Category Archives: Guilty Pleasures

Mondelēz taps into 3 more of our investment themes

Mondelēz taps into 3 more of our investment themes

Mondelez International (MDLZ) often floats to the top of the conversation whenever we dig into our Guilty Pleasures investment theme — Cadbury Creme Eggs, Oreos,  Nutter Butters, Toblerone . . . these pieces of heaven here on earth are all part of the Mondelez empire and are perfect representatives of those products and services consumers will buy no matter what the economic environment.

But at the same time, the snacking giant focuses its business around a core concept of “empowering people to snack right by offering the right snack, at the right time, in the right way”. That is why this new initiative announced by Mondelez caught our attention as it taps into three more of our investment themes:

DEERFIELD, Ill., Oct. 30, 2018 (GLOBE NEWSWIRE) — Mondelēz International announced today that it will launch a forward-thinking innovation hub called SnackFutures to capitalize on changing consumer trends and emerging growth opportunities in snacking around the world. . . . For the program’s initial innovation projects, SnackFutures will seek entrepreneurs, suppliers, nutritionists, food and technology engineers and other potential partners to collaborate on opportunities in three key strategic areas:

  1. Well-being snacks and ingredients
  2. Premium snacks and ingredients
  3. Digital platforms and capabilities

Read full press release: Mondelēz International Launches SnackFutures™ Innovation Hub to Lead the Future of Snacking | Mondelēz International, Inc.

 

The three themes this initiative taps into, of course, are  Clean Living (“Well-being snacks”), Living the Life (“Premium snacks”) and Digital Lifestyle (“Digital Platforms”).  While all of our themes reflect pronounced secular market shifts, these three, in particular, are having a profound impact at the grocery store these days. Clean Living is changing the foods we eat as consumer are choosing natural, organic, non-GMO and even gluten-free foods at the grocery store, while specifically avoiding those foods containing an overabundance of preservatives, artificial sweeteners, saturated fats and chemicals in an effort to achieve a feeling of health and well-being as well as weight-loss in many cases. Mondelez has already begun this movement with acquisitions of brands such as Enjoy Life as well as “natural” versions of its Ritz, Wheat Thins and other Nabisco branded products.

Hershey says candy prices are going higher

Hershey says candy prices are going higher

The toll of higher freight costs and other inputs is pushing many companies to announce price increases, including Guilty Pleasure company Hershey Co. We’ve seen this in the past from the company behind the Almond Bar, Kisses, Kit-Kat and Twizzlers, but in our collective memory, we haven’t seen a price decrease. Maybe some specials here and there, but the net of it is candy prices have climbed over the last several years. Why? Because of the inelastic demand dynamics for most consumers, which means a sect of consumers will buy no matter what the price much the way there are consumers of tobacco that will buy a pack of smokes even as they continue to climb in price.

At the margin, there are likely some Middle-class Squeeze customers that will downshift to lower quality and store brand candy from Hershey as the company continues to contend with repositioning its business in response to our Clean Living investing theme.

 

Hershey Co. has revealed that it will raise its prices on chocolate to offset costs.

Higher freight prices boosted Hershey’s cost in the third quarter and the issue will most likely persist into 2019, Chief Executive Michele Buck said Thursday (October 25).

Many consumer product companies have raised prices lately because of freight costs, Buck said in an interview, according to the Wall Street Journal. “Based on what we know from our experience and what we’ve heard, it seems to be going okay. Retailers understand that when costs go up, something has to give.”

With Halloween and the holidays approaching, Hershey’s expects sales to be stronger from new candy offerings such as hot cocoa-flavored Kisses, and next year, it is releasing a thinner Reese’s Peanut Butter Cup. The company is also looking beyond sweets. In January it acquired the owner of SkinnyPop popcorn and snacks, Amplify Snack Brands, for $1.6 billion including debt, its largest deal. And in September, Hershey’s agreed to buy the maker of Pirate’s Booty for $420 million.

Source: Hershey Raises Chocolate Prices To Offset Costs | PYMNTS.com

McDonald’s takes steps to offer better burgers

McDonald’s takes steps to offer better burgers

While we would pause to say McDonald’s is a contender for our Clean Living investment theme, the company continues to overhaul its food offerings, making them a “better” Guilty Pleasure choice for consumers. Yes, it would be a stretch to call those now artificial ingredient free burgers “healthy” but we do applaud McDonald’s efforts to improve the quality of its products by making more of them free of artificial preservatives, artificial flavors, and added colors. And while they’ve dealt with the cheese and buns, one has to wonder how and when they will handle their pickles…

Given the herd like mentality across competitors, now to see how long until Burger King and others follow suit.

McDonald’s announced today that it has officially removed all artificial ingredients from its burgers, including regular burgers, cheeseburgers, double cheeseburgers, Big Macs, Quarter Pounders, Quater Pounders with cheese, and Double Quarter Pounder with Cheese.

All the ingredients in these burgers—that means the American Cheese, the Special Sauce, and all the buns, including plain, sesame and Big Mac—will be free of artificial preservatives, artificial flavors, and added colors. Specifically, there’s no more sorbic acid in the cheese; no more potassium sorbate, sodium benzoate, and calcium disodium EDTA in the Special Sauce; and no more calcium propionate in the buns, USA Today reports.

Now, McDonald’s, with its 14,000 U.S. locations, says that a full two-thirds of its burgers and sandwiches are totally natural. 

The remaining one-third is bad news for breakfast fans who want to “eat clean.” The Egg McMuffin; Bacon, Egg & Cheese Biscuit; and Bacon, Egg & Cheese McGriddles, among other sandwiches, still contain artificial ingredients.

Source: McDonald’s Nixes Artificial Ingredients from Its Burgers | Food & Wine

Cannabis-infused beverages catch growing attention, including Coca-Cola’s

Cannabis-infused beverages catch growing attention, including Coca-Cola’s

Cannabis is catching a lot of attention this week following the news that even Coca-Cola is considering cannabis-infused drinks. While Coca-Cola isn’t the first company to consider tapping into the increasingly legal market, much like the tobacco company Altria (MO), home of Marlboro cigarettes, it is facing a waning market for its core sugary and artificially sweetened beverages as more consumers embrace healthy and better for you beverages and products that are part of our Clean Living investing theme. In recent months, we’ve seen a flurry of M&A activity as companies look to ride that Clean Living tailwind. Starbucks has taken to promoting its lower-calorie Cold Brew and tea products and is bringing its own kombucha product into its stores.

In some respects, Coca-Cola and Altria are looking to trade one Guilty Pleasure for another, while tapping into a new growth category that is benefitting from growing legalization of cannabis.

We are still in the early innings of the cannabis market, and odds are there will be much M&A activity to be had as those legal barriers continue to fall. If history holds, it means larger companies with the scale and scope to bring national distribution if not the international distribution will be those left standing in the coming years.

Coca-Cola Company is closely monitoring the rapidly growing marijuana-infused drinks market with the goal to take an entry to intensify its efforts to moving away from sugary sodas. This is part of Coca-Cola’s attempts to tap into markets outside its signature fizzy drinks in a bid to associate the brand with healthier options.

Earlier this week, Coca-Cola responded to a BNN Bloomberg report mentioning the company’s talks with Canada-based cannabis producer Aurora Cannabis to develop cannabidiol-infused beverages. Cannabidiol (CBD) is a non-psychoactive chemical present in marijuana.

Both Coca-Cola and Aurora denied sharing any specifics, but expressed their interest to enter the infused beverage market.

Coke isn’t the first beverage maker to notice the potential of cannabis-infused drinks. The constant change in consumer preferences has made the beverage industry look for new options, and cannabis-infused drinks attracted their attention too.

The inclination toward healthier drinks has made soda sales drop to its lowest level in more than 30 years in the United States, according to a Bloomberg report.

According to a report by BDS Analytics, sales of cannabis-infused drinks hit $35.6 million in 2017 across Colorado, California, Washington and Oregon with many states reporting rapid growth. This fast-growing segment of beverage industry bets on the health benefits of cannabidiol.

According to the American Cancer Society, CBD reduces inflammation and pain treats seizures and even inhibits rapid spread of cancer.

As more consumers switch their sodas for cannabidiol-infused beverages, it makes the segment extremely lucrative. Many brewing businesses such as Heineken HEINY-owned Lagunitas Brewing Company, Molson Coors Brewing Company TAP and Corona beer maker Constellation Brands STZ are coming up with variants of marijuana-infused drinks to emerge as the biggest players in the new industry.

Source: Coke Eyes Cannabis-Infused Beverages, Will Others Follow?

Hershey’s transformation continues with the purchase of Pirate’s Booty but…

Hershey’s transformation continues with the purchase of Pirate’s Booty but…

With sugar under attack as well as the overall shift toward healthier for you foods, snacks, and beverages that are part of our Clean Living investing theme, it comes as little surprise to us that candy company Hershey continues to scoop up companies outside of its bread and butter candy business. The thing is Hershey is but the latest company that is opening up its purse strings, using its balance sheet to transform the company’s business. And while Pirate’s Booty would be its third acquisition that meshes with our Clean Living investing theme, Hershey has a long way to go until it puts a dent into its overall revenue stream that is expected to hit $7.8 billion this year.

 

 

Hershey Co. plans to buy Pirate’s Booty cheese puffs from B&G Foods Inc. BGS 0.94% in a $420 million deal, the companies said Wednesday.

Pirate Brands, which also includes Smart Puffs and Original Tings, will add to Hershey’s growing roster of salty snacks.

Hershey has been working to diversify its business beyond candy and chocolate for the past several years as consumer tastes shift toward healthier snacks.

Hershey bought SkinnyPop popcorn ownerAmplify Snack Brands Inc. in January in a $1.6 billion deal, including debt, its largest acquisition ever.

Prior to that, it bought Krave jerky and expanded into the faster-growing snack aisle with new products like Reese’s pretzel-nut-and-chocolate snack mixes.

Source: Hershey to Buy Pirate’s Booty Maker for $420 Million – WSJ

Guilty Pleasures: the affordable treats that bring a moment of happiness

Guilty Pleasures: the affordable treats that bring a moment of happiness

 

There are several notions as to what constitutes a guilty pleasure. One definition is something one enjoys but would be embarrassed to have others know, while another is enjoying something even though it may not be held in high regard or may not be good for you. As one might expect there are a number of guilty pleasures to be had, ranging from certain films and TV programs (like the Bachelor, but we don’t judge), products ranging from tobacco, alcohol and marijuana to fast food, coffee and sugary treats as well as gambling and video games.

Some may label these as “vice” stocks, but that category tends to be limited to alcohol, gaming and tobacco and has a pejorative connotation vs. the little affordable treats and pleasures that bring a moment of enjoyment and happiness as well as much needed relief at certain times. By their nature, these guilty pleasures are ones that people will consume no matter the tone of the economic environment. In other words, they tend to be inelastic goods, and more often than not the companies behind them tend to be characterized as healthy cash flow generators and dividend payers.

These companies and brands differ from our Living the Life investing theme in that the pleasure derived is not a function of the premium price or image, but rather simply from the product or experience itself. Part of the joy of owning a Prada bag is having others see it whereas a guilty pleasure may be and often is, enjoyed in private.

In our view, Tematica’s Guilty Pleasure investing theme, like all of our other investing themes, cuts across several traditional Wall Street industry sectors, as the concept focuses on those companies that bring the kinds of products that consumers won’t do without, regardless of the economic climate. With that in mind, it should come as little surprise that the guilty pleasure group of stocks held up well during the last two recessions and performed even better on a relative basis when compared to several stock market indices. A 2009, report by Merrill Lynch that examined the performance of tobacco, alcohol, and casino stocks during all of the recessions since 1970 found that while the broad S&P 500 fell by 1.5% on average, guilty pleasure stocks rose on average 11%. During the great tech meltdown, the broad market fell 20% between June 2001 and June 2002, but during that time tobacco stocks gained 8% and gambling related stocks nearly 20%.

The inelastic nature of the products produced by these guilty pleasure companies has enabled them to weather price increases better than other products and services that are considered to be more of a commodity in nature. Perhaps the best example is in the tobacco industry. Consider that while the domestic tobacco business is in a decline as more people become aware of the health effects of smoking on their well-being and taxes are raised each year on cigarettes, price increases more than offset the decline in volume consumption by customers. Another example: despite the increasing concern over sugar as part of our diets, chocolate companies like Hershey Co., have been able to pass through price increases to offset any combination of higher raw material, fuel, utilities, and transportation costs.

When the price of key inputs of these guilty pleasure products, (such as commodities like coffee, beef, sugar, or cocoa) decline after a period of upward movement , the combination of lower input costs and prior price increases tends to deliver better margins, profit generation, EPS growth and cash flow. Think about it … when was the last time you saw the price of a beverage at Starbucks or the price for a package of Oreos decline? Demand for these products is such that rising costs are passed onto the consumer, but declining costs don’t result in much downward pricing pressure. Your wallet and your taste buds know what we’re talking about…

 

Altria: A Guilty Pleasure stock and a dividend dynamo as well

As mentioned above, tobacco is universally known to be harmful, yet people continue to smoke in one form or another. The US tobacco market saw a slight decline in volume sales and a slight increase in value sales in 2017 as Americans slowly continued to reduce their tobacco consumption, perhaps in part due to our Clean Living investment theme, while producers increased prices to maintain profits.

Big Tobacco has long been under threat from the steady decline of smoking, particularly in the developed world. But in recent years, the industry has been able to push through price increases to make up for falling volumes — boosting both their profits and stock prices. Those profits and cash flow have allowed tobacco companies to invest in smoking alternatives (e-cigarettes, vape pens and other devices) that deliver nicotine without as many of the harmful effects that come with lighting up as well as return capital to shareholders in the form of share repurchases and increasing dividends.

One such stock that falls into that grouping is Altria (MO), which is best known for cigarettes (primarily the Marlboro brand that has 43% market share in the US) and smokeless tobacco products (Copenhagen, Skoal, Red Seal, and Husky brands) and to a lesser extent wine under the brands Chateau Ste. Michelle, Columbia Crest, and 14 Hands. In the US, Altria has commanded 50%-51% of the cigarette market over the last year, and while primarily known for that product category, in cigars, the company has a 26% share with its large machine-made Black & Mild brand. In smokeless products, it has 55% share with the Copenhagen (32%) and Skoal (19%) brands.

Digging into Altria’s financials, roughly 85% of its revenue and profits are drawn from the smokeable products business, with smokeless accounting for 11% of sales and growing, and 14% of its operating profit. What that tells us is the smokeless products are a higher margin business for the company, thus a continued shift toward that product line bodes well for Altria’s profits and cashflow. Rounding out the revenue and profit mix at just under 4% and 1%, respectively, is the company’s wine business. What that business mix analysis tells us is even though we may hear some talk of the non-smokeable product potential, at least in the near-term, Altria is a smokeable product company.

That means we can expect additional tobacco taxes and further cigarette price hikes. As we’ve seen in the past, that should translate into rising profits, continued share buybacks and dividend increases. Current consensus estimates have Altria achieving EPS of $4.35 in 2019, up from $4.05 this year and $3.39 in 2017. Helping those EPS comparisons, during the June 2018 quarter, Altria repurchased 7.6 million shares at an average price of $57.65 and exiting that quarter, Altria had slightly more than $1 billion remaining in the current $2 billion share repurchase program. Management signaled it expects to complete that program by the end of the second quarter of 2019. As simple math shows us, shrinking share counts do wonders for EPS and their comparisons.

In terms of dividends, Altria recently announced it was boosting its quarterly dividend by 14% to $0.80 per share from the prior $0.70 per share – offering up a dividend yield of just over 5.4%. That marked the 53rd increase in the company’s dividend since 1968, which qualifies the company as a dividend dynamo company – one that increases its dividend year in, year out. That increase tends to lead to a step function higher in the share price overtime, something we’ve witnessed time and time again with Tematica Select List resident McCormick & Co. (MKC). With Altria, this latest dividend increase puts its annual 2018 dividend at $3.00, up from $2.00 in 2014.

If we look at other Guilty Pleasure stocks such as Hershey (HSY), Molson Coors (TAP), Constellation Brands (STZ) and your choice of a gaming company, the dividend yield range is 1.7% to 2.9%. If Altria shares traded in that dividend yield band, it would result in a share price well north of $100. Historically Altria shares have traded in the average dividend yield range of 3.74% to 4.8% over the last several years, which would suggest upside to $81 and downside to $63, which is well above the current share price.

Even after this latest quarterly dividend increase, Altria’s dividend payout remains close to 73% based on expected EPS of $4.35 in 2019 (vs. $3.39 in 2017) leaving ample room for additional dividend increases in the coming years. For example, if Altria kept its dividend payout ratio intact and achieved expected 2020 EPS of $4.70, it could mean a quarterly dividend of more than $0.85 per share. That would imply a potential annual dividend in the range of $3.30-$3.40, and further upside to be had in MO shares over the coming several quarters.

That’s a Guilty Pleasure company worth holding onto, especially if it manages to further transform its business from a tobacco centric one to something more evenly divided between smokeable and smokeless products. There is also the likely prospect of Altria entering the cannabis space as the legal status of marijuana continues to expand in the US. In many ways that move is a natural extension of its existing skill set – tobacco growth, processing, packaging and distribution – and it fits with the guilty pleasure framework of Altria’s business focus.

  • We are issuing a Buy on the shares of Altria (MO) and adding them to the Tematica Investing Select List with an $81 price target.

 

Companies riding the Guilty Pleasure Tailwind

  • ALTRIA (MO)
  • ANHEUSER-BUSCH (BUD)
  • BRITISH TOBACCO (BTI)
  • BROWN-FORMAN (BF.B
  • CAESAR’S ENTERTAINMENT (CZR)
  • CONSTELLATION BRANDS (STZ)
  • CRAFT BREW ALLIANCE (BREW)
  • DIAGEO PLC (DEO)
  • DOMINO’S (DPZ)
  • DUNKIN BRANDS (DNKN)
  • HERSHEY COMPANY (HSY)
  • L BRANDS (LB)
  • LAS VEGAS SANDS (LVS)
  • MCDONALD’S (MCD)
  • MELCO RESORTS AND ENTERTAINMENT (MLCO)
  • MGM RESORTS (MGM)
  • MOLSON COORS (TAP)
  • PEPSICO (PEP)
  • SHAKE SHACK (SHAK)
  • STARBUCKS (SBUX)

 

Tobacco Giant Altria exploring expanding its Guilty Pleasure reach with cannabis

Tobacco Giant Altria exploring expanding its Guilty Pleasure reach with cannabis

After our recent podcast in which we talked with Bill Kelly from AgriCascadia about the cannabis industry, it comes as little surprise to us that Guilty Pleasure company Altria and others in the tobacco industry are “exploring” entry into the cannabis space. From our perspective, Big Tobacco has the manufacturing scale and distribution reach currently lacking in the cannabis industry. Odds are, however, we’ll need to see federal regulations against cannabis be lifted before M&A activity heats up.

Tobacco giant Altria, parent company of Phillip Morris and owner of many popular cigarette brands, is “exploring options” within the cannabis industry, company executives said Wednesday.

At the Barclays Global Consumer Staples Conference in Boston, Billy Gifford, Altria’s vice chairman and chief financial officer, and Murray Garnick, executive vice president and general counsel, fielded several questions from a Barclays analyst as well as an audience member regarding the company’s aims on cannabis.

Interest from mainstream consumer companies in the marijuana industry is at an all-time high, following several high-profile investments. Tobacco industry players have been eyeing marijuana since at least the early 1970s, according to documents unearthed by researchers at the University of California, San Francisco.

But so far, only alcohol-industry giants have gone as far as to invest in cannabis. Constellation Brands, for example, recently took a large stake in cannabis company Canopy Growth Corp.

There is reason to believe the Altria executives may be choosing to be deliberately coy.

Their predecessors recognized marijuana as an “alternate, and perhaps a superior, method of satisfying the needs that cigarette smoking satisfies,” according to an internal Philip Morris memo from 1970.

Since then, the company’s bottom line has been hit hard by public health laws that severely restrict and heavily tax cigarette use.

As Barclays’ analyst noted during Wednesday’s event, the tobacco industry is feeling the pain: Stocks in tobacco firms are down about 20 percent all-around, with Altria’s stock prices down 18 percent.

In 2016, after telling VICE that the company had “no plans to sell marijuana products,” Philip Morris International invested $20 million into Syqe Medical, a Israel-based company that produces 3D-printed cannabis inhalers.

Source: Tobacco Giant Altria Is ‘Exploring Options’ On Marijuana | Marijuana Moment

With Its Games No Longer “Destination TV”, the NFL Goes Where the Fans Are

With Its Games No Longer “Destination TV”, the NFL Goes Where the Fans Are

 

Much has been made about the declining ratings in the NFL over the past two seasons and its causes. Cord-cutting, political protests, distaste for the violent hits, the fact that your team hasn’t had an 11-win season since 1991 . . . no matter what the cause, fewer and fewer folks plopped down on the couch to take in a game last season and that has owners concerned. Who wouldn’t be concerned when you have a reported $14 billion in annual revenue on the table?

Well, at least on the cord-cutting front, the NFL is mobilizing itself and ensuring its product is in front of viewers no matter where they are:

The National Football League’s regular season kicks off Thursday, but there’s still time for those who don’t have cable or pay TV to devise a game plan to watch online.This season, fans have more options than in the past to stream local and primetime games on their phones and other Net-connected devices.That strategy could be a move to tackle declining NFL ratings and a growing audience of viewers without traditional pay TV. While down, NFL games still are among the most-watched TV broadcasts.”They are trying to reach every possible viewer, partially because of ratings and partially because there are simply more ways to watch now,” said Phil Swann, publisher of TheTVAnswerman.com, a TV news site.For starters, it will be a lot easier to watch a lot of games, including those featuring your local team, on your mobile device this season. In the past, only Verizon wireless customers could watch local and primetime NFL games on their smartphones and tablets.

Read full article: For cord cutters, an improved NFL streaming strategy this season

 

The National Football League is embracing our Digital Lifestyle investment theme and going where the viewers are. Amazon (AMZN) will be streaming Thursday night NFL games and wireless customers can stream Sunday in-market games for free using the NFL mobile or Yahoo Sports apps (data usage fees apply). Hulu, YouTubeTV, PlayStation Vue, DirectTV Now, Fubu TV — all can be used in one way or another to access almost as much football a fan could want. Almost.

With all these available options for streaming games, we’ll know at least if cord-cutting is the culprit impacting viewership of the NFL games or not.  Of course, the NFL owners aren’t too worried about their pots of gold. With the Supreme Court ruling in May allowing states to legalize sports gambling, we soon could see the NFL riding another one of our investment themes, Guilty Pleasures.

Soft and hard seltzers gaining share and quenching consumer thirst

Soft and hard seltzers gaining share and quenching consumer thirst

When companies ranging from PepsiCo and Coca-Cola add aggressively to their product portfolio it likely means we are at or near an inflection point in terms of consumer preference. That is what we are seeing with flavored seltzers given PepsiCo’s 2018 introduction of its bubly Sparkling Water, its more recent acquisition of SodaStream and Coca-Cola testing its Dasani PureFill machine. Those perusing the shopping aisles may have noticed the influx of seltzer flavors but the observant shopper probably noticed the growing number of hard seltzers being offers from Spiked Seltzer, Nauti, and others. One has to wonder how long it will be until these Guilty Pleasures catch the eye of companies like Molson Coors and Constellation Brands.

 

While sparkling water on the whole has seen impressive growth, canned sparkling water in particular has emerged as a huge contributor to category performance. Nielsen reference data by package type shows that while bottled sparkling water commands the majority of dollar sales (64% of all sparkling water sales were from bottled varieties), canned sparkling water has performed exceptionally well this year, up 43% from last year to reach sales of over $803 million. And the week ended Aug. 18, 2018, saw sales of over $21 million for canned sparkling water, up 39% compared to the same week last year, whereas bottled sparkling water is up 11% during the same period. Above and beyond the effects of rising aluminum prices, growth in canned sparkling water is driving the category’s profits.

Stretching across the store, hard seltzers is a category on the rise in the alcohol market. Within the last 12 months ended July 14, 2018, sales of hard seltzers are up 177%. In fact, hard seltzers now represent about 10% of all flavored malt beverage (FMB) sales.

Renewed interest in sparkling waters is yet another reflection of consumers’ ongoing shift toward opting to make healthier choices. The sparkling water category across traditional beverage and alcohol beverage categories taps into several health and wellness trends popular with Americans today, such as the appeal of a low carbohydrate and low calorie option would could potentially be seen as a low guilt beverage and an offering that is gluten free. Beyond the potential health benefits consumers see, these drinks can be refreshing, provide interesting flavors and, within the beverage alcohol market, its versatility could appeal thanks to its ability to be part of a cocktail mix.

 

Source: No Signs of Fizzing Out: America’s Love of Sparkling Water Remains Strong Through August

Beer and Spirits company Constellation Brands invests big in cannabis 

Beer and Spirits company Constellation Brands invests big in cannabis 

We are seeing soft drink companies bring new products to market to market due to shifting consumer preferences that are in tune with our Clean Living investing theme. A different side of consumer tastes is moving away from beer to wine, spirits, and non-alcoholic drinks, which explains why Anheuser-Busch InBev and Budweiser keep rolling out newfangled concoctions (my opinion) in the hopes of keeping engaged consumers. With the growing legalization of cannabis, we are seeing existing Guilty Pleasure titans like Constellation Brands investing in what could be the next leg to their growth. Interestingly, a beer and spirits company has made the biggest move so far, not the tobacco industry. As we discussed on our recent podcast, it would seem like a matter of time until Big Tobacco moves into the cannabis space.

 

Corona brewer Constellation Brands Inc.  is investing about $4 billion into Canadian marijuana grower Canopy Growth Corp. , one of the biggest corporate wagers on the potential global market for cannabis-infused drinks and other products.

Constellation, which also produces Robert Mondavi wines and Svedka vodka, has benefited from strong U.S. sales of its Mexican beer imports, Corona and Modelo. But overall beer consumption in the U.S. is in decline, as consumers abandon American lagers for wine, spirits and nonalcoholic drinks.

Cannabis is “the logical fourth leg” for the beer, wine and spirits company, giving Constellation a “total mood-modulation portfolio,” said CEO Rob Sands, whose family controls the company through its ownership of supervoting shares.

Over the past year, three big beer companies—Constellation, Heineken  NV and Molson Coors Brewing Co. —have announced development plans forcannabis-infused beverages in Canada or the U.S. Heineken’s Lagunitas brand launched a cannabis-laced, hop-flavored sparkling water in California in July.

Source: Corona Brewer Bets $4 Billion on Cannabis Startup – WSJ