I was poking thru the annual report for Constellation Brands (STZ) and came across an interesting tidbit.  Constellation Brands is primarily a beer and wine company.  Popular beer brands it owns are Corona, Modelo, and Pacifico, as well as some craft brews.  It owns some major wine and spirits brands too, such as Kim Crawford, Robert Mondavi, SVEDKA Vodka and others.  It is a big company with a market cap of 42 billion and net income of 2.31 billion in 2017.

As  I was reading thru the report trying to figure out if I wanted to add it to my watch list, I came across this in the recent acquisitions section:

Corporate Operations and Other Segment
Canopy Growth Corporation investment		November 2017		Investment in Ontario, Canada-based public company; leading provider of medicinal cannabis products; supported our long-term strategy to identify, meet and stay ahead of evolving consumer trends and market dynamics.

This was a pretty understated note, but it seems like they are dipping their toes in the water to see it if make sense to be in the cannabis business.  As an investor, it seems to me that if you want to place a bet that the cannabis business will be a great investment in the coming years, this may be an interesting way to play it.  There are numerous cannabis growing and marketing stocks out there, but they seem pretty risky, and more hype than revenue.

A couple more interesting comments in the annual report on this investment:

We have also recently invested in a Canadian company that manufactures and supplies medicinal cannabis. While we will not develop, distribute, manufacture or sell cannabis products in the U.S., or anywhere else in the world, unless it is legally permissible to do so at all governmental levels in the particular jurisdiction, this investment could affect consumer perception of our existing brands and our reputation with various constituencies.

It looks to me like they have not yet fully embraced this new market, at least publicly, and they want to make sure this market doesn’t tarnish their other brands.  Also (emphasis mine),

In November 2017, we acquired (i)  a 9.9% investment in Ontario, Canada-based Canopy Growth Corporation, a public company and leading provider of medicinal cannabis products (the “Canopy Investment”), and (ii)  warrants which give us the option to purchase an additional ownership interest in Canopy Growth Corporation (the “Canopy Warrants”) for C$245.0 million , or $191.3 million . The Canopy Warrants expire in May 2020 . For the year ended February 28, 2018 , we recognized an unrealized gain of $464.3 million from the changes in fair value of the Canopy Investment and the Canopy Warrants, which is included in income from unconsolidated investments.

I couldn’t find how much they paid for this investment, but in four months they made 464 million on this investment.  So their initial foray into this market is pretty successful, even if they don’t market cannabis themselves.

So if you are a believer that cannabis will have a place in the worlds leisure culture next to alcohol, Constellation Brands may be an interesting investment.  While clearly not a pure play in cannabis, they have the distribution and marketing infrastructure in place to really build the market.