Cannabis Drinks Boost Sales for Constellation-Backed Canopy

(Bloomberg) -- Canopy Growth Corp., the cannabis company that attracted Corona beer producer Constellation Brands Inc. as an investor, is planning to introduce cannabis beverages in the U.S. after reporting strong demand in Canada.

With interest rising in Canopy’s cannabis-infused drinks like Tweed, the company is boosting output. Canopy’s beverage production doubled in July from June, and officials anticipate this will double again in August, Chief Executive Officer David Klein said on a conference call with analysts Monday. The company is also planning to expand its drink offerings, and U.S. distribution will be handled by Acreage Holdings Inc.

The strong beverage sales helped boost Canopy’s revenue in the quarter ended June 30. Constellation Brands, which also makes Modelo Especial beer and Svedka vodka, has a 39% equity stake in Canopy, and stands to benefit from Canopy’s success. Canopy shares rose as much as 13% on Monday.

Canopy is looking for new ways to stand out amid an increasingly crowded field of CBD and cannabis products. In an interview, Klein said that the company is tailoring its drinks to produce difference experiences for users -- for example, some can produce “an uplifting or relaxing effect.”

The Smiths Falls, Ontario-based company is targeting gross margin of 40% or more -- much wider than the 6% it reported last quarter.

There’s a significant hurdle to this goal, however: The current economic environment is causing consumers to demand cheaper raw cannabis flower. This is prompting Canopy to introduce more “value” products.

The company seeks to help offset this with a launch of CBD products with Martha Stewart, who joined the company as an adviser in 2019. Martha Stewart-branded products will go on sale within the next month on the company’s website, Klein said. He added that the products’ name and quality will help them to stand out in the U.S. market.

“We believe as consumers try brands like the Martha Stewart brands, they will notice the difference,” he said. “There’s an effect you feel when you consume the Martha Stewart gummies that you don’t get when you consume other product in the space.”

In addition to the gummies, the Martha Stewart line will include gels and oils. A line of CBD products for pets will arrive by the end of the year.

CBD, an abbreviation for cannabidiol, doesn’t give a high and can be derived from either hemp or marijuana. Pitched as a natural way to mitigate anxiety, insomnia, inflammation and other ailments, it’s showing up in everything from beauty creams and bath bombs to vape pens, seltzer and snacks.

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