Investors in Canopy Growth (NYSE :), (TSX :), who have held onto the severe downturn in the cannabis industry, raise a glass in a small celebration to the news that the company's partnership with the US-based Acreage Holdings (OTC 🙂 could fuel expansion into the United States earlier than expected.
Last week, the Ontario-based cannabis giant announced that its new, amended agreement with Acreage Holdings will see its adult drinks on US store shelves by the following day. This marks an important step forward in expanding the reach of the retail industry.
According to the announcement, Canopy has plans in partnership with Acreage Holdings to distribute cannabis-infused beverages in some US markets by mid-2021. The plan is to remove the canned drinks – which contain THC, the psychoactive element of marijuana that will deliver the & # 39; high & # 39; produces – to be rolled out in Illinois and California, states that have already legalized cannabis. The drinks will initially be available in dispensaries, but will eventually be available for purchase in liquor stores and other secret outlets.
Bill Van Faasen, interim CEO of Acreage Holdings said:
"We see THC-infused beverages as a game-changer in US cannabis, and we are excited to launch Canopy Growth & # 39; s unique beverage offering next year in our core markets with the greatest growth potential."
The drinks are already available in Canada, where Canopy controls an estimated 74% of the cannabis adult beverage market, according to Canopy CEO David Klein. The amount of THC in the drinks allows people to experience a buzz similar to wine or beer, but without the next day's hangover effect, the company said.
The announcement clearly illustrates the benefits of Canopy & # 39; s acclaimed deals, which have led to a dramatic rise in market share in the past. The creation of the adult beverages, which was supported by its major US investor Constellation Brands (NYSE :), the maker of Corona beer, will now be driven by Acreage's move to build manufacturing operations to scale the beverages. to produce.
In April 2019, Acreage signed a multi-billion dollar deal with Canopy when the US federally legalized marijuana. The two companies have since revised the pact, saving Canopy money and speeding up the synergy they create.
Under the terms of the original agreement between Canopy and Acreage, Canopy should earn more than $ 300 million. advance payments to Areaal shareholders. Under the terms of the new agreement, Canopy fired approximately $ 37.5 million. That makes a big difference to the.
Shares of Canopy have gained just over 6% since it announced the details of the new agreement to work with Acreage. However, the stock is still down, by more than 34% in the past year.
In media reports, RBC Capital Markets analyst Douglas Miehm predicts a likely expansion of the legal cannabis market with the launch of Canopy's new beverages. It's a safe bet as cannabis-infused drinks only make up about 2% of that market.
According to the 21 Wall Street analysts who have issued reviews and price targets for Canopy Growth in the past year, the average target is $ 17.98, which is about 20% from Tuesday's closing price of $ 14.94.
