Big Marijuana Is Thriving: Here Are Their Ideal Partners

Cannabis companies Canopy Growth Corp. (TSX:WEED)(NYSE:CGC), Cronos Group Inc. (TSX:CRON)(NYSE:CRON), and Hexo Corp. (TSX:HEXO) are fortunate to have strategic partners. They need to prove soon they are worthy of the investments.

Modern buildings in business district

Image source: Getty Images

The partnerships sealed by big corporate names with cannabis producers is a clear indication that the income potential in the cannabis industry is immense and beyond imagination. Indeed, experts predict the global legal marijuana market to be worth a staggering US$146.4 billion by the end in 2025.

Will each of the partners of Canopy Growth Corp. (TSX:WEED)(NYSE:CGC), Cronos Group Inc. (TSX:CRON)(NYSE:CRON), and Hexo Corp. (TSX:HEXO) regret investing or do they see a match made in heaven?

Cannabis and beer

Constellation Brands Inc. (NYSE:STZ), the maker of beer, wines, and other spirits, invested $5.0 billion in Canopy Growth that translated into 38% ownership of the cannabis producer. The Corona-beer maker is bent on assuming the leadership role in the global alcohol/cannabis industry over the next decade and beyond.

Molson Coors Canada Inc. (TSX:TPX.B), the Canadian business unit of Molson Coors Brewing Co. (NYSE:TAP), formed a joint venture with Hexo called Truss. Hexo was able to raise $57.6 million from the JV, while Molson was awarded a 57.5% stake. The goal is to develop non-alcoholic, cannabis-infused beverages.

Most cannabis companies are reporting phenomenal increases on the top line, but declaring wide losses on the bottom line. Until the losses are reversed, the drag might weigh heavily on Constellation Brands and Molson Coors.

Of the projected US$146.4 billion total of the global legal marijuana market, the global cannabis beverages market would generate US$4.5 billion. This new market has two types and refers to alcoholic and non-alcoholic beverages.

Molson Coors has specified the focus on non-alcoholic, cannabis-infused beverages to serve the Canadian market. Constellation Brands will rule the alcoholic cannabis beverages market consisting of cannabis-infused beers, cannabis-infused spirits, and cannabis-infused wines.

The demand for non-alcoholic cannabis beverages and smoke-free cannabis is strongest in North America. Molson Coors will definitely pursue and seize the opportunities. We can anticipate a head-on collision in the region as the respective partners of Canopy Growth and Hexo take on the driver’s seat.

Cannabis and tobacco

Cronos can boast of a having solid partner too; this time it’s a mix of cannabis and tobacco. Altria Group Inc. (NYSE:MO), the maker of Marlboro cigarettes, acquired a 45% stake in Cronos as part of its diversification strategy. Declining tobacco sales prompted the move.

With US$1.8 billion from the undisputed leader in the U.S. tobacco industry, Cronos has the cash to expand production as well as establish distribution footprint. The company can accelerate the construction of greenhouses and new processing facilities in Canada.

Cronos can earmark funds for R&D to fast track the development of cultured cannabinoids. The capital infusion is timely because the company can scale up and produce cannabis oils and extracts, and there is no further hindrance to making technology-related investments to perfect their complex extraction process.

Greatest weakness

The three cannabis companies have great partners, all of which gained significantly from a strategic and financial standpoint. However, investing in weed stocks is still speculative and the lack of fundamentals is their greatest weakness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Cannabis Stocks

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Coworkers standing near a wall
Cannabis Stocks

Why Is Everyone Talking About Canopy Growth Stock?

Canopy Growth stock (TSX:WEED) saw shares surge in the last two weeks for a variety of reasons investors can dig…

Read more »

Pot stocks are a riskier investment
Stocks for Beginners

Why Shares of Cannabis Stocks Are Rising This Week

Cannabis stocks received a boost this week as the White House urged the drug enforcement administration to reschedule the drug.

Read more »

A person holds a small glass jar of marijuana.
Stocks for Beginners

Why Canopy Growth Stock Jumped 16% on Wednesday

Canopy Growth stock (TSX:WEED) is up 16% on Wednesday, adding to a surge of 60% growth in the last week…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Is the Worst Over for Canopy Growth Stock?

Down 99% from all-time highs Canopy Growth stock has burnt investor wealth and remains a high-risk investment.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Cannabis stocks have fallen.
Cannabis Stocks

2 Best Marijuana Stocks to Buy This Month

Marijuana stocks in the U.S. such as Green Thumb and Curaleaf can help you deliver outsized gains to investors in…

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »