3 Consumer Stocks Loading up on Marijuana
There’s no denying that investing in marijuana stocks is one of the hottest trends in the entire market. With commercial legalization around the corner, many marijuana stocks are partnering with big names in the consumer world to bring forth new commercial and medical cannabis products. Canopy Growth’s (NYSE:CGC) partnership with spirit maker Constellation Brands (NYSE:STZ) was perhaps the most famous and largest of these deals.
However, CGC and STZ aren’t the only ones that have caught cannabis fever.
There are now several other big consumer firms looking at marijuana stocks for inspiration. As we have said before, these multinational firms are a safer bet on the growth of cannabis than individual marijuana stocks. After all, their diverse product lines can provide safety from the volatility of the sector. They will still benefit from the growth and sales of cannabis-related products.
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At the end of the day, it’s a win-win for investors.
With that, here are three consumer stocks hitching a ride to rising cannabis demand.
Mondelez International Inc (MDLZ)
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We already mentioned how Mondelez International’s (NASDAQ:MDLZ) portfolio of snack foods, cookies, and candy is a bit on the boring side. Top brands like Nabisco and Cadbury produce plenty of stable cash flows, profits, and sales for MDLZ. And thanks to their discretionary nature, the firm has been able to pass on price increases with relative ease.
But that huge stable of brands could mean plenty of pin-action and growth as MDLZ pivots to adding cannabis to its products. During its last earnings call, Mondelez CEO Dirk Van de Put mentioned that the firm was looking into adding CBD-infused snacks to their product line.
Mondelez has been working hard to expand into a variety of natural, organic and healthy snack foods. These healthy snacks come with higher margins and are one of the reasons why MDLZ has seen revenues tick higher in recent quarters. Cannabis would be a natural fit to this. Given that consumers already trust and recognize its portfolio of top brands, they could be more willing to try a Nabisco-branded CBD snack than some other unknown brand. This gives the firm an edge in actually getting people to buy cannabidiol-infused foods.
While MDLZ hasn’t partnered with any marijuana stocks just yet, it will be ready to make the plunge sooner rather than later, which could be great for investors.
Molson Coors (TAP)
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Constellation Brands is not the only spirit maker looking at marijuana stocks. Brewing giant Molson Coors Brewing (NYSE:TAP) has caught the cannabis bug as well. And TAP is going full-bore into the sector.
Late last year, Molson Coors partnered with Quebec-based Hydropothecary Corporation (NYSEAMERICAN:HEXO). The duo formed a joint venture — dubbed Truss — that will primarily focus on non-alcoholic, cannabis-infused beverages.
Canada has already legalized marijuana and cannabis-infused beverages will be available in the country at the end of 2019. For Molson Coors, this is a big opportunity. The firm’s size gives it a huge edge in Canada right from the get-go: TAP estimates that this drink market could be worth about $3 billion in annual sales.
Molson Coors will be able to score a high percentage of much-needed revenues.
In the U.S., analysis from investment bank Cowen determined that states with legal cannabis binge-drink 13% fewer times per month than non-cannabis states. The idea is that TAP can pick up revenues in Canada and then add additional revenues here in the U.S. when cannabis becomes fully legal.
For investors, TAP stock could be a sure thing. It already has a big foothold in key markets and should be able to boost its fortunes with its marijuana stock deal.
Diageo (DEO)
Source: Mustafa Khayat Via Flickr
Johnnie Walker, Smirnoff, Captain Morgan, and Guinness have served Diageo (NYSE:DEO) well over the years. These top booze brands — along with the rest of DEO’s massive staple of spirits — have continued to rack up billions in annual sales. And they are about to get even better.
DEO hasn’t been shy about its intentions to add cannabis to their lineup of brands. Around this time last summer, BNN Bloomberg reported that Diageo was conducting talks with several different marijuana stocks for partnerships. A deal hasn’t been reached yet, but it could happen soon.
For one thing, pot stock Aphria’s (NYSE:APHA) chief commercial officer, Jakob Ripshtein, was formerly the chief financial officer of Diageo North America and president of Diageo Canada. Meanwhile, spirit sales have slowed in North America over the last year. This provides plenty of impetus to get a deal done.
DEO’s brand range includes 14 of the top 100 premium distilled spirits brands and seven of the top 20 premium spirits brands worldwide. Like TAP and MDLZ, this huge portfolio gives Diageo a significant edge in getting consumers to actually try CBD-infused products in the first place. The best part is that these DEO brands are consumed globally. Its moves today could make it the global leader in marijuana sales.
Meanwhile, investors can score a respectable dividend of 2% while they wait.
At the time of writing, Aaron Levitt did not hold a position in any stock mentioned.
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