Are we overestimating the future profitability of cannabis?

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According to the best information available about two to three percent of the global population uses cannabis-products regularly. A number that is still far below the consumption of alcoholic beverages, such as wine. Until recently marihuana was either illegal, or only available as prescription drug. But times are changing, last year we saw the first multi-billion dollar investment by one of the largest winery groups.

What Constellation Brand’s recent investment in cannabis company Canopy Growth tells us, is that they view wine and cannabis-derived products as the similar category’s. A view that might still be controversial in Europe but is gaining momentum fast. Today there is 20 countries that has legalised medical marihuana. Recreational use is more controlled and only fully allowed in Uruguay, Canada and nine states in the US. The strongest argument for the legalisation has been to tax the drug and prevent vast amounts of money entering the black market.

The wine industry has been watching the development from a distance, and since Canada legalised the drug in October 2018 it’s been more and more difficult to not have an opinion about it. Large investors are currently pushing up the stock prices of cannabis companies. Enterprises such as Canntrust, Tilray, Cannabix Technologies and Aurora Cannabis are seen as the next big thing by investors that feel that they missed the boat on Apple, Google and Amazon.

The investment case is that these early marihuana businesses will profit greatly once the drug becomes legal on the federal level in the US. Marihuana exports to the US might well become a multi-million dollar business over night. But are we not overestimating the profitably of the cannabis business?

Should wineries invest in cannabis companies?


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