Constellation Brands bet $4B on cannabis — and wrote down most of it

Constellation Brands, the Fortune 500 company behind Corona, Modelo, Svedka, and Kim Crawford, made its first investment in Canopy Growth in October 2017 — C$245 million for a 9.9% stake in Canada's largest cannabis producer. In August 2018, Constellation deepened the bet with an additional US$4 billion investment that raised its ownership to 38% and gave it four of seven board seats. The thesis was that Canada's recreational legalization (October 2018) would be followed by US federal legalization, opening a massive new market for cannabis-infused beverages.

Canopy Growth used Constellation's cash to expand — building greenhouses, hiring thousands, and expanding internationally. Its market cap briefly exceeded US$14 billion in October 2018. But US federal legalization never came. Canada's legal market was smaller than expected, with high taxes, strict rules, and a thriving black market. By mid-2019, Canopy was burning cash and reporting losses. Co-founder Bruce Linton was fired as CEO in July 2019, and Constellation CFO David Klein replaced him in December 2019.

In October 2020, Constellation took a $1.1 billion impairment charge on its Canopy investment. In January 2022 it took another $875 million impairment. By 2023, Constellation had reduced its stake and signaled it could exit entirely. Canopy shrank from over 3,200 employees to roughly 1,000, sold its retail stores, and reported a fiscal 2024 net loss of CA$657 million on just CA$297 million in revenue. The most high-profile corporate bet on legal cannabis had become a textbook case of betting on regulatory change.