,” Mr. Villa said. “It gives consumers more choice.”

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